Mid-Year Update: Q2 Recap & What We're Watching in Q3 2026 | The AAA Storage Podcast #39

In this episode, Paul Bennett delivers a mid-year update on the state of self-storage and small-bay industrial real estate. Paul unpacks current market trends, including shifts in occupancy, rent growth, and the increasing institutional interest in small-bay properties. You will gain practical insights into regional opportunities, supply constraints, and why now may be a rare window for investors looking to capitalize on these asset classes. Tune in to hear expert analysis and firsthand market perspective from one of the industry's most experienced operators.

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Chapters
(00:00) Midyear Self Storage Market Overview
(04:11) In-Place Rent Growth and Occupancy Trends
(07:11) Regional Performance and Market Dynamics
(13:30) Limitations of REIT Data for Investment Decisions
(16:08) Small-Bay Industrial Market Strength
(21:03) Supply Constraints and Investment Window
(24:41) Key Growth Markets and Strategic Focus

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Creators and Guests

Host

Paul Bennett

Managing Director at AAA Storage

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Investing in self storage gives you the fundamentals and growth you need to grow your portfolio. But skip the opportunities from golf buddies and gurus—invest in a real track record. Started by John Muhich in 1993, AAA Storage has delivered 19% IRR across 90 deals, totaling $450M in exits. Listen to our expert insights on investing from the AAA Storage team. See more at aaastorageinvestments.com.

Welcome to the AAA storage podcast,
your integrated real estate and

development partner, exploring all
things, self storage investing to

bring you diversified success.

Let's dive in.

Brandon Giella: Paul, we're back
again with another update on how

the real estate market is shaping
up here in twenty twenty-six.

So right now it is June 3rd, so we are
right in the middle of the year, and I'm

curious what your read is on the market.

What's the data you're seeing?

What's anecdotal, you know,
evidence that you're seeing?

Like how should we understand if
the market is up, down, sideways?

Where are we at?

Paul: Yeah.

Well, Brandon, first of all, from
a selfish standpoint, we're really

gonna focus on self-storage and
small-bay industrial and sort of

how they're performing as we hit the
mid-year point in twenty twenty-six.

maybe reference the, you know, some of
the other major sectors in commercial

real estate go, but, but I'm really
gonna focus on those two 'cause

that's what we do every day, and it's
what our investors care most about.

let's start with self-storage.

Um, the first thing, uh, and I don't
think I've, I've done this or said

this before when we, when we did
our, our, our sort of '26 outlook.

So we tried to look forward into '26
at the end of '25, and now we're, we're

halfway through the year, so we'll sort
of test and see how well our outlook

stands up, um, from six months ago.

a lot of the data,
particularly on self-storage…

No, particularly.

The…

A lot of the data on self-storage is
based on data received from the REITs.

as everyone probably knows, self-storage
is a fairly fragmented industry.

Over sixty percent of all self-storage
facilities are owned by, you know,

by either individuals or small
private equity groups, and that

data doesn't aggregate very well.

But the five publicly traded REITs publish
a ten Q, a ten K, and, and, and quarterly

financials every quarter, and they're
required by law to disclose a lot of data.

And so a lot of the, the data
that, that I have to work with is

really i-institutional level data
from publicly traded companies.

And I say that just because I'll
point out something, in just a minute.

Um, but, but the, the REIT data is the,
the, the basis for the sort of national

statistics that we all quote and refer to.

Um, you know, we're in an interesting
place, and I said this in a, uh,

update to our investors not long ago,
and I think I said this, um, as we

looked forward into twenty twenty-six.

We, we went through a very difficult
period operationally in twenty…

late '21 through about twenty twenty-four.

driven by the, the high occupancy rates
during COVID and low cost of money,

um, really impacted most major markets.

And for, you know, twenty-eight months
in a row, we saw declining advertised

street rates on a month-over-month basis.

That oversupply has clearly been absorbed.

Um, however, we are at the bottom
of a cycle, and in some markets

beyond the bottom of a cycle.

But the reality is, it's not
a steep curve coming out.

Uh, and some markets are gonna bounce
along the bottom for another six

months as it, they still struggle
to, to absorb the excess supply.

