Self Storage REITs Pacing the Competition

2 August 2013 by


The Real Estate Investment Trusts are reporting robust earnings for the first quarter of 2013. Many of the REITs, especially in the self storage industry, are posting huge gains, even exceeding Wall Street expectations. A recent Wall Street Journal article provided more information about the REIT sector.

The self storage REITs are benefitting from strong demand and increased monthly prices on storage units. With the economy slowly rebounding, storage facilities can once again begin raising rates to customers without much fallback. Extra Space seemed to benefit the most with a record high occupancy rate of 88.6% companywide which boosted revenue 7.5% and Net Operating Income 10.8%.

Apartment complexes and other commercial real estate are growing but at a slower pace than in the past due to lackluster employment and more competition. The slowly improving economy has allowed landlords to slightly raise rents which are contributing to a larger bottom line. In addition, occupancy rates are slightly up as well.

Larger apartment REITs are reporting strong rental growth but could face a slowdown because of rising competition and more people purchasing homes. During a conference call, David Stockert, CEO of Post Properties said, “Apartment REITs are moving into a new phase of the multifamily housing cycle, a more typical phase, characterized by higher levels of apartment supply and incrementally greater competition from for-sale housing. The competition will result in a more sensitive trade-off between pushing rents and sustaining high occupancy.”

Self storage operators continuously deal with the issue of rental rates and occupancy. While some may think it is great to be 100% full there are opportunity costs one must consider. We wrote about the issues with having 100% occupancy a few months back and there are several problems with being full. Increased competition from new developers and lost revenue from not raising rates are two big issues. What is the best course of action for your storage facility? Take some time to research your area, competition and customers. It will most likely be different for each facility and town.

One index which tracks 51 REITs with nearly $500 billion in assets, increased 1% in April and showed values have fully recovered the ground which was lost during the Great Recession and are hovering above 2007 peak levels. This is good news and seems to mean we are pulling out of the recession, slowly recovering and should continue to see good growth in the self storage REIT sector.

SSF Team

SSF Team

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