Self-storage real estate investment trusts (REITs) have become a popular choice for investors seeking stable and consistent returns. These REITs own and operate self-storage facilities that provide individuals and businesses with a secure and convenient space to store their belongings.
Self-storage is considered a recession-resistant industry, as people often require storage solutions during economic downturns when they downsize or move to more affordable spaces. When looking for the best self-storage REITs to invest in, it's essential to consider factors such as occupancy rates, rental rates, property locations, and the overall performance of the REIT.
What are Self-Storage REITs?
Self-storage REITs develop, own and manage storage facilities and rent them to individuals and businesses. With short-term rental contracts, people looking to safely store their belongings or small businesses searching for affordable places to stockpile their inventory opt for such storage units. Self-storage units come in different sizes, depending on the space required.
Common uses for self-storage are:
- Keeping valuables safe
- Renovating
- Storing goods
- Downsizing
- Relocating
- Business storage
- Storing vehicles
Benefits of Self-Storage REITs
- High Demand: The low cost of renting a self-storage unit combined with lower space availability in metropolitan cities has significantly raised the demand for self-storage units over the past decade.
- Low Costs: It is relatively easy to operate a self-storage facility, as they require minimal maintenance. And because the cost of building a self-storage facility is low, they often have significantly higher turnovers and break-even rates.
- Lease Terms: Self-storage units are typically rented on a month-to-month basis. This is especially beneficial for operators in periods of high inflation since rents can be adjusted quickly to keep up with rising costs.
Risks of Self-Storage REITs
- Oversupply: Because of the high profit margins on self-storage units, REITs often overestimate the market demand for such facilities in a given region, resulting in unoccupied spaces. As they are easy to build and maintain, some REITs focused on other real estate sectors might enter this space, resulting in a severe oversupply risk.
- Systematic Risks: People often begin cutting down on frivolous discretionary expenses such as renting a storage unit during a recession. As inflation rises, renting a self-storage unit becomes relatively expensive.
- Lease Structure: The short-term lease structure on self-storage units is also a risk. Since tenants can leave with just a 30-day notice, occupancy levels could quickly fall if people and businesses are looking for ways to cut costs during a recession.
How to Invest in Self-Storage REITs
Most REITs are publicly traded like stocks. You can trade them through your preferred online stock broker during stock market trading hours.
Investing in publicly traded REITs can increase your dividend income significantly, as these organizations are required to distribute at least 90% of their total taxable earnings to shareholders.
Largest Self-Storage REITs
Public Storage (PSA)
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| PSA | Public Storage | -0.48% | $332.86 | Buy stock | ||
Public Storage (NYSE: PSA) is the largest self-storage REIT in the world, with over 170 million square feet of net rentable space. It is a Fortune Global 500 company and a constituent of the S&P 500 index.
Extra Space Storage (EXR)
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| EXR | Extra Space Storage | -0.28% | $165.04 | Buy stock | ||
Headquartered in Salt Lake City, Utah, Extra Space Storage Inc. (NYSE: EXR) is the second-largest self-storage REIT in the U.S. It owns and manages approximately 164 million square feet of rental storage space spread across 1.5 million units across the country.
CubeSmart (CUBE)
CubeSmart (NYSE: CUBE) is a self-administered REIT operating 1,272 units across the country. It also manages 663 stores through its third-party management platform.
Industry Overview
| Number of REITs | 4 |
| Average Dividend Yield | 4.44% |
| YTD Total Return | -8.18% |
| January Total Return | -8.18% |
| 2023 Total Return | 18.49% |
Quarterly Performance Data
| Financial Metric | Q4 2023 | 2023 |
|---|---|---|
| FFO ($M) | $1,333 | $5,369 |
| NOI ($M) | $1,756 | $6,661 |
| Dividends Paid ($M) | $1,138 | $4,330 |
| Same Store NOI | (0.3%) |
All Self Storage REITs
| Ticker | Company | ±% | Price | Invest | ||
|---|---|---|---|---|---|---|
| CUBE | CubeSmart | -1.37% | $48.31 | Buy stock | ||
| SELF | Global Self Storage | 3.5% | $5.33 | Buy stock | ||
| NSA | National Storage | -0.77% | $43.90 | Buy stock | ||
| EXR | Extra Space Storage | -0.28% | $165.04 | Buy stock | ||
| PSA | Public Storage | -0.48% | $332.86 | Buy stock | ||
REIT Alternatives
REITs provide a low-cost and simple way to invest in real estate. However, they aren't the only option available to generate passive income through real estate with a low minimum investment.
Real estate crowdfunding offers investors the ability to decide which properties they want to invest in while still enjoying passive income at a fraction of the cost of traditional methods of investing in real estate. Here are some of our favorite real estate crowdfunding platforms:
- Best For:Diverse Range of Alternative InvestmentsVIEW PROS & CONS:securely through Yieldstreet's website
- Best For:Beginner Real Estate InvestorsVIEW PROS & CONS:securely through Fundrise's website
- Best For:Accredited InvestorsVIEW PROS & CONS:securely through CrowdStreet's website
What is the largest storage REIT?
Are self-storage REITs a good investment?
Is Extra Space Storage a REIT?
Extra Space Storage is indeed a REIT that specializes in owning and operating self-storage facilities.