I say struggle, that's
a little bit strong.

still just work through the,
the excess supply that was

created in certain markets.

but I'll always remind everybody that
I can promise you right now, I can give

you statistics that show that o- that,
uh, um, San Antonio, Texas is overbuilt,

and I can then point to one of our new
facilities that we just built that's

leasing that up at above average pace.

Because San Antonio may be overbuilt,
but the five-mile radius around that

project isn't overbuilt, and at the end
of the day, that's really what matters.

But on the whole, I think we're
seeing, um, we, we, we saw revenue

growth reported by the REITs in the
first quarter of the year f- i- and

it was the best quarter in the last
four years in terms of revenue growth.

Brandon Giella: Hmm

Paul: that was primarily driven by
in-place rents, not by new tenants

and, and not by advertised rates.

there still continues to be downward
pressure on advertised rates, but in-place

rent growth has, is real at about 0.6%

month over month.

So that would equate to something, um,
a little over 7% on an annualized basis.

Brandon Giella: Mm-hmm.

Meaning they're charging higher rates for
current tenants as the year progresses?

Yeah.

Okay.

Yeah.

Paul: uh, uh, I mentioned, I
think we were talking earlier, I

mentioned there are a couple of
other dynamics that relate to that.

Number one, the average stay for a tenant
has lengthened pretty significantly.

Um, and the other thing, um, that,
that's happened, um, is, is that

the, uh, the, the ability to raise
rents, particularly for the REIT

players, that's been their strategy.

They, they use low advertised rents
and, um, and then rapidly increase rates

over a fairly short period of time.

But you've seen stays in self-storage
facilities, you know, get longer,

which has helped those in place rent
growth 'cause they're, they're, a good

operator's gonna have price increases.

Um, and I think that's had a, a positive
effect overall on, on revenue growth.

Um, you're, you're also, uh, we've
also seen the data tell us that

the percentage of the United States
population that's using self-storage

has grown from 11, a little over
11% to just a little bit over 13%.

That's a 2% move, but as a, as a
percentage of the, the, you know,

the 11%, it's about a 20% increase.

Brandon Giella: Oh, well, yeah

Paul: n-not, not, you
know, not insignificant.

occupancy has stabilized.

We saw the, the, the REIT, the
advertised rate competition,

um, really put some pressure on.

People were dropping prices
to, to maintain occupancy.

Occupancy's really stabilized
across all the, the market.

Uh, and there continues to be
weakness in demand, the housing

issues that we've talked about.

Um, until the housing market
unlocks, the housing…

Mobility is a key driver in self-storage,
and- Housing sales, residential

real estate sales about 25 to maybe
30% of demand in self-storage.

there's still activity there,
but it's at reduced rates from

what it historically has been.

And so until interest rates come down
and, and people start buying homes

or being willing to sell their home,
'cause part of the problem is people

have got, you know, mortgages at 2.5%

and they're not willing…

Even if they wanna move, they're
not w- unless they're moving because

they've gotta move for a job they
live at a place they just hate, um,

and they've, they've gotta get out,
they're not gonna give up a 2.5%

mortgage and trade it for a 6% mortgage.

And, and so you've got buyers that
are constrained on one side and

sellers on the other, and it's just
reduced all the overall activity.

But

Brandon Giella: right

Paul: enough, the Midwest and Northeast
have the strongest performance

data for self-storage right now.

Brandon Giella: Interesting

Paul: they're…

traditionally, that wouldn't be the case.

It would be the Sun Belt markets, but the
Sun Belt markets were the ones that saw

the most construction activity in that
2022 to '24 time period, and they're the

ones still working through the oversupply.

So pricing stability and rent growth is
stronger in the Northeast and Midwest

than it is in the Sun Belt markets, but
I think that's a short-term phenomena

that won't hold long term as these
Sun Belt markets work through the

excess inventory and sort of get back,
'cause they're the part of the country

that's really showing any growth.

Um, advertised rates, um,
continue to see pressure.

Remember, in the self-storage
industry, there are really

two components of, of rate.

