An overview of a self-storage facility designed to meet diverse storage needs.
California, August 12, 2025
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.
Recent data from DXD Capital’s 2025 lender survey reveals that the enthusiasm for self-storage lending has remained unchanged compared to the previous year. This enduring interest in the self-storage sector continues even amidst a more cautious lending climate characterized by higher interest rates, which have pressured asset values and led to a more conservative approach.
With a focus on risk management, lenders are tightening their underwriting standards and restricting exposure in their loan portfolios. This shift from the more generous lending practices seen in 2021 and 2022 indicates a significant change, as lenders adapt to the new economic environment where interest rates have risen and led to some distress in asset performance.
According to the survey, over 94% of respondents indicated that their self-storage lending appetite has not fluctuated in the past year. Additionally, nearly three-quarters of lenders noted they had not restructured or extended existing loans within the self-storage sector, signaling overall stable loan performance.
Most lenders limit their self-storage investments to a modest 25% of their total commercial real estate (CRE) loan portfolio. Almost half of the lenders surveyed feel that self-storage performs similarly to other CRE sectors, while about one-quarter perceive it as underperforming in comparison.
Lenders have expressed several key underwriting concerns that impact their decision-making, particularly regarding absorption risk during lease-up periods. Other significant areas of concern include potential oversupply in the market, the capabilities of sponsors, and the rising costs associated with construction projects.
Moreover, macroeconomic and regulatory issues such as the softening of the CRE market and the looming risk of recession contribute to a challenging lending environment. A noted pullback by regional banks further complicates the lending landscape for self-storage projects.
The survey indicates specific areas where lenders are channeling their financing efforts: approximately 94% are focusing on acquisition loans, 88% are looking at ground-up construction, 71% are prioritizing refinancing options, 35% are considering bridge or transitional loans, and 18% are exploring conversion loans such as transforming retail spaces into storage facilities.
Recently, White Oak Real Estate Capital issued a $27.2 million senior secured loan to 1784 Holdings for developing a self-storage facility in Garden Grove, California. This new facility will include climate-controlled units, reflecting a growing demand for enhanced storage solutions in the market.
Looking beyond the U.S., Canada’s self-storage market is projected to see a marked increase in activity, likely doubling year-over-year by 2026. This growth is anticipated due to factors such as the aging population, greater interprovincial migration, and the downsizing trends among older adults in search of affordable living arrangements. However, recent changes in Canadian immigration policies—introducing stricter limits—may ultimately influence future supply and demand in the self-storage sector.
Self-storage lending remains steady, with most lenders reporting unchanged appetites. A more conservative lending approach due to rising interest rates is prevailing.
Lenders are primarily concerned with absorption risk during lease-up, potential market oversupply, capabilities of sponsors, and rising construction costs.
The outlook for construction lending is generally subdued over the next one to two years, with increased scrutiny and caution among lenders.
Yes, White Oak Real Estate Capital recently provided a $27.2 million loan for a new self-storage facility in Garden Grove, California, which will feature climate-controlled units.
Canada’s self-storage market is expected to double its activity by 2026, driven by demographic trends and increased mobility, although immigration policy changes may affect future growth.
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