Self-storage turned out to be a winner during the pandemic.
During the coronavirus pandemic, many businesses and industries took a severe financial hit, with small businesses often closing down permanently, but the act of storing one’s items grew in popularity, and the self-storage environment benefited from it.
According to The Wall Street Journal, “[s]elf-storage stocks have been big gainers since last year’s economic lockdown, outrunning e-commerce warehouses, rebounding malls and rental houses.”
Investors got rid of their stocks in self-storage when the coronavirus pandemic affected the world, but reportedly did so without realizing that there was a major uptick about to happen in the industry of renting storage spaces.
The Journal noted how Americans across the country moved furniture and items out of bedrooms and garages in order to transform those spaces into home gyms and work-from-home offices. Many people had to leave their campuses and move home or to remote places to live. In addition, businesses leased areas to store inventory due to concern over potential scarce availability of items. As the options for rentals decreased, the price in the rentals skyrocketed.
The Journal added:
Since Feb 21., 2020, just before the pandemic tanked markets, self-storage shares in the FTSE Nareit All Equity REITs Index have returned more than 85% between price gains and dividend payments. That compares with a roughly 18% return on the broader real-estate investment trust index, which tracks the performance of 153 companies that own income-producing properties, from cell towers to timberland.
Multi-Housing News, a real estate outlet, reported this month that even though self-storage leases continued to decrease for the third month in a row in November, the need for storage is still high.
It reported, “Street-rate rents dropped to 6.7 percent for the average 10×10 non-climate-controlled units, year-over-year in November, down almost 200 basis points from the previous month, while same-size climate-controlled units declined to 8.2 percent over the same time frame,” adding that in spite of “moderating rent growth, street rates remained stable by historical standards and no metros in the top 30 markets tracked by Yardi Matrix recorded negative rate performance for the standard 10×10 non-climate- and climate-controlled units.”
“A total of 24 markets registered 5 percent or higher rent growth in the non-climate-controlled category and 22 markets experienced the same growth in the climate-controlled category. Rent growth dropped to 2 percent or less only in a few metros, including Minneapolis, San Francisco, Portland and Washington, D.C.,” the outlet reported.
It added, “On a month-over-month basis, national street rates for 10×10 non-climate-controlled units fell $1 to $127 in November over the previous month, while for the similar-size climate-controlled units, rates declined $1 for the third straight month to $145.” However, the outlet noted that this shouldn’t be a point of worry ” as it is simply reflecting the traditional effects of seasonality.”
It also noted that there are more self-storage spaces being created, adding:
There were 2,943 self storage assets in various stages of development as of November. This included 719 properties under construction, 1,252 planned properties, and 476 prospective projects. The pipeline accounted for 8.8 percent of existing inventory, a 20-basis point increase over October numbers.
The stock market has also taken note of this development. Shares in Extra Space Storage Inc. have doubled their value since the start of the pandemic, and stock in Public Storage “has returned 73%. The S&P 500 index, to which both companies’ shares belong, has delivered a total return of about 41% over that time,” per the Journal.
Hedge fund Land & Buildings Investment Management LLC reportedly has a $41 million holding in Public Storage.
“We decided self storage is a great place to be in an inflationary environment,” said Chief Investment Officer and founder Jonathan Litt.