From Treasury Yields to Cap Rates: How Interest Rates Impact Self-Storage Values

Interest rates affect nearly every part of a commercial real estate transaction—from how much a buyer can borrow to the return investors expect from a property.

For self-storage owners and investors, one of the most important benchmarks to watch is the 10-Year U.S. Treasury yield.

As of September 3, 2026, the 10-Year Treasury constant-maturity yield stood at approximately 4.79%. But what does that number actually mean for someone buying, selling, or owning a self-storage facility?

The connection isn't always direct, but understanding the relationship between Treasury yields, borrowing costs, cap rates, and property values can help investors make better decisions.

Why Investors Watch the 10-Year Treasury

U.S. Treasury securities are generally considered among the lowest-credit-risk investments available because they are backed by the U.S. government.

Commercial real estate, including self-storage, carries considerably more risk.

Investors therefore generally expect a higher potential return from owning real estate than they would receive from a Treasury security. The difference between a property's yield and a benchmark such as the Treasury yield is often part of the risk-return analysis investors consider when evaluating an acquisition.

When Treasury yields move higher, investors may require higher returns from commercial real estate.

When Treasury yields decline, real estate can become relatively more attractive, although many other factors influence property pricing.

Treasury Yields and Cap Rates Are Not the Same Thing

It is important to understand that the 10-Year Treasury does not directly set self-storage cap rates.

Cap rates are influenced by many factors, including:

• Property quality

• Location

• Occupancy

• Revenue growth potential

• Local supply and demand

• Buyer competition

• Financing availability

• Perceived investment risk

Interest rates and Treasury yields are part of that equation, but there is no fixed formula stating that a specific change in Treasury yields must produce an equal change in cap rates.

That is why cap rates can sometimes remain relatively stable even when Treasury yields move significantly.

The Cost of Debt Changes What Buyers Can Pay

Interest rates also affect property values through financing.

When borrowing costs increase, the debt service required to acquire the same property generally increases as well.

That can reduce a buyer's cash flow after debt service and potentially lower the amount of leverage that makes economic sense.

For example, imagine two buyers evaluating the same self-storage facility at the same purchase price and NOI. If one can obtain financing at a materially lower interest rate, that buyer may be able to generate a stronger cash-on-cash return than a buyer financing the property at a higher rate.

This is one reason changes in the lending environment can affect buyer purchasing power.

Small Cap Rate Changes Can Have a Big Impact on Value

Cap rates become especially important because commercial real estate values are commonly evaluated using a property's net operating income.

Consider a self-storage facility generating $500,000 in annual NOI.

At a 5.0% cap rate, the indicated value would be approximately:

$10,000,000

At a 5.5% cap rate, the same $500,000 NOI would indicate a value of approximately:

$9,090,909

At a 6.0% cap rate, the indicated value would fall to approximately:

$8,333,333

Nothing about the property's NOI changed.

Only the capitalization rate changed.

This illustrates why movements in investor return requirements can have such a meaningful impact on commercial real estate valuations.

The Other Side of the Equation: NOI

Interest rates and market cap rates are largely outside an owner's control.

NOI is different.

Owners may be able to improve property performance through strategies such as:

• Optimizing rental rates

• Increasing occupancy

• Reducing unnecessary operating expenses

• Improving collections

• Adding ancillary income

• Improving marketing and lead conversion

• Implementing technology and automation

Increasing NOI can help offset some of the valuation pressure created by higher cap rates.

Using the previous example, a facility producing $500,000 in NOI would be worth approximately $8.33 million at a 6% cap rate.

If the owner increased NOI to $600,000, the indicated value at the same 6% cap rate would be:

$10,000,000

That is why operational performance remains so important regardless of where interest rates move.

Where Rates Stand Today

The Federal Reserve maintained its target range for the federal funds rate at 3.50% to 3.75% following its July 2026 meeting.

Meanwhile, the 10-Year Treasury constant-maturity yield was approximately 4.79% as of September 3, 2026.

The Federal Reserve's next scheduled policy meeting is September 15–16.

For self-storage investors, these numbers are worth monitoring—but trying to predict the next interest-rate move shouldn't replace disciplined underwriting.

What Buyers Should Be Watching

Rather than asking only, "Where are interest rates going?" investors should consider several questions:

What does the property generate today? Evaluate current NOI rather than relying entirely on projected future performance.

What will the debt cost? Understand the actual loan terms available for the transaction.

Does the deal still work if rates remain elevated? Stress-test the investment instead of assuming refinancing will become cheaper.

Is there a realistic path to increasing NOI? Operational upside can sometimes be more important than predicting interest rates.

What return does the investment provide relative to the alternatives? Investors should consider the return they are receiving for the additional risk associated with owning and operating real estate.

What Sellers Should Understand

Sellers should also pay attention to the interest-rate environment because it affects the buyers bidding on their properties.

Higher borrowing costs can reduce purchasing power or make buyers more sensitive to pricing.

However, quality properties with strong NOI, good locations, limited new competition, and identifiable growth opportunities can still attract significant interest.

Preparing accurate financial statements, maintaining strong operations, and demonstrating realistic upside can become especially important when capital is more expensive.

The Self-Storage Market Adds Another Layer

Interest rates aren't the only factor affecting storage valuations.

According to Yardi Matrix's August 2026 national report, self-storage fundamentals are showing some positive signs as occupancy improves and new supply slows. At the same time, national advertised rental rates remained 1.6% below the prior year in July.

Yardi also reported that new self-storage supply is projected to decline by almost 19% in 2026 compared with 2025, based on year-to-date completions and construction-start data.

That combination illustrates why investors need to look at both the capital markets and the property market.

Interest rates affect the cost of capital.

Supply, demand, rents, occupancy, and operations affect the income produced by the asset.

Ultimately, both influence value.

The Bottom Line

The 10-Year Treasury is an important economic indicator for commercial real estate investors, but it shouldn't be viewed as a crystal ball for self-storage values.

Treasury yields, borrowing costs, investor return expectations, property fundamentals, and NOI all interact to influence what buyers are willing and able to pay.

For self-storage investors, the goal shouldn't necessarily be to perfectly predict the next move in interest rates.

The goal should be to understand how today's rates affect the deal today—and make sure the investment still makes sense under realistic assumptions.

Sources & Resources

U.S. Department of the TreasuryDaily Treasury Par Yield Curve Rates

Federal Reserve BoardH.15 Selected Interest Rates

Federal Reserve — Federal Open Market CommitteeJuly 28–29, 2026 Meeting Statement and Implementation Note

Yardi MatrixAugust 2026 Self Storage National Report

Yardi MatrixQ3 2026 Self Storage Supply Forecast

Disclaimer

This article is provided for informational purposes only and does not constitute investment, financial, legal, or tax advice. Interest rates, financing terms, cap rates, and market conditions change over time and vary by property and location. Investors should perform independent due diligence and consult appropriate professionals before making investment decisions.