Amid Rising Demand, Philadelphia’s Self Storage Market Sees Record Growth Over The Past Decade

Philadelphia’s self storage market is primed for expansion. The city is currently underserved, offering roughly 6.64 million square feet of rentable storage space. This translates to about three square feet per person — less than half the national average — indicating a significant supply gap.

Meanwhile, interest in extra space outside the home is steadily increasing, driven by several local factors. Small living spaces, coupled with the high cost of upsizing, an aging housing stock and a growing number of small businesses, all contribute to the heightened demand, making self storage a valuable commodity in the city.

In the context of historic undersupply, these factors have created a competitive landscape for storage customers. The average monthly rate for a self storage unit in Philadelphia is around $144, significantly above the national average of $135.

However, over the past decade, the market has seen some relief, with an active development pipeline providing additional options for space-constrained Philadelphians. This surge in new construction has also contributed to a more renter-friendly market, as evidenced by a 4.8% year-over-year drop in rental rates as of July.

After a slow start, supply surges since the mid-2010s

Despite challenges like limited land availability and zoning regulations, self storage construction has gained momentum over the past decade. Notably, 43% of the city’s total inventory was built between 2014 and 2023, reflecting robust demand and positive investor sentiment.

Looking back at the past decade, self storage construction in Philadelphia had a slow start. Between 2014 and 2023, the sector saw minimal activity in the early years, with 2014 and 2016 experiencing virtually no new deliveries. However, 2015 fared slightly better, adding a modest 224K square feet of space to the market.

These were challenging years for self storage construction in Philadelphia, largely due to lingering effects from the Great Recession. The economic downturn had sent shock waves through the real estate market, leading to tighter lending standards and reduced access to financing for new developments. On top of that, Philadelphia’s economic environment remained sluggish during that period, with slow job growth and cautious consumer spending reflecting broader uncertainty. Thus, developers were hesitant to invest in self storage projects amid concerns about the city’s economic recovery pace and the potential for sustained demand.

However, as consumer confidence steadily recovered and the economy improved, 2017 and 2018 saw a flurry of activity in Philadelphia’s self storage sector, with significant new inventory added in both years. In 2017, about 422K square feet of new space went online, while 2018 registered almost as much: 401K square feet.

After two years of intense activity on the construction front, 2019 registered a slowdown in self storage development in Philadelphia, with only 103K square feet of space delivered. The deceleration allowed the market to adjust to the influx of new space and align supply with demand — however, the following few years, marked by the pandemic and its effects on both the economy and consumers, changed the narrative when it comes to self storage construction in Philadelphia.

Self storage pandemic boom behind 2021 deliveries peak

During the pandemic years, the self storage industry across the country experienced a significant boom as people sought more space and flexibility amid widespread disruptions. Remote work and the shift to home offices forced many to declutter and repurpose their living spaces, driving demand for storage units.

At the same time, economic uncertainty led to a surge in relocations and downsizing, further fueling the need for temporary storage solutions. Philadelphia, naturally, mirrored the national patterns. Residents facing similar pressures turned to self storage as a convenient option to manage their belongings during a period marked by rapid change and adaptation.

Despite the inherent difficulties of 2020, with lockdowns and related challenges, Philadelphia’s self storage sector still managed to deliver a consistent 242K square feet of new self storage space. However, construction activity truly exploded in 2021, when an impressive 537K square feet of new space was added, responding to the heightened demand for storage away from home and topping the decade’s deliveries.

In 2022, rising interest rates made borrowing more expensive, discouraging new investments in real estate. Construction costs also surged due to supply chain disruptions and increased prices for materials and labor, squeezing profit margins for developers, while inflationary pressures reduced consumer spending power. This combination of higher costs, tighter financing conditions and economic uncertainty created a challenging environment for self storage development, and ultimately, only about 137K square feet of space were added to Philadelphia’s inventory.

2023 ranks as second-best year for self storage growth, with 2024 poised to sustain the momentum

As many of the pandemic-induced economic challenges subsided, self storage construction in Philadelphia saw a strong rebound. In 2023, the sector had its second-best year of the decade, with almost 461K square feet of new space added, providing much-needed inventory to an undersupplied market.

Looking ahead, 2024 is shaping up to be another productive year, with more than 423K square feet of new storage space expected to be delivered by year’s end.