Investing.com - Mizuho maintains an Equal-Weight rating on the Self Storage subsector, citing near-term headwinds including elevated supply, higher mortgage rates, weak demand, and emerging concerns about agentic AI impact on pricing power. The subsector's earlier outperformance of 1,000 basis points versus the RMZ index has largely eroded as multiple pressures mount.

The firm expects operators to continue trading rate for occupancy in the near term, with fundamentals likely to "bounce along the bottom" absent a demand recovery. The 30-year mortgage rate currently stands at 7%, up 75 basis points year-over-year, while home sale forecasts for 2026, 2027, and 2028 continue to be revised downward. Supply remains elevated in Sunbelt markets including Florida, Atlanta, and Phoenix, forcing operators to discount move-in rents to stabilize occupancy.

Mizuho anticipates a "push-and-pull" impact from AI on the subsector. The firm expects existing customer rate increases to decrease as consumers utilize AI tools to push back on rate increases. Labor costs and marketing costs are likely to decrease as operators deploy more sophisticated pricing algorithms and operational efficiencies.

Bulls point to slowing development that should reduce cannibalization and improve pricing power, according to Yardi data. The subsector's month-to-month lease structure has historically allowed it to outperform longer-lease subsectors in rising rate environments. Broker conversations indicate transaction activity is increasing and keeping cap rates tight, while sentiment at this year's Self Storage Association conference was incrementally more positive.

Regulatory risk is expected to grow after New York City adopted new licensure and forward 12-month price transparency requirements. Mizuho expects more jurisdictions likely to follow, which may impact pricing strategies in an already-weak demand environment. A competitor report recently included Self Storage REITs in a basket of companies facing agentic risk alongside consumer subscription services.