Analysts at JPMorgan, Raymond James and Truist Securities have recently reconsidered their earnings forecasts for storage companies and raised price targets for the stocks. “Despite robust rate growth for new and existing customers, we are hearing of little change in customer behavior,” Jonathan Hughes of Raymond James wrote to clients.
For many, it is easier to pay an ever-rising monthly bill than figure out what to do with grandma’s old dining set. Nonpayers’ belongings are auctioned off online sites such as storagetreasures.com and lockerfox.com. The big firms suspended auctions at the pandemic’s onset, but they are back to clearing out space for nonpayment.
Land & Buildings Investment Management LLC,
a hedge fund that invests in real-estate stocks, has a $41 million stake in Public Storage. “We decided self storage is a great place to be in an inflationary environment,” said founder and Chief Investment Officer Jonathan Litt.
The company says self-storage is a good hedge against inflation because operational costs are paltry compared with properties such as hotels, which require more staffing and upkeep. Monthly leases offer more opportunities to raise rent than properties subject to multiyear contracts, like malls and offices.
Rising construction costs have set off a scramble for existing storage facilities. Green Street analysts don’t expect supply growth to return to the 2020 rate until 2025. Big public companies, particularly
Life Storage
Inc. and
CubeSmart
, have been bulking up with acquisitions. Big investors are buying, too.
KKR & Co. has spent more than $300 million on storage facilities in recent months and started a company to operate them and add more. Roger Morales, who leads KKR’s commercial real-estate acquisitions in the Americas, said the firm is betting on increased demand from businesses stashing just-in-case inventory as well as from people who have been priced out of larger houses and apartments by rising home prices and residential rents but need more space.