SSA Blog

The self storage industry is bracing for President Donald Trump’s steel tariffs 2.0 with expectations that storage construction could decline significantly this year.

On April 2, Trump announced the largest increase in tariffs in U.S. history. His plan includes a baseline tariff rate of 10% on imports from all countries and a separate set of what he called “reciprocal” tariffs that impose a country-specific rate. New tariffs include a 25% tariff on auto imports, a 20% tariff on goods from the European Union and a 54% tariff rate on Chinese imports.

Markets cratered a day after Trump’s tariff announcement with the S&P dropping 4.8% and erasing nearly $2 trillion from the index. The Dow Jones Industrial Average tumbled 3.98%. A small-cap stock index entered bear market territory.
 
The 10% across the board tariff rate was much higher than investors had expected. Canada matched U.S. auto tariffs with a 25% tariff on vehicles imported from the U.S. China and the EU were also expected to hit back.

Among the wide-ranging new tariffs, the 25% metals tariff imposed March 12 on imported steel and aluminum appears likely to have the most direct impact on storage. Self storage facilities are commonly built using cold-formed steel (CFS) framing — which is a light-gauge metal that’s pre-engineered and can be bent into various shapes — along with metal wall panels and roofing. Steel is a fundamental input of self storage buildings and makes up about 25% of the overall cost of constructing a facility.

CBRE has warned that steel and aluminum tariffs could increase construction costs by up to 5%.

Tariffs on steel and aluminum will do more than curb imports. Steel tariffs could slow construction activity, and construction firms are likely to feel the squeeze within months.

“It’s starting to hurt the deals, especially in the storage industry now,” said Nicholas Bergmann, vice president at Capco General Contracting in San Antonio, Texas. “The tariffs are painful. If steel keeps going up, it’s going to ripple through the entire industry.”

Since the beginning of the year, the hot rolled coil commodity index has gone up about 23%. By the time steel is formed into beams or studs, the price increase translates to about a 10% on the finished product, Bergmann said. His steel supplier announced a 10% increase coming at the end of April. His teams are recommending developers increase their materials contingency fund.

John Chang, senior vice president and national director of research for Marcus & Millichap, said higher steel prices have the potential to impact storage development.

As steel prices peaked previously in 2021, self storage completions began to fall, though Chang said the decline can’t be tied directly

Nonetheless, the number of completions fell from 18.2 million square feet in the first quarter of 2021 to a trough of 13.9 million square feet a year later in the first quarter of 2022. Chang said the falloff in construction may have reflected the combination of tariffs and the pandemic.

                                                                             When steel prices peaked in 2021, storage completions began to fall.

Market conditions for storage are quite different today than the high-water mark in rent growth and occupancy the industry enjoyed in 2021.

“Given the substantially higher vacancy rate today — 9.8% as of the end of 2024 — and the 33% increase in the price of steel since the beginning of the year, it's likely self storage construction will decline substantively this year,” Chang said.

For the self storage construction industry, this is Trump Tariffs 2.0. In 2018, self storage deliveries peaked with supply growth reaching 4.8%. That’s also when Trump, during his first term, imposed steel tariffs.

Bergmann said the first Trump trade war caused rapid escalation of prices.

“I’d never seen anything like that in my 24 years in this business,” Bergmann said. “The lessons we learned from that was to communicate more with customers and talk about changes in the pricing environment and to carry contingencies.”

Domestic steel mills churn out about three-quarters of what Americans use. But construction depends on foreign sources for some specific types of steel, such as pipes and tubes. And domestic manufacturers gain leverage to raise their prices when imported steel becomes more expensive.

Storage development was already subsiding before the new tariffs, held back by higher interest rates and declining or flatlined rental rates. According to Yardi Matrix, about 56 million square feet of storage is expected to be delivered in 2025, down from 57.5 million in 2024. That’s down from 137 million square feet in 2022.

Cory Sylvester, a principal with DXD Capital, which is currently developing self storage in multiple markets, said the best strategy is to prepurchase steel products before price increases take effect.

“The only thing you can do is lock in the costs, so you know what they are,” he said.

That approach requires having a place to store steel products until they are needed on the job site. Sylvester said so far different contractors had held steel for DXD in their warehouses. And while steel tariffs will make projects more expensive, he said they shouldn’t derail strong projects.

“If the tariff makes your project unfeasible, the project was close to unfeasible before,” he said. "There are a lot of other things that are within our control. Ultimately, this part of the business is out of our control, and we will do our best to hedge around it. A certain input is not going to drive the outcome of an entire facility.”