The 2008 great recession impacted the construction industry greatly and led to an overall slowdown in development as well. Construction firms closed down, and over 2 million construction workers were out of work due to layoffs or industry exits.
Within a few days of each other, both Silicon Valley Bank (SVB) and Signature Bank both shuttered their doors and relinquished control over their operations. While the circumstances of their turmoil are different, the result is the same. Uncertainty in the market and increasing loss of confidence in banks.
With this in mind, how could this cause ripple effects in the Self Storage industry? Self Storage is commercial real estate, and oftentimes development and acquisition deals are financed in part through raising debt. High-interest rates have already slowed down the volume of deals like this, as it is harder to remain profitable. However, with big banks seemingly under duress, the lending market could slow down even more as financial institutions grow wary of giving out money at all. This would severely impact supply growth and impact the number of deals that brokers are able to see over the goal line. In the short term, I expect a continued slowdown of development and acquisition deals until the macro economy starts to stabilize.