One is, what are you advertising
to get a new customer?

And the other is, what are you charging
your in-place customers, your in-place…

What are your in-place rents?

And there's a pretty big delta
between what you can rent for the

first month and what you're likely
to be paying six or eight months

later if you stay in that facility.

this is one of the places where
the data is really, interesting.

Um, the REITs showed rates down 3.6%

month over month between
April and May of this year

The non-REITs or the privately
owned facilities showed advertised

rates down one point nine percent
month over month from April to May.

and it's a place where
the REIT data, uh…

rates are one of the data points that we
can see across the entire market 'cause we

can scrape competitors' websites and see
what their, their advertised rates are.

Brandon Giella: Mm-hmm.

Paul: uh, unlike in-place rent growth
and some of the other data that we really

have to get from the REITs because we
just can't see it from other operators.

But, um, it's an interesting place
where the performance where privately

owned facilities, facilities that are
owned by people like us, outperform the

REITs, where we were able to hold our
advertised rates a little bit better

than they were, though we were competing
with the, the REIT, you know, facilities.

Um, part of the reason
there is convenience.

We build single-story, drive-up
self-storage, and I don't care who

you are, backing up to your unit and
unloading the sofa is a lot easier

than loading it onto a cart, jamming it
onto an elevator, going up three floors

and, you know, and, and dealing with
all the headaches that come with that.

And a lot of the REIT facilities are
now the multi-story sort of Class A,

uh, brick construction, all climate
control, you know, facilities.

And, so I, I think that's
maybe one of the, um, places.

But private operators have outperformed
the REITs for the last three months in

terms of advertised rate performance.

Um, the last factor in self-storage,
and we're about right on point.

We're about 10 minutes in, so I'll give us
10 minutes or so to talk about small bay.

Um, and to me, this is
an important statistic.

It's part of our thesis for
Fund II and Fund I, that is

development continues to decline.

Um, the, the…

And because of that and because
there is growth in demand, it's

just not as dramatic as it's been in
the fa- in the past, um, sequential

improvement in the fundamentals,
in the operating fundamentals for

self-storage should continue through
the balance of twenty twenty-six.

Again, it's not gonna be a dramatic,
curve climb out of this bottom, but

I think we're pretty confident that
because development continues to decline,

because these Sun Belt markets have
shown their ability to absorb this

excess supply, because of the inward
migration and the growth that they have

had historically and continue to have,
we see the market really stabilizing.

And interesting statistics,
um, I've talked a lot about

this on a lot of our podcasts.

the peak in twenty…

late twenty twenty-two, late, uh,
twenty twenty-three, supply was in

excess of four percent of current
inventory on an annual basis.

As of May, it was two point two
percent Of, of existing inventory.

expected to deliver about fifty-two
million, almost fifty-three

million square feet of self-storage
during twenty twenty-six.

twenty twenty-eight, twenty
twenty-nine, that'll be thirty…

it's projected to be
thirty-six million square…

excuse me, thirty-eight million square
feet annualized basis, which will put new

development or new deliveries at about one
point seven percent of current inventory.

Brandon Giella: Hmm.

Paul: Um, and so you've got a
market where s- demand continues

to grow, although modestly.

Housing did a little lock, it'll take a
leap, but it's still growing modestly.

You're seeing longer stays.

You're seeing a higher percentage
of the population use storage.

So all…

And you've got demographic
trends that are driving all that.

So you've got a demand curve that looks
steady and increasing, and you've got a

supply cur-- a supply line that's going
the opposite direction, declining from

a high of over four, currently at two
point two, trending to about one point

seven percent of current inventory.

And we continue to believe, uh, this
is an absolute great time to invest in

self-storage, whether you're developing
like we do or buying an existing facility

Brandon Giella: Gosh, okay.

So things sound good.

This is promising.

Latter half of 2026 into 2027.

Feeling okay

Paul: but we're, we're, we're
not gonna see a return to

the heyday of tw- 2019, 2020,

Brandon Giella: Yeah

Paul: the next six months.

I think the, the market's maturing.

Um, it will behave more
like a mature market.

