Dream Storage Newsletter - April 2024

Monthly Newsletter

Our team attended an industry conference in Las Vegas earlier this month where we sat down with investment sales brokers and other operators to exchange information regarding the self-storage market. Additionally, the two largest public REITs in our industry released first quarter earnings results this week.

In our April edition of the Dream Storage newsletter, we share insights from the conference, operating results from the public self-storage companies, and thoughts on where we are headed.

Market Insights

There were three main takeaways from the industry conference. Firstly, while a level of uncertainty remains in the market due to the interest rate environment and upcoming election, people are significantly more confident today compared to this time last year. Next, the transaction market remains muted as buyers and sellers continue to diverge widely on asset valuations. Lastly, there is “stress, but not distress”, meaning that while some operators are having challenges from a financing perspective, there have been very few circumstances of distressed assets actually creating forced sellers.

Public Storage reported Q1 revenue growth of +0.1% and a weighted occupancy of 92.1% which is above the historical average this time of year. Extra Space Storage reported Q1 revenue growth of +1.0% and an average occupancy of 93.1%. Despite street rates largely remaining flat month over month, facility occupancies have remained steady and are an indicator of strong industry operating fundamentals.

Dream Storage’s Outlook

The self-storage industry has normalized after settling from its pandemic driven highs. Good operators with well located properties continue to outperform. Additionally, elevated interest rates have constricted development which will limit new supply in the near term. This should insulate existing properties and bolster performance. For these reasons, self-storage remains a favored real estate asset class by lenders.

With transaction activity still down, we believe opportunities will come from properties in lease up and financed with bridge debt. While we do not anticipate widespread distress, the assets most likely to sell fit this category and that is where we have been focusing our efforts. We look forward to sharing the next opportunity with you.

The Dream Team