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Timing the Self Storage Market and interest rates

by Marc Goodin. Sounds good, but next to impossible. It is easy to look back. From 2009 to 2022 you could borrow often borrow money around 4%. (less years 2018 - 2020 where rates where 6%+_) During that time inflation was low so construction prices did not clime like they did in the last 2 years. Easy to say what an incredible time this was to develop new self storages or buy existing facilities.

Historical Prime Rate

The prime interest rate is often close to the rate banks offer their most qualified borrowers. SBA 7a loans are often prime plus 1. Here you can see the recent long span of the prime rate around 4%. If you look back further you will see the prime rate started around 20% in the beginning of the 80's and ended at 10% at the end of the 80's.

Let's face, since most people did not work night and day during the recent 4% rate period, it is impossible to time the market. And some would even argue the best time to be preparing to develop a new self storage is during the high rate periods so you don't miss the low rate period.

The good news is you do not have to time the Market. Just like time in the stock market equals good results the same is ture for self storage. The key is neogoating the a loan. During high interest rates you want to be able to refi when rates come down without the prepayment penalty costing you a leg and an arm. During times of low interest rates you want to increase the term from 5 years to 7 or 10 years even if you have to accept a slightly higher interest rate.

Recsssions are one item that reck havic on development and banking. If you look back you will find that most recessions last less than 2 years. And if you look back to 2000 in the above chart you will see interest rates fall from their peaks in 2 years+_. Of course, history is longer than 20 years and you can not predict the future based upon the past. A quick look back at past recessions.

But developers and investors do have to predict the future to make sure they understand the returns at highand low interest rates. The good news is self storage has a long term track record of sucess in good and bad times.

Chart of Fed Rate
Fed Rates

Here is a chart of the fed rate that we have been watching clime at record rates going from in 2021 to 8.25% today. If you own a facility and did not have to refi in the last 2 years or next 2 years I can tell you your rents should have skyrocketed to new highs making your facility more valuable then ever.

Banks know self storage has one of the very highest success rate, making it one of the top catagories they want to make loan fo in the current environment. The current high rates and vacancies in the office and retail markets make it hard for the bank to find good loans outside of self storage that make sense today.

Given the high rates with limited places to loan money some banks are open to negotiating terms. You can ask for a reduce rate and longer interest only periods.. And you must get acceptable pre payment penalties so you are not stuck with 8-9% interest when the rates come down.

It used to be we simple went to our local banker or preferred SBA lenders but now banks lending varies considerable based upon each banks unique situation so you need a great broker to check with several banks to get the best deal. If you are looking for a loan broker and need assistance call me. (Marc 860-830-6764)

Looking at the recent years it took approximately 2 years for rates to go from their peak to the bottom. May be we are at rate peaks and it is a great time to be looking for land, given it takes time to find land, get approvals and build a new facility. Or maybe not and you have to go back to the baisics to make a project work

Bottom line: We all need to go back to the basics no matter if high or low interest rates exist.

1) Find better land, get better site and building plan designs, prepare better bid packages to reduce extras and negotiate with lenders. Check this out - How to save $350K during development.

2) Have better operations plans.

3) Have a high end sales and marketing team with a written plan

4) Higher service and higher rental rates

5) Mandatory insurance

6) No free months (Can cost you over $50,000 a year in lost payments

I found that for nearly everyone who is waiting for the right time to get in self storage will never get started. You can do it!!

If you want to have a 15-minute call to learn how Storage Authority helps insure the above items and more are accomplished at your facility and how we help you find land and get your facility built please send me an email or call me – no appointment needed:

Get more information on Storage Authority Franchise at

Marc Goodin is the President of Storage Authority Franchising. He owns 3 self-storages he designed, built, and manages. He has been helping others in the self-storage industry for over 25 years. He can be reached at or directly at 860-830-6764 to answer your franchising, development, marketing, sales, and operations questions. His best selling self storage books are available on Amazon.


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