Revenue Growth Slows in Self-Storage

CHICAGO—The nation's largest self-storage REITs maintained revenue growth in the first quarter, although that rate is somewhat slower than their outsized growth over the past few years, according to a new report from MJ Partners, a Chicago-based self-storage firm.

The five companies generated same-store year-over-year revenue growth ranging from 3.2% to 6.6%, But last year at this time, the big REITs were at a peak, with growth ranging from 6.5% to 9.1%.

“It's been a steady march downward,” Marc Boorstein, principal of MJ Partners, tells GlobeSt.com. But many companies would love to have the revenue growth of self-storage. “It's a reversion to the historical average, it's not by any means a decline.”

Occupancy rates have also stabilized. Public Storage, the largest REIT, has 2,354 US locations and 220 in Europe, and had an occupancy rate of 93.1% in the first quarter, the highest in the industry, compared to 93.6% one year ago. The other big players put up similar numbers. Extra Space Storage, the next largest storage REIT with 1,441 US locations, did see its first quarter occupancy rate increase a bit, from 91.4% to 92.2%.

Still, “their stocks have taken a hit,” says Boorstein. ”Analysts are asking, 'show me where the growth is going to come from.'” And the companies have also decided to “take a bit of a breather” and slow down their acquisitions, an important factor in an industry long-dominated by thousands of Mom-and-Pop operators.

Public Storage spent $23 million in the first quarter to acquire four existing facilities, one each in MN, NY, NC and OH. It also continues to be the only major REIT heavily involved in developing new properties. By the end of the first quarter, it had about $470 million worth of new projects consisting of about four million rentable square feet at various stages of development.

“There is still activity from all the public companies, but they are all being a little bit more cautious,” says Boorstein.

But the slowdown of acquisitions by the largest firms, coupled with this continuous revenue growth, has opened up opportunities for others. “Private equity has had no hesitation when it comes to filling this gap.” In fact, MJ Partners has seen sovereign wealth funds move into the sector for the first time.

The big question hovering over the sector is whether the stabilization among the public companies will continue for the rest of the year. Boorstein says MJ Partners is watching it closely. “We'll see in the second quarter.”

CHICAGO—The nation's largest self-storage REITs maintained revenue growth in the first quarter, although that rate is somewhat slower than their outsized growth over the past few years, according to a new report from MJ Partners, a Chicago-based self-storage firm.

The five companies generated same-store year-over-year revenue growth ranging from 3.2% to 6.6%, But last year at this time, the big REITs were at a peak, with growth ranging from 6.5% to 9.1%.

“It's been a steady march downward,” Marc Boorstein, principal of MJ Partners, tells GlobeSt.com. But many companies would love to have the revenue growth of self-storage. “It's a reversion to the historical average, it's not by any means a decline.”

Occupancy rates have also stabilized. Public Storage, the largest REIT, has 2,354 US locations and 220 in Europe, and had an occupancy rate of 93.1% in the first quarter, the highest in the industry, compared to 93.6% one year ago. The other big players put up similar numbers. Extra Space Storage, the next largest storage REIT with 1,441 US locations, did see its first quarter occupancy rate increase a bit, from 91.4% to 92.2%.

Still, “their stocks have taken a hit,” says Boorstein. ”Analysts are asking, 'show me where the growth is going to come from.'” And the companies have also decided to “take a bit of a breather” and slow down their acquisitions, an important factor in an industry long-dominated by thousands of Mom-and-Pop operators.

Public Storage spent $23 million in the first quarter to acquire four existing facilities, one each in MN, NY, NC and OH. It also continues to be the only major REIT heavily involved in developing new properties. By the end of the first quarter, it had about $470 million worth of new projects consisting of about four million rentable square feet at various stages of development.

“There is still activity from all the public companies, but they are all being a little bit more cautious,” says Boorstein.

But the slowdown of acquisitions by the largest firms, coupled with this continuous revenue growth, has opened up opportunities for others. “Private equity has had no hesitation when it comes to filling this gap.” In fact, MJ Partners has seen sovereign wealth funds move into the sector for the first time.

The big question hovering over the sector is whether the stabilization among the public companies will continue for the rest of the year. Boorstein says MJ Partners is watching it closely. “We'll see in the second quarter.”