A key concept is local supply-and-demand underwriting: before trusting the purchase price, cap rate, or projected returns, ask whether the facility’s trade area actually has enough unmet demand to support the rents and occupancy you are assuming.
For a self-storage deal, that means looking at nearby competitors, occupancy, street rates, promotions, pipeline projects, and whether the market is already oversupplied. Industry feasibility discussions often describe supply-and-demand analysis as the most critical part of determining whether a storage project or acquisition can support projected performance.
The simple idea is:
Can this property realistically achieve higher economic occupancy and rent per square foot than it has today?
Then connect that to valuation:
NOI ÷ cap rate = estimated property value
So if your market analysis supports a believable increase in revenue or reduction in expenses, that can raise NOI and create value. But if the market is saturated, projected rent growth or lease-up assumptions may be unrealistic even if the deal looks cheap on paper. Cap-rate underwriting should not be done in isolation from local market conditions.
If you want help with your underwriting, here are two templates geared towards self-storage projects:
- Unit-based Model (single deal analysis, more granular)
- Capital Scaling Model (up to 6 deals over 15 years, high-level inputs)
