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Lenders Show Stable Sentiment in Self-Storage Sector

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A modern self-storage facility with climate-controlled units

California, August 12, 2025

News Summary

The self-storage sector remains appealing to lenders despite a cautious lending environment, with over 94% indicating consistent funding willingness. A recent survey by DXD Capital shows lenders are tightening underwriting processes due to rising interest rates and market pressures, affecting construction lending. While many lenders maintain stability in loan performance, they express concerns over absorption risks and macroeconomic factors. In Canada, the self-storage market faces growth, driven by demographic trends, but immigration policy changes may influence future demand.

Lenders Keep Steady on Self-Storage Loans as Risk Controls Tighten

A recent 2025 lender survey shows that most lenders have not pulled back from the self-storage sector, but they are lending more cautiously.
More than 94% of lenders said their appetite for self-storage loans was about the same as the year before. At the same time, underwriting standards and exposure controls have been tightened to manage rising risk.

Topline: steady demand, conservative behavior

Lending activity for self-storage continues even in a more conservative market. Generous lending from 2021 and 2022 has given way to tighter scrutiny after interest rate rises and some asset pressure.
Construction lending, especially for ground-up projects, is expected to stay subdued for the next one to two years, with lenders focusing on deals that show clear risk controls and strong sponsor qualifications.

Loan types lenders are focused on

Lenders reported the types of self-storage loans they are most active in. About 94% are focusing on acquisition loans, 88% on ground-up construction, and 71% on refinancing. Bridge or transitional loans make up a smaller share at 35%, and conversion loans such as retail-to-storage account for around 18%.

Portfolio exposure and loan performance

Most lenders assign less than 25% of their total commercial real estate portfolios to self-storage. Nearly three-quarters said they did not restructure or extend self-storage loans in the past year, which points to generally stable loan performance across the sector.
When asked about relative performance, nearly half of lenders view self-storage as performing in line with other commercial real estate sectors, while roughly one-quarter see it as underperforming.

Main underwriting and market concerns

The top underwriting worry is absorption risk during lease-up — how quickly new facilities can fill units. Other key concerns are oversupply in certain markets, sponsor capabilities, and rising construction costs.
On the macro side, lenders flagged rising interest rates, a softening CRE market, recession risk, and regional bank pullbacks as important headwinds that shape loan decisions and terms.

Construction and development outlook

Construction lending in self-storage is expected to be muted. Lenders want stronger pre-leasing, clearer pro formas, and experienced sponsors before committing to ground-up loans. This makes new projects harder to finance unless they reduce leasing risk or are in markets with proven demand.
One recent large senior secured loan of about $27.2 million was used to develop a climate-controlled self-storage facility in Garden Grove, California, showing that deals still move forward when terms and location align with lender risk appetites.

Canada: demand drivers and policy risk

Activity in Canada’s self-storage market is projected to increase sharply, with expectations that activity could double year-over-year in 2026. Drivers include an aging population downsizing, higher mobility among international and interprovincial migrants, and affordability trends that push people into smaller living spaces.
However, recent tightening of immigration limits could change that outlook and affect both demand and future supply planning for developers and lenders.

What this means for developers and borrowers

Developers seeking financing should plan for tougher underwriting, provide clear evidence of market demand, and show strong sponsor track records. Borrowers may face higher scrutiny on lease-up assumptions and a preference for deals with lower exposure to construction risk.
For lenders, the current stance combines stable interest in the sector with careful portfolio management and an emphasis on downside protection.


Frequently Asked Questions

Is self-storage still an active lending sector?

Yes. Most lenders report their appetite for self-storage lending is unchanged compared to the prior year, although credit standards have tightened.

Are lenders still financing construction of new self-storage projects?

Some lenders are, but construction lending is expected to be subdued for the next one to two years. Lenders are cautious about lease-up risk and prefer projects with strong underwriting and sponsor experience.

What loan types are lenders most focused on?

Lenders are most active in acquisition loans (about 94%), ground-up construction loans (about 88%), and refinancing (about 71%). Bridge and conversion loans are less common.

What are the main risks lenders watch for?

The biggest underwriting concern is absorption risk during lease-up. Other risks include oversupply, sponsor capabilities, construction costs, higher interest rates, CRE market softness, recession risk, and regional bank pullbacks.

How is Canada’s self-storage market expected to change?

Activity is expected to rise notably in 2026, driven by demographics and migration. Stricter immigration limits could, however, reduce demand growth and affect supply plans.

Quick visual: Key lender focuses and concerns

Loan focus (share of surveyed lenders active)
Acquisitions — 94%
Ground-up Construction — 88%
Refinancing — 71%
Bridge/Transitional — 35%
Conversion Loans — 18%

Primary underwriting concerns (relative emphasis)
  • Absorption during lease-up — top concern
  • Oversupply — market-specific risk
  • Sponsor capabilities — experience matters
  • Construction costs — impact on pro formas

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