Beyond Major Metros: Unlocking Operational Upside in Secondary Self Storage Markets

For years, institutional capital has gravitated toward major metropolitan markets. However, some of the strongest risk-adjusted returns in self storage continue to come from smaller communities throughout Mississippi, Arkansas, Tennessee, Alabama, and Louisiana. While these markets may not receive the same attention as Nashville, Memphis, Birmingham, or New Orleans, they often present compelling investment opportunities for both private investors and regional operators.

At Superior Capital Advisors, we continue to see significant demand from buyers actively seeking well-positioned assets in secondary and tertiary markets throughout the Mid-South. The fundamentals behind this demand remain strong.

Less Competition Creates Better Investment Opportunities

One of the greatest advantages of investing in smaller markets is limited competition. Many communities simply do not have enough population density to attract large institutional developers, resulting in fewer new facilities entering the market.

This creates several advantages:

• Existing facilities often enjoy stabilized occupancy -  The catch is you have to manage rates in some markets more conversative as the tenant may be more sensitive to rental rate increases. 

• Rental rates tend to remain stable – You do not usually see the rental rates fluctuate up and down as much as you do in metropolitan areas that are dominated by professional management. 

• Operators that are able to scale in small market may be able to more influence on market rates. 

• Supply growth is more predictable – In a normal market, developers do not build in smaller markets because the returns for new construction may not be there. The developers normally gravitate to larger markets with higher population growth, higher household income, and markets with a better exit strategy. 

Unlike larger metropolitan areas where multiple developments may deliver simultaneously, smaller markets often experience long periods with little to no new construction.

Stable Local Economies Drive Consistent Demand

Many smaller cities throughout Mississippi, Arkansas, Tennessee, Alabama, and Louisiana and other small towns across America have diverse economic drivers that provide a dependable customer base.

Examples include:

• Manufacturing and industrial employers

• Distribution and logistics centers

• Agricultural businesses

• Healthcare systems

• Universities and community colleges

• Military installations

• Regional government offices

These industries create consistent population movement and employment stability, both of which generate recurring demand for self-storage.

Lower Acquisition Costs Improve Returns

Investors frequently discover that acquisition pricing in smaller markets allows for significantly stronger cash-on-cash returns compared to larger metropolitan areas.

Benefits often include:

• Lower purchase price per square foot

• Higher capitalization rates

• Stronger initial cash flow

• More attractive debt coverage ratios

• Lower operating expenses

These factors allow investors to achieve meaningful returns without relying solely on aggressive rent growth.

Population Growth Isn't Everything

While headline population growth receives significant attention, many successful self storage investments occur in markets with stable populations rather than rapidly growing ones.

Storage demand is driven by life events, including:

• Moving

• Divorce

• Marriage

• Downsizing

• Business inventory needs

• Estate settlements

• College students

• Military transfers

These events occur regardless of whether a community is growing by 5% annually or remaining relatively stable.

Smaller Markets Often Have Operational Upside

Many facilities in secondary markets remain independently owned by operators who have successfully managed their properties for decades.

This creates opportunities for investors to increase value through:

• Revenue management programs

• Online rentals

• Modern websites and digital marketing

• Tenant insurance programs

• Ancillary income streams

• Security upgrades

• Professional management systems

• Expense optimization

Often, these operational improvements can generate significant increases in net operating income without requiring major capital expenditures.

Buyer Demand Remains Strong

The buyer pool for quality self storage facilities in smaller markets has grown considerably over the past several years.

Today's active buyers include:

• Regional operators expanding their footprint

• Private equity groups

• Family offices

• High-net-worth investors

• Local ownership groups

• Experienced self storage operators seeking yield

Many buyers specifically target secondary markets because they believe pricing remains attractive compared to gateway cities.

Financing Continues to Support Investment Activity

Lenders remain comfortable financing well-performing self storage facilities, particularly those demonstrating:

• Strong historical occupancy

• Stable collections

• Experienced ownership

• Limited competitive supply

• Positive demographic trends

• Consistent operating history

Even in a more disciplined lending environment, quality assets in well-positioned smaller markets continue to attract financing.

Why the Mid-South and Southeast Stands Out

States like Mississippi, Arkansas, Tennessee, Alabama, Georgia, South Carolina and Louisiana offer a unique combination of affordability, economic diversity, and investment potential.

Many communities benefit from:

• Major interstate transportation corridors

• Expanding manufacturing investment

• Distribution hubs

• Affordable cost of living

• Strong local business communities

• Limited barriers to entry for acquisitions while maintaining reasonable barriers to new development

• Taxes remain low relative to the Northeast and West Coast, driving population growth. 

For investors willing to look beyond primary metropolitan markets, these states continue to provide opportunities to acquire assets with durable cash flow and long-term appreciation potential.

Challenges that Turn into Value 

Buying an asset from a “mom and pop” seller also comes with challenges but likely will be worth the effort. Challenges I have seen that turn into value:

Poor financials to properly underwrite the asset leads to an un-bankable facility which in turn leads to a cash heavy deal or seller financed deal. 

Sorting through friends and family units to understand the true physical occupancy of the facility leads to units for rent at a new street rate immediately. 

Move outs with the slightest of rate increases leads to a large majority of the tenants paying the new rate leading to a short term lower physical occupancy and a gradually increasing economic occupancy. 

Underwrite to an appropriate capex budget such as roof repairs or replacement, paving, fence, gate, security cameras, paint, etc.. 

Trouble finding cost efficient management for smaller sites, good boots on the ground in a market is very crucial. 

The Bottom Line

While institutional investors often focus on major metropolitan areas, experienced self storage buyers recognize that some of the best investment opportunities still exist in America's smaller communities.

Well-operated facilities in secondary and tertiary markets frequently offer stronger yields, less competition, operational upside, and resilient demand fundamentals. For investors seeking stable income and long-term value creation, the Mid-South remains one of the most attractive regions in the country.

At Superior Capital Advisors, we specialize in helping buyers and sellers navigate self storage transactions across Mississippi, Arkansas, Tennessee, Alabama, Louisiana, Texas and throughout the Southeast. Whether you're looking to acquire your next facility, expand an existing portfolio, or understand the current market value of your property, our team provides the market knowledge and transaction experience to help you make informed investment decisions.