Self-Storage Financing: Your 2025 Look at This Surprisingly Stable Asset
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Self storage has quietly become one of the most resilient asset classes in commercial real estate. Driven by life transitions like dislocation, divorce, downsizing, and death, storage demand remains consistent even in volatile markets.
For brokers, understanding how lenders view this niche — and how to position deals within it — can open up a wealth of opportunity. This guide is part of our larger series on financing every type of commercial real estate.
What Counts as Self Storage?
At its core, self storage involves leasing out individual units to consumers or businesses, typically (but not always) on a month-to-month basis. Most properties are simple in design and low on operating costs. The business model is straightforward: high gross margins, limited capital expenditure, and revenue from ancillary services like locks, boxes, and renter's insurance.
Self Storage Subtypes: Not Just Sheds
Generation I/II
These are traditional drive-up facilities — single-story buildings with exterior access units. They're inexpensive to build and operate, often found in suburban or rural areas. Lenders may consider them less desirable than newer builds, especially in competitive markets.
Generation III/IV/V
Modern, climate-controlled properties with multi-story layouts, elevators, digital access control, and surveillance. These are increasingly common in urban and high-barrier markets and are more favorably viewed by institutional lenders.
Specialty Storage: RV & Boat
These serve a more affluent customer base and are typically found near recreational areas or metro outskirts. Demand can be seasonal, but the rent premiums and low wear-and-tear can appeal to certain lenders.
Why Lenders Like Self Storage
- Diversified Rent Roll: Hundreds of tenants spread risk. No single tenant can jeopardize cash flow.
- Sticky Occupancy: People tend to forget (or just avoid) moving their belongings, making turnover low and occupancy steady.
- Low Break-Even: Facilities often break even at relatively low occupancy rates — sometimes below 60%.
This combination of predictability and simplicity has made self storage a favorite for certain capital sources.
Where to Find Capital for Storage Deals
Banks and Credit Unions
Strong players in both acquisition and construction lending, especially for local operators. Expect recourse and more conservative leverage, but flexible structures.
CMBS
Attractive for stabilized, cash-flowing portfolios or larger facilities. Offers nonrecourse, fixed-rate, long-term debt.
SBA Loans
SBA 7(a) and 504 programs are popular for smaller or first-time owners. Long amortizations and relatively low equity requirements make them especially accessible.
What Lenders Are Watching
Submarket Saturation
Too much supply in one trade area can tank rents and lease-up velocity. Lenders will often require a feasibility study to validate market need.
Lease-Up Risk
Construction deals must present a credible pro forma and timeline to stabilization. Lenders want to see a plan backed by strong market data and an experienced operator.
Operational Complexity
While simple on paper, success depends heavily on marketing, pricing algorithms, and active management. Institutional lenders will expect modern systems and third-party management if the sponsor lacks experience.
Broker Tips: Structuring a Financeable Deal
- An older facility in need of upgrades? Highlight the upside with a clear CapEx and revenue growth plan.
- Building new in an infill market? Emphasize barriers to entry and unmet demand.
- Have multiple assets? A portfolio refi may attract stronger lender interest than one-off deals.
The key is demonstrating stable income, realistic projections, and capable management — especially for first-time borrowers.
Final Thoughts
Self storage doesn’t get the spotlight that multifamily or industrial enjoys — but that’s part of the appeal. With strong fundamentals, favorable underwriting characteristics, and a wide array of lender options, it’s a space brokers should understand inside and out.