Joe Margolis, CEO of Extra Space Storage, believes self-storage supply pressures will continue to moderate in 2022. But he says that trend could reverse in 2023.
During an Oct. 28 call to discuss third-quarter financial results, Margolis said the “great performance” of the self-storage sector, the high level of investor interest in the sector and the ongoing environment of low interest rates may send the industry “back into a development cycle” that could start after next year.
For Margolis, that possibility isn’t necessarily negative. It would result in the Salt Lake City, UT-based self-storage REIT being able to boost its bridge loan business and third-party management platform, and ramp up acquisition and development activity, he said.
“Now that’s not all bad, right?…But it’s also a challenge for the stores that have new supply coming in their trade area, and we’ll manage through that just like we managed through the last cycle,” Margolis said.
‘An exciting quarter’
Margolis’ remarks came as Extra Space continues to report eye-popping financial results.
In the third quarter, the REIT saw an 18.4% spike in same-store revenue compared with the same time last year and a 27.8% jump in same-store NOI. For the year, Extra Space now anticipates same-store revenue growth of 12.5% to 13.5% compared with 2020 and same-store NOI growth of 18% to 19.5%. Those projections are up from previous forecasts.
Meanwhile, Extra Space expects same-store expense growth this year of negative 1% to 0% versus last year. In the third quarter, same-store expenses fell by 4% compared with the same period in 2020.
“We had an exciting quarter. I’m not sure how else to describe it,” Margolis told Wall Street analysts.
Other highlights of Extra Space’s third-quarter results include:
- Surpassing the 2,000 mark for the number of facilities in its portfolio.
- Bumping up the number of facilities in its third-party management platform to 827 as of Sept. 30.
- Reaching same-store occupancy of 96.7% as of Sept. 30.