Inside Growth Fund 2: A 2026 Self-Storage Development Pipeline Update

On the latest episode of The AAA Storage Podcast, Paul Bennett gives an update on Growth Fund 2, AAA Storage's $40 million ground-up development fund. This article is for growth-minded investors tracking the fund's build-out and weighing whether the window to invest is still open. Below is Bennett's project-by-project update, the market thesis behind the fund's timing, and where the numbers stand eight months after breaking escrow.

Why the self-storage development pipeline is shrinking

The national self-storage development pipeline has fallen from roughly 4% of existing inventory at its 2022–2023 peak to about 2.3% today, and AAA Storage projects it will keep declining toward 1.5% by 2029–2030 — a trend Bennett says sets up a seller's market for developers positioned to sell into it.

COVID-era demand pushed occupancy to 98% nationally while rates sat near 2.5% to 3%, and that combination pulled a wave of new construction into 2021 through 2023 that left most markets oversupplied. Higher interest rates since have made new deals harder to pencil, which is part of why the pipeline keeps shrinking even as demand keeps growing. "There's not a data point out there that would tell you that there'll be less demand for self-storage in five, six, seven years than there is today," Bennett said. Falling supply and rising demand point to a seller's market in the 2027-through-2031-or-2032 window — the window Growth Fund 1 and Growth Fund 2 were both built to sell into.

Six projects, eight months in

Growth Fund 2 broke escrow in late November 2025 and started construction on its first three projects in January 2026. Huffmeister Self Storage, a roughly 70,000-square-foot facility in Northwest Houston, is on budget and on schedule for its certificate of occupancy in late September or October, with property management already preparing initial marketing. About a month behind it, a combined self-storage and small-bay business park in Buda, south of the Austin airport, is set to reach its certificate of occupancy in October or early November and begin renting units by mid-fourth-quarter.

Elgin, east of Austin in Bastrop County, is next to break ground, in September, carrying what Bennett called one of the fund's best loan terms since the COVID era: an 80% loan-to-cost ratio, 36 months of interest-only payments, and a rate just under the fund's typical benchmark. In Hutto, a site originally planned as storage and small-bay shifted to all small-bay after a nearby Samsung chip plant created demand from the contractors that serve it — plumbing, HVAC and similar vendors needing warehouse space close to the plant. Rounding out the six active projects is Blake Manor, which Bennett said has the strongest supply-and-demand numbers in the portfolio; a seventh project is targeted for early-to-mid first quarter of 2027, on the way to a planned eleven.

How AAA Storage manufactures value in ground-up development

Growth Fund 2 is underwritten to the spread between what it costs to build a project and what the stabilized asset is worth once it's leased — not to market appreciation. "We manufacture value in the development process. We're not dependent on appreciation," Bennett said. As an illustration of that spread, he described building a project for $10 million that, once stabilized, is worth $16 million — the difference between a project's cost to construct and the yield the market assigns it once it's generating income.

It's the same mechanism behind Growth Fund 1's early results: every active Fund 1 project is tracking ahead of its modeled projections on gross revenue, and a 104,000-square-foot business park in Georgetown was 82% leased eight months after its certificate of occupancy, with a sale targeted for the first quarter of 2027. AAA Storage hadn't closed a legacy-portfolio sale since 2022; it has closed five since last fall, all to institutional buyers who Bennett says are re-entering the market as storage cap rates find a bottom. See our Growth Fund 1 portfolio update for the full picture.

Key Terms

• Loan-to-cost: the share of a project's total construction cost covered by debt; Elgin's loan covers 80%.

• Interest-only period: the stretch of a loan's term when payments cover only interest, not principal — 36 months on the Elgin loan.

• Yield on cost: the income a stabilized property generates divided by its cost to build, the metric AAA Storage underwrites development returns against.

• Stabilization: the occupancy level, typically 80–85%, at which a newly built facility is considered to have reached steady-state performance.

Frequently Asked Questions

What is Growth Fund 2 investing in?

Growth Fund 2 is a $40 million private equity real estate fund developing seven self-storage facilities and four small-bay industrial facilities in Houston, Austin, San Antonio and Charlotte, North Carolina, with eleven projects planned in total.

Why is AAA Storage building small-bay industrial alongside self-storage?

When a site is large enough, AAA Storage splits it between a self-storage facility and a small-bay industrial park, and will shift a planned storage site entirely to small-bay when local demand changes — as it did in Hutto, where a nearby Samsung chip plant created demand from vendors needing warehouse space.

When will Growth Fund 2 investors start seeing an exit?

AAA Storage's funds typically begin exiting properties in year three or four and complete all exits within six to seven years, developing, stabilizing and selling each asset rather than holding it long term. Growth Fund 2's first project, Huffmeister, is targeted to sell roughly four years after its January construction start, though timing is not guaranteed.

Is it too late to invest in Growth Fund 2?

No — the fund is still raising capital, and Bennett said investors who join now receive a pro-rata interest across all eleven planned projects, including the three nearest completion.

What return is Growth Fund 2 targeting?

Bennett said Growth Fund 2 is targeting an internal rate of return north of 20%, consistent with the firm's track record across dozens of full-cycle deals. This is a target based on projected performance, not a guaranteed return, and individual projects can perform above or below expectation.

Talk to Us About Growth Fund 2

Growth Fund 2 is still accepting investors. Contact AAA Storage's investor relations team to talk about how a ground-up development fund in self-storage and small-bay industrial fits your portfolio.