I think you'll, you'll…

I don't think you'll ever see new
supply at of 4% of current inventory

again ever in our industry, because the
industry's becoming more sophisticated,

more institutionalized, those types of
players are more disciplined in terms of

how they make investment decisions than
the historical base for our industry,

which has been sort of more, I don't wanna
say mom and pop, but less sophisticated,

less data-driven, um, you know, players

Brandon Giella: Question for you.

How, how-- Real quick, when you're
looking at this, the, you know, public

REIT data and, you know, reading ten
Qs, ten, 10Ks, what's your sentiment

on how you think about your investment
decisions based on that data?

And what I mean is, the way that you guys
think about your-- the, the properties,

the localities that you're investing
in, hyperlocal markets, three to five

radius, three to five mile radius, and
then these public REITs have these…

It, it seems like the data would almost
be so coarse it would, it would hard, hard

to make sense of, kind of, I don't know,
generally how you guys would wanna invest.

I'm not sure I'm articulating that
well, but, uh, is the sentiment like,

"Ah, it's helpful information, but it
really doesn't impact kinda how we're

thinking about it," or, I don't know,
what's the relationship between that?

Paul: just nailed it right

Brandon Giella: Okay.

Okay.

Paul: it's very helpful
contextual information.

Brandon Giella: Yeah

Paul: paints the picture
on a broad national basis

Brandon Giella: Yeah

Paul: and is good for identifying
trends and directions.

Brandon Giella: Yeah

Paul: really useful for making
individual investment decisions.

Brandon Giella: Okay.

That's what I was wondering.

Yeah.

Okay

Paul: and, and I mean, you've got,
you've got another complicating

factor, which is Extra Space would
be the one that's probably gone

the furthest in this direction.

now…

They have a property management
division, and we're starting to see

a lot of privately owned facilities
get rebranded as Extra Space,

And they're not owned by Extra Space,
they're managed by Extra Space.

Brandon Giella: Huh

Paul: and, and, uh, I
think it's, I don't know.

I, I don't, uh, as an operator,
that's not a direction I would go,

but, um, uh, obviously a lot of
people must be, think it's a good

Brandon Giella: Yeah

Paul: But, um, that adds a whole
different dynamic because it takes,

takes facilities that used to operate
like a private operator and turns them

into facilities that are driven…

I mean, the, the big REITs, particularly
in the operating environment, are

driven by algorithms and data.

Brandon Giella: Mm-hmm.

Paul: I mean, they're, they've
gotten as sophisticated with

pricing as the airlines are.

Brandon Giella: Hmm

Paul: It's really demand-driven
pricing, and their pricing may

change hour to hour depending

Brandon Giella: Gosh.

Wow.

Paul: they're seeing, so

Brandon Giella: Wow.

Okay.

Okay.

That's helpful.

I was, I was curious.

I mean, we've got tons of episodes,
I, I recommend, uh, folks listening

go check that out, on hyperlocal
markets, how you guys underwrite deals.

We've, we've got a lot of data
or, or, you know, content on that.

But I'm just curious, like, in the context
of this conversation, when you're reading

those, how you're kind of working through
them and how seriously you take them.

So yeah.

Paul: it's great at a contextual
level and sort of for trends and

Brandon Giella: Yeah, yeah

Paul: not super useful in
making individual investment

Brandon Giella: Yeah.

Okay.

Interesting.

Okay.

Thanks for that.

Okay.

Small bay industrial,
what's going on there?

Paul: small-bay industrial is easy.

That's a, that's an easy, um…

It, it, you couldn't have gotten this
outlook wrong in December if you tried,

because the data is just so obvious.

small-bay industrial was, and
continues to be one of the strongest,

if not the strongest segment in
all the commercial real estate.

Brandon Giella: Wow

Paul: on a nationwide
basis is north of 97%.

Um, and there are markets
that are literally at 100%.

Brandon Giella: Wow

Paul: uh, the broader industrial
market, um, is still recovering

from an oversupply, overdevelopment
that occurred in 2021 through

Brandon Giella: Hmm

Paul: of like self-storage did.

you know, and, and so the general
industrial category, big box logistics

is kind of how it's referred to,
facilities over 100,000 square feet,

and particularly facilities a, you
know, approaching a million plus square

feet, are still sort of digging out,
if you will, from the oversupply.

