Dream Storage Newsletter - October 2024

Monthly Newsletter

The self-storage real estate investment trusts (REITs) began reporting third quarter earnings this week. As public companies, their size and scale serve as a barometer for industry operating fundamentals and investment activity. In our October newsletter, we discuss their results and the implications for the self-storage world.

Market Insights

Public Storage reported quarter end revenue of -1.3% and net operating income of -2.5%. Change in occupancy was nominal and remained at a healthy 92.7%. The largest REIT by market cap acquired three facilities in the quarter and just five year to date. While five facilities acquired is historically slow relative to their size, investment activity has increased as they are in contract to acquire an additional 14 facilities.

Extra Space, the largest operator by number of facilities, ended the quarter with -0.3% revenue growth over the prior year and net operating income of -1.0%. Occupancy increased slightly to a very strong 94.3%. Year to date, they have acquired 20 facilities. While they have been the most aggressive with acquisitions among the REITs, deal making has also been down for the Salt Lake City based operator this year.

Dream Storage’s Outlook

With self-storage demand continuing to moderate to pre-pandemic levels, the resiliency of the industry continues to be an asset. The unique operating characteristics of the business, particularly its month to month lease structures, have allowed operators to implement dynamic pricing models to hold revenue and occupancy growth largely flat despite a backdrop of broad declines in other real estate property types.

While the investment sales market remains down as sellers are reluctant to list their properties with the election looming, it is a positive sign that the large public operators have begun to purchase properties again. We expect this to lead to an increase in activity in 2025 and are hearing sales brokers share the same sentiment based on their conversations with property owners.

The Dream Team