Risk/Reward: Strategic Developers Push Forward Despite Economy

Posted by Eric Blum on Jul 30, 2025 10:16:45 AM
When the economy wavers, even seasoned developers can find themselves at a crossroads: hold off and wait for stability, or double down on opportunity while others hesitate?
 

In commercial real estate, and particularly within the self-storage sector, timing is everything. While conventional wisdom might suggest pressing pause during economic uncertainty, the data tells a more nuanced story. Slow periods are often the smartest times to build.

 

As lending tightens, inflation persists, and the Federal Reserve navigates the balancing act between recession risks and long-term recovery, developers across the U.S. are asking a familiar question: Should we wait it out?

 

For the self-storage industry, the answer leans increasingly toward no, not without a strategy.

 

A Historically Resilient Asset

Unlike many other real estate sectors, self-storage has proven its resilience time and time again. It weathered the 2008 financial crisis with minimal downturn and even saw rising demand during the COVID-19 pandemic.

 

The Self Storage Association attributes this resilience to the nature of demand. Most self-storage use cases are driven by what’s called the “four Ds” (death, divorce, dislocation, and downsizing)—life events that occur regardless of economic cycles.

 

Additionally, ongoing urbanization, population shifts, and housing transitions continue to create a baseline level of need. According to a 2023 report from IBISWorld, the U.S. self-storage industry is valued at over $40 billion and has grown steadily over the past decade, with occupancy rates remaining strong, even as interest rates rise.

 

In short: People may spend less, but they still need space.

 

The Risk Of Waiting

The instinct to wait until conditions feel “safe” is understandable. However, developers who delay too long often miss prime opportunities, not because the market crashed, but because others moved faster.

 

In real estate, the delay isn’t just months, it’s years. Between site selection, entitlements, financing, design, and construction, it can take 12 to 24 months to bring a facility to life. Waiting until the economy rebounds means others will already be mid-construction or worse, leasing up.

Meanwhile, construction costs rarely drop significantly in downturns, and land deals may be more negotiable when fewer buyers are at the table. Planning during a cooling market positions developers to break ground just as demand surges again.

 

Local Insight Is Critical

One of the most overlooked risks in self-storage development is relying solely on national market data or desktop research. While tools like Radius+, Yardi Matrix, and CoStar offer helpful baselines, they often miss hyperlocal nuances.

 

For example:

  • A competitor’s facility may be underperforming due to poor visibility or access, which would not be captured in occupancy data.
  • Road construction could impact traffic flow for months, affecting visibility and consumer convenience.
  • A city council may be prioritizing residential development over commercial permits, changing your project’s timeline entirely.

 

Successful developers supplement big-picture data with on-the-ground intelligence: physically walking the site, speaking with local officials, tracking nearby construction, and assessing neighborhood sentiment. These micro insights often make or break a deal.

 

Shift Your Pitch

Capital is still available, but it’s more selective than it was two years ago. Lenders and equity partners are taking fewer risks and demanding stronger business cases.

 

That means a quick market summary won’t cut it. Financial partners expect:

  • Demographic and absorption analysis,
  • Lease-up projections based on real comps,
  • Competitive assessments with visual maps,
  • Development cost modeling and ROI projections, and
  • Municipal planning and entitlement timelines.

 

This level of preparation not only improves your chances of securing funding, it also builds confidence in your ability to execute, which can influence interest rates and deal terms.

 

Early Validation Saves Time, Money

For those still weighing multiple options, early-stage market validation is more accessible than many think. Desktop studies, while limited in scope, can offer a low-cost, low-risk entry point to assess potential sites. They provide clarity on demographics, supply, and early saturation signals, helping developers avoid wasting months on poorly positioned locations.

 

If the data looks promising, a more in-depth feasibility study with site visits and municipal research can follow. The key is starting the process before the next rush begins.

 

Successful developers supplement big-picture data with on-the-ground intelligence: physically walking the site, speaking with local officials, tracking nearby construction, and assessing neighborhood sentiment. These micro insights often make or break a deal.
 

Slower Seasons Offer Advantages

Historically, downturns have created space for the most prepared players to move ahead. During the 2008 crisis, many self-storage developers who began projects in 2009 and 2010 reaped the benefits by 2012 as demand rebounded. A similar pattern followed in 2021 for those who moved quickly during COVID’s early stages.

 

According to Green Street’s 2024 Sector Outlook, self-storage remains one of the top-performing REIT sectors in terms of NOI growth and investor confidence. But with interest rate uncertainty and cautious underwriting on the rise, only the best-positioned projects will get greenlit.

 

Developing during a slow market requires foresight. It’s not about rushing construction. It’s about using the time wisely to:

  • Secure entitlements,
  • Finalize design and architecture,
  • Attract capital partners,
  • Refine business strategy, and
  • Prepare for optimal timing.

 

Here’s a real-world example of local insight shifting the strategy. In a recent southeastern U.S. market, online data suggested minimal competition and favorable demographics for a new storage facility. However, a local market walk revealed:

  • A new facility had quietly opened nearby with aggressive pricing,
  • Zoning officials were in the early stages of restricting new commercial permits, and
  • A planned infrastructure project would hinder traffic access for up to 18 months.

 

Armed with this insight, the developer shifted focus to a neighboring submarket just five miles away that was still underserved but with smoother development pathways. That shift could be the difference between average returns and market-leading success.

 

Starts Before The Rebound

In times of economic hesitation, the best developers don’t stop—they prepare. They refine their strategy, build financial support, and position their project to break ground when the window opens.

 

It’s not reckless optimism. It’s deliberate action backed by local data, long-term trends, and operational readiness.

 

Whether you’re planning your first facility or expanding a regional portfolio, consider this: By the time the economy feels safe again, it may already be too late to secure the site, financing, or first-mover advantage.

In self-storage, as in life, hesitation is often the real risk.

 
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Eric Blum, who has more than 30 years experience in self-storage consulting, is president of BMSGRP, which specializes in data-backed, boots-on-the-ground feasibility studies that help developers make smarter decisions.