Self-storage REITs own and manage storage facilities and collect rent from customers. Self-storage REITs rent space to both individuals and businesses. While the designs of self-storage facilities have evolved dramatically over the decades—from glorified garages to multi-story, tech-enabled facilities—the functionality and use of storage space has changed little over time.
Having drivers in both “good” and “bad” economic times, self-storage demand is often viewed as being recession resistant. While the pandemic bolstered sector demand, related phenomenon like the work-from-home and decluttering trends appear to be becoming more permanent demand tailwinds. Contrary to prior concerns, millennials have also been driving demand.
Scale has proven to be an important element of managerial and operational efficiencies in the self-storage sector. As a result, storage REITs have historically been focused on growing their portfolios. Green Street estimates that REITs account for 15% of self-storage ownership; only the senior housing and mall sectors have comparable or greater REIT ownership penetration.
With the surge in the 10-year Treasury yield, pricing for public equity self-storage REITs has changed dramatically. Data from the Nareit Total REIT Industry Tracker Series (T-Tracker®) indicate that the sector’s REIT implied cap rate was 3.8% in the fourth quarter of 2021. As of the second quarter of 2023, it was 200 basis points higher at 5.8%.
Self-storage REITs have been well-insulated from today’s mortgage market turmoil. As of the second quarter of 2023, Nareit T-Tracker data show that fixed rate and unsecured debt accounted for 84.3% and 92.4% of total debt, respectively. Access to unsecured debt provides a competitive advantage in the current marketplace.
- 4 and 7.1%: The self-storage sector in the FTSE Nareit All Equity REIT Index is comprised of four REITs with a net market capitalization of 7.1% as of October 31, 2023.
- 19.6%: Nareit T-Tracker data for the second quarter of 2023 indicate that self-storage REITs had a leverage ratio of 19.6%, the lowest ratio of the 13 REIT sectors.
- 70%: According to Green Street, approximately 70% of self-storage users live in single-family homes, showing that demand exists even for those with access to “free” storage.
Below is a list of Nareit member companies from the self-storage sector.