Dream Storage Newsletter - May 2025

Monthly Newsletter

In this newsletter, we take a look back at the month of May and reveal findings from the REITs Q1 earnings as well as the industry’s sentiment on 2025 and where we are headed.

Market Insights

A summary of each REIT’s Q1 reports is provided below (source: CBRE). The REITs reported an average same-store revenue growth of 0.04 percent compared to the same quarter last year. The average same-store expenses increased by 2.6 percent, leading to an average same-store net operating income decrease of 1.1 percent compared to the same period last year. Extra Space Storage added 113 stores to their third-party management platform, reflecting a trend many of us in the industry have observed as owner-operators reconsider selling their properties and instead opt to have one of the large operators manage their facilities. As third-party management options become increasingly accessible, many operators no longer have to choose between retiring and the daily, rigorous business of running a storage facility.

The California Self Storage Association successfully turned back the self storage price controls proposed in SB709. As introduced, SB709 would have limited self storage annual rent increases in California to the lower of 5 percent plus CPI or 10 percent. Ultimately, the bill was amended so that leases only need to disclose the maximum monthly rate during the initial 12-month period of the rental agreement. While the outcome is preferable to the original bill, the CSSA maintains that any regulation limiting market-based pricing for self storage is inappropriate and ultimately harmful to both consumers and businesses.

Dream Storage’s Outlook

While many brokers remain cautiously optimistic about transaction volume picking up pace in 2025, many buyers feel this optimism is tied primarily to REITs and very large players who are beginning to transact as they accept lower returns. In addition to having access to cheaper debt (if using traditional debt at all for these purchases), larger players are often able to invest on a macro level and evaluate investments through the lens of a long-term hold. For many of us, this is not an option and continues to make buying and competing in this environment difficult.

Rachel spent last week at an Industrial Outdoor Storage conference in Dallas, Texas. While the asset class is by no means new, it is starting to attract attention for many of the same reasons selfstorage has been appealing for years. Ownership is extremely fragmented, information on competitors is limited, third-party management is rarely available (making it harder for many players to enter the space), and private equity has not yet fully changed the investment landscape. Many panelists described the asset class as being in the second inning of its investment lifecycle, indicating that opportunities are still plentiful. We will continue to explore this space alongside our ongoing commitment to securing a self storage investment and will keep our investors informed on both.

As always, thank you for your support.

Dream Storage