REITs (Real Estate Investment Trusts) have been buying self-storage facilities at a lower cap rate for several reasons:

Growing demand: The demand for self-storage has been increasing in recent years, driven by population growth, urbanization, and the rise of e-commerce. This has led to higher occupancy rates, rental rates, and overall performance of self-storage facilities, making them more attractive to REITs.

Low-interest rates: Low-interest rates make borrowing cheaper for REITs, which in turn allows them to pay more for properties and still maintain a positive spread between the cap rate and the cost of borrowing.

Stable cash flow: Self-storage facilities generate stable and predictable cash flow, which is attractive to REITs, particularly in an uncertain economic environment.

Less competition: Self-storage facilities have been less popular among institutional investors than other types of real estate assets, such as apartments, offices, and retail properties. This has led to less competition among REITs and other investors for self-storage properties, which can enable them to purchase them at a lower cap rate.

Low correlation with other assets: Self-storage has a low correlation with other assets, meaning that its price does not move in the same direction as other assets. This has made self-storage an attractive diversification option for REITs as it reduces the overall risk of the portfolio.

Tax benefits: REITs can also benefit from tax benefits for owning self-storage facilities, which can make it more profitable for them to invest in the asset class.

It’s important to keep in mind that the cap rate is not the only metric used to evaluate the performance of a self-storage facility. Other factors such as occupancy rate, revenue growth and operating expenses must be considered as well. Additionally, the market conditions may change in the future, which can affect the cap rate and the prices of self-storage facilities.