But small bay is so supply
constrained, um, and the demand

continues to grow that you're s- we're
seeing extraordinary rent growth.

I mean, write into our leases in
small bay, which are typically three

to five-year leases, a 3 to 3.5%

rate increase every year, and
that's on top of the fact that

these are triple net leases.

So to the extent that property taxes or
property insurance go up, those costs are

also being passed through to the tenants,
along with common area maintenance costs.

So, um, really supply constrained,
increasing demand, which is driving

rent increases almost across the
board, a really significant increase

in institutional investor interest.

And I say significant on a relative
basis, um, because if, if you, if you

look at institutional dollars invested
in the different segments of real estate,

indu- the general industrial category
is one of the largest places, and

it's because you've got single-tenant
facilities that tend to be national or

in-international companies with triple
A, know, institutional credit ratings.

Um, that's a safe harbor
for institutional investors.

The, the assurance that the income
stream is gonna continue is very high.

small bay is sort of the inverse of that.

Tends to be smaller tenants, often
local or regional businesses.

They're not national businesses,
and they don't have, you know,

institutional grade credit.

Um, but because of dynamics in small bay,
the, the supply constraint and the, the

ability to raise rents and the increasing
demand for it, the institutional investors

are really starting to wake up Um, and
I'll m- maybe give you a, a conclusion

at the end of this that what I think will
happen over the next five to 10 years.

But talk about the supply
constraint for a minute.

Over 80% of the small-bay inventory in
the United States was built before 2000.

Um, and there's been very little new, I
think, 23 million square feet last year,

um, across the country of new supply.

so there's been very
little built since 2010.

the big commercial, the big industrial
developers would prefer to develop a

million square foot data center or a
million square foot Amazon warehouse

because it's more efficient for them.

When we're building a small-bay
industrial park, it's usually 100

to 120,000 square feet in five or
six 20,000 square foot buildings.

That's just an inefficient proposition
for an industrial developer who's used

to building these massive facilities.

So they just haven't, they just
haven't taken advantage of what has

been a, a really good opportunity,
which has been great for us, right?

We've had this market
sort of to ourselves.

what we do see happening is the
institutional investment interest is

starting to tick up and non-traditional
industrial developers like us

are starting to realize there's
a real opportunity in small bay.

And I think what will happen, and
it's un- I say unfortunate, it's not

unfortunate, it's, it's inevitable,
but I do think the market will shift

over the next five to 10 years.

I think we've got a good five to
eight-year window here before the

market really changes, I think it
will become more institutionalized

like self-storage has.

You know, self-storage really began
that transition process in 2012.

'11, '12, '13, in there.

out of the Great Recession, um, it
became a favorite asset class with

institutional investors, and more and
more real estate developers started to

take notice and, and create product.

I think that same transition
will happen with small bay

over the next five to 10 years.

Brandon Giella: Hmm

Paul: Um, and it'll still be a great
market to be in, but I think the

next five to eight years are a unique
opportunity in small bay, where y- y-

you've got the institutional interest,
so you're getting the value on the exit

and you're, you've got buyers that give
you the market liquidity enough to be

able to reasonably sell a property fairly
quickly, and yet the threat of oversupply

won't have grown to a point where it
destabilizes the market at some level.

Brandon Giella: Hmm.

Paul: Um-

Brandon Giella: This might be a total
rabbit hole, but I, I'd be curious

how-- You talked about, like, business
formation being, uh, you know, a

factor to, to think about in this
and, and how entrepreneurship and

people starting maybe these local or
regional businesses might play into

that over the next five to eight years.

Like, I have people telling me they're
sick of their office jobs and AI and

all this kind of stuff, and so they
just wanna go start a trade, you know?

Start a HVAC company or, or a lawn
mowing business or something like that

Paul: Well, but even the
e-commerce side of the equation.

