This article appeared in WallStreetJournal on December 23rd.
Americans are paying more than ever to stash their extra stuff and filling space rapidly, lifting storage stocks.
Since the pandemic began, the best bet in real estate has been that Americans need to store their extra stuff.
Self-storage stocks have been big gainers since last year’s economic lockdown, outrunning e-commerce warehouses, rebounding malls and rental houses.
Investors dumped self-storage stocks when the pandemic hit, unaware that the business of leasing lockers was about to boom. Americans cleared out bedrooms and garages for home offices and gyms. Others packed up apartments and headed for Covid-19 cabins or home from campus. Businesses fearing shortages rented space to stash inventory. Availability dwindled and rents shot up.
Since Feb 21., 2020, just before the pandemic tanked markets, self-storage shares in the FTSE Nareit All Equity REITs Index have returned about 84% between price gains and dividend payments. That compares with a roughly 20% 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.
Industrial properties, data centers and McMansions also outperformed during the pandemic. But none nearly as much as self-storage.
Extra Space Storage Inc. shares are twice as valuable as when the pandemic began, and Public Storage stock has returned 73%. The S&P 500 index, to which both companies’ shares belong, has delivered a total return of about 43% over that time.
Leading the market is a familiar position for these storage providers. Public Storage pioneered the self-storage business, and as its bright orange signs became ubiquitous, its stock-market value has swelled to more than $64 billion. A $1,000 investment in Extra Space shares in 2009, at the depths of the housing bust, would be worth more than $60,000 today, including dividends.
Self storage thrives in good times and bad. Marriage and household formation are good for business. So are divorces.
Investors large and small streamed into storage, and by 2019 a flood of new units threatened to outpace the rate at which Americans were amassing excess belongings. Another 5% of space was added nationally in each of 2018 and 2019 and 3.8% hit the market in 2020, according to Green Street, a property-investment research firm that estimates roughly 1 in 10 Americans use storage units.
The pandemic helped fill the new space. The four largest storage companies each reported record occupancy above 95% in the third quarter. Extra Space and Public Storage, with about 345 million square feet of space between them, were nearly 97% full.
The average monthly storage bill in the U.S. hit $155.65 in November, the highest in five years of credit- and debit-card data examined by analysts at KeyBanc Capital Markets. Rents aren’t rising as sharply as they did this summer, yet they charged higher in November—by more than 10% year over year for a 10-foot-by-10-foot space in many places, according to real-estate data firm Yardi Matrix. The hottest markets for storage are the same as those for houses: Florida, Texas, Phoenix and Atlanta.
Appeared in the December 23, 2021, print edition as 'Self-Storage Shares Are Hot Pandemic Buy.'
Write to Ryan Dezember at ryan.dezember@wsj.com