While commercial real estate delinquencies across the broader commercial mortgage-backed securities market have climbed past 6%, self-storage delinquencies have hovered around 0.1%, according to KBRA data cited by Shawn Hill, Principal and Founding Member of The BSC Group.
That 60-fold gap explains why capital keeps flowing into a sector most CRE conversations barely mention. Office is repricing. Multifamily is wobbling. Parts of industrial are giving back gains. Self-storage, meanwhile, has held its footing and the recent acquisition of National Storage Affiliates by Public Storage signals that institutional appetite is not just intact but consolidating.
“A natural constraint on new supply …”
Cook County’s high property taxes and challenging development environment have long been treated as liabilities for industrial and commercial real estate. For self-storage, those same friction points have functioned as a kind of accidental supply discipline.
“Elevated property taxes and a more challenging development environment in Cook County have acted as a natural constraint on new supply,” Hill said. “That has limited the degree of overbuilding seen in faster-growth Sunbelt markets where new deliveries have put more pressure on rents and occupancy.”
Steven Weinstok, Senior Managing Director and National Director of the Self-Storage Division at Marcus & Millichap, sees the same dynamic playing out in pricing. With development activity slowing across Chicagoland and vacancy declining, self-storage assets are commanding rental rate increases that operators in oversupplied Sunbelt markets cannot match. What looks like a liability on a development pro forma has been an asset in practice.
The capital story
Liquidity has remained deep across the lender landscape with banks, credit unions, life companies, CMBS shops and private debt funds all participating. The shift over the past 18 months has not been about whether capital is available. It has been about how selective that capital has become.
“Lenders today are more disciplined around in-place performance, stabilization assumptions and sponsorship,” Hill said. “Deals that demonstrate durable occupancy, realistic expense loads and experienced ownership continue to attract strong execution. Conversely, transactions that rely on aggressive lease-up projections, underwritten rent growth or transitional business plans are facing wider spreads, lower leverage or difficulty closing altogether.”
The buyer pool reflects a similar split between sophistication and capital depth. REITs and institutional owners have leaned heavily on technology and data platforms to make micro-adjustments to rental rates and manage expenses with precision. Private investors have not been frozen out of that advantage.
“Private investors continue to play a critical role as they too can now access marketing, data and operating platform resources in order to maximize their returns,” Weinstok said.
“More transaction activity …”
For Class A self-storage assets in Chicago, cap rates currently range from 4.9% to 5.7%, with Class B product trading between 5.5% and 6.2%, according to Weinstok. Those numbers reflect a market that is repriced from the 2021 and 2022 peak but still aggressive relative to most other property types.
The transaction pipeline is being shaped less by distress than by timing. Many lenders spent the past few years extending and amending loans to give borrowers room as interest rates climbed. That patience is running out.
“As we move through 2025 and into 2026, the maturity wall has become more pressing and lenders are increasingly focused on resolving loans and cleaning up their balance sheets,” Hill said. “That shift is beginning to drive more transaction activity.”
True distress remains rare. The more common scenario involves operationally challenged assets that are underperforming pro forma but not fundamentally broken. In many cases, borrowers are recapitalizing through new debt, preferred equity or fresh joint venture capital rather than selling under pressure.
“A short-lived phenomenon …”
The collar counties have absorbed most of the recent construction activity. Lake, McHenry, DuPage, Will, Kane and Kendall have all benefited from suburban household growth and the development economics that come with land outside Cook County. Urban Chicago has seen comparatively less new product, though Weinstok thinks that gap may close.
“Urban Chicago is experiencing less development, yet given the absence of and surging demand for new multifamily housing, this may be a short-lived phenomenon as developers will undoubtedly rise to the occasion and start building again once more multifamily developments are announced,” Weinstok said.
“Potential volatility …”
The biggest variable for Chicago self-storage pricing is not supply. It is how investors model the tax line on their underwriting. Reassessment risk and expense growth assumptions can swing valuations meaningfully across otherwise comparable assets, creating dispersion in pricing that has more to do with buyer conviction than market fundamentals.
Stabilized properties in well-located submarkets should continue to command strong pricing. Assets with near-term lease-up exposure or weaker submarket fundamentals are more likely to see modest softening. The depth of capital targeting the sector continues to provide a meaningful floor under valuations, but Hill flagged a caveat that should keep operators paying attention.
“Right now, liquidity is masking a lot of potential volatility,” Hill said. “If inflation, particularly driven by energy and geopolitical dynamics, keeps rates elevated, that equilibrium could shift, leading to modest cap rate expansion and greater dispersion in pricing. Even then, the reset is likely to be orderly given the depth of capital in the sector.”
Self-storage has spent this cycle being underestimated. The capital flowing into the sector suggests that may not last.