And we've

Brandon Giella: Yeah, for sure

Paul: tenants that are, are selling
coffee on the internet, and they've got

a 3,000 square foot bay in one of our
facilities with 1,000 square feet of

office in the front and 2,000 square feet
of warehouse in the back, and they're

Brandon Giella: Yeah.

Paul: U-

Brandon Giella: Yeah

Paul: truck drives up three times a day
and picks up packages that are going out,

Brandon Giella: Yeah

Paul: and they're processing orders
and doing all that in the front.

So yeah, it's, um, it…

So here's, here's, here are the factors
that drive a successful small-bay project.

Number one, it's got to be a
market with growth, and business

formation is part of that growth.

Um, needs to be a market with limited
supply and pipeline growth, and that's

almost the case in every market.

You want a market with vacancy under 5%.

Um, and I, I can't find a market in
the country that has vacancy over 5%.

Brandon Giella: Yeah

Paul: then the other thing is you want
development cost below replacement cost.

and, and, and that's often driven
at some level by land cost.

Um, you, you can't

Brandon Giella: Mm-hmm.

Paul: a small-bay facility and make the…

Well, you can, but it, the, the more
expensive markets from a land standpoint

are tougher to make the numbers work.

Brandon Giella: Mm-hmm.

Paul: But if you take those
characteristics and you say, "Okay,

where in the country do those exist?"

There are four markets.

Number

one is the

Carolinas.

Number two is secondary markets in Texas.

In other words, not downtown Dallas-Fort
Worth or downtown Austin, but the

ters- the secondary markets around
Dallas-Fort Worth, around, you

know, that, in that I-35 corridor,
um, outside Austin and San Antonio.

And then Tennessee and
certain submarkets in Florida.

Um, there, there…

I mean, I can tell you, I, I overlaid
sort of the, the growth numbers, the,

the supply and pipeline vacancies,
development cost, overlaid them, and

those are the four markets that stand out.

And two of them, the first two,
are where we're focused and where

we're developing small bays So, um-

Brandon Giella: That anecdotally
I can, I can totally see that.

I live about six blocks from I-35 in
Fort Worth, and if you go about 30

minutes southwest of here and then about
an hour north of Dallas, in those two

corners of DFW, just explosive growth.

Just amazing growth.

Yeah.

Paul: Yeah.

Brandon Giella: Yeah.

Amazing

Paul: Yeah.

It's, um, it's a, it's very interesting.

But I, I think small-bay is probably
the best opportunity I've seen in

commercial real estate in the last

years.

Brandon Giella: Hot take.

Okay.

Paul: I think, I think it…

I think it's,

Brandon Giella: Okay

Paul: at a unique point in its evolution.

Um, a- a- and it's just

It's…

The, the unique combination, I said this
a minute ago, the unique combination is

now institutional interest sufficient
to provide liquidity, and it's yet

still not seeing the growth in the
supply side of the equation that will

start to distort the fundamentals.

Brandon Giella: Hmm.

Hmm

Paul: And there's, just like
there was in self-storage,

Brandon Giella: Hmm

Paul: in self-storage beginning about
2010, 2011, through 2019, 2020, when

COVID kind of changed everything.

There was a unique window of
time, and if you look at our track

record, the best deals we ever did,

Brandon Giella: Hmm.

Paul: most of them fall
into that timeframe.

Brandon Giella: Hmm

Paul: Uh, our average hold
period pre-2011 eight years.

Our average hold period
from 2011 to 2022 was 3.3

years.

Brandon Giella: Gosh, yeah

Paul: Our average IRR from inception
in 1993 to 2011 was an 18% IRR.

Brandon Giella: Hmm.

Paul: Our average internal rate of return
projects built between 2011 and 2021 33%.

Brandon Giella: Okay

Paul: we're, I think we're in that second
window in the small-bay space, that

10-year stretch between 2011-2020 9-10
stretch that we saw in self-storage.

I think we're getting ready
to see that again in small-bay

Brandon Giella: This is fascinating.

I wanna emphasize that for, for our
listeners because you, you've been

doing this a long time, 40 years.

You've seen a lot of things
come and go, a lot of trends, a

lot of hype, a lot of whatever.

So for you to say that, seeing
what you've seen, is strong,

Paul: Yeah.

Brandon Giella: say the least.

Yeah.

Paul: I

Brandon Giella: Interesting.

Okay

Paul: And it's the magic.

It's…

Pre where we are right now,

Brandon Giella: Mm-hmm

Paul: we were able to sell properties,
but there were a lot of institutional

buyers, and the competition for,
for, to buy properties wasn't

there to drive cap rates downward.

Brandon Giella: Hmm

Paul: So although we were
able to underwrite at a 10.5%

yield on cost, 10, 10.5%

yield on cost, cap rates, which
is a full 100 basis points above

where we are in storage, cap rates
were also 100 basis points higher.

Brandon Giella: Hmm

Paul: So the development spread, the
profit opportunity, was basically

equivalent to self-storage.

Brandon Giella: Hmm.

Paul: We're now seeing the institutional
interest start to compress cap rates in

the small-bay space, Which is widening
the development spread, and therefore

the opportunity to develop, stabilize,
and sell and s- create significant value

Brandon Giella: Growth fund two,
growth fund three, here we come.

Paul: yeah.

We're even thinking about…

This is a, a, this is a really hot
take 'cause we've not decided at all,

but there's every chance in the world
that Fund III will flip the allocation

to capital and focus 60 to 70% of the
capital in Fund III on the small-bay side

Brandon Giella: Wow, yeah.

Paul: 40% on the storage side.

Brandon Giella: Wow, yeah

Paul: storage 'cause we, we know
it works and we know how to do

it, and it's such a great asset
class, uh, to, to be invested in.

But I think we're in a
unique window of time

Brandon Giella: That's cool

Paul: the market's telling you this
is the play that, whose time is really

right right now, and it's small bay.

Brandon Giella: Wow, interesting.

Okay.

So I won't hold you to that, but,

Paul: Yeah

Brandon Giella: uh, is, uh, same kind of
markets as what you would see, you know,

maybe over the next five to eight years?

Is it still gonna be this
Carolinas, Texas, and, and some

other Sun Belt states like that?

Paul: I think there are
opportunities in a lot of places.

Brandon Giella: Yeah

Paul: we'll focus in
the Carolinas and Texas.

N-

Brandon Giella: Yeah, yeah

Paul: probably on the small-bay
side a little less than Florida.

Um, but, uh, 'cause, uh, yeah, I just…

Yeah, Florida's a tough
state to develop in.

Lot of regulation, lot of zoning

Brandon Giella: hear that

Paul: of, And it, it drives cost
a little bit north of where,

you know, we'd like to be.

So Carolina's very development friendly.

Texas, super development friendly.

Brandon Giella: Yeah

Paul: those secondary markets
supported by major metropolitan

areas, in the interstate corridors,

Brandon Giella: Yeah.

Yeah

Paul: is, is, uh, it's
just an opportunity.

Like I said, it's as good as I've
seen in the last 10 years, so

Brandon Giella: Fascinating.

Okay.

Well, there's the takeaway
for the, for the show.

That's great.

Paul: So

Brandon Giella: Okay.

Paul: overall the market outlook for
the, you know, the first half of '26

and looking forward to the second
half of '26 is, I think self-storage

continues to be a solid performer.

and, uh, and we're excited about
how all the properties in Fund

1 and Fund 2 are performing.

A- and then on the other side, I think
small-bay is sort of, uh, uh, the, uh,

the timing is so right for small-bay,
not just in the balance of this year,

but for, for the next five years.

Brandon Giella: Wow, cool

Paul: and, uh, so

Brandon Giella: Cool.

Okay.

I love it.

Well, in a couple of months, I'm sure
we'll do a, a, a, a 2027 market outlook,

how, how things are shaping up then.

Um, but in the meantime, for those
listening, to check out more and more of

our data and content and resources, please
go to aaastorageinvestments.com/insights,

and you'll see all this data that we're,
we're producing, uh, and the different

episodes that we've done before, and
Paul's wonderful wisdom as always.

Paul, thank you.

We'll talk soon.

Paul: buddy.

Thanks