Public Storage experienced slower growth in all of its top 20 markets during the first quarter compared to the previous year. CEO Ron Havner repeated two common refrains as to why during the company’s earnings conference call with analysts: a return to historical norms and competition from new supply.

But Havner pointed the finger at a third reason as the biggest culprit behind deceleration—declining consumer financial health.

“You are seeing a variety of things where the consumer, which is basically our customer, is stretched and over-stressed,” Havner said.

Havner pointed to rising credit card delinquency rates, charge offs and rising consumer debt as signs that the average U.S consumer isn’t as financial healthy as they have been in years passed.

Other signs?

The company has seen an increase in delinquent tenant sales over the last two to three quarters and overall merchandise sales are down as well, Havner said.

Same-store sales

Sales at the company’s 2,060 same-store facilities grew 4 percent during the first quarter. That is a smaller return compared to the first quarter of last year when same-store sales grew 6.5 percent.

Net income at same-store facilities also slowed down in the first quarter, increasing 4.1 percent during the most recent quarter, compared to 10.4 percent last year.

Average occupancy ticked down five basis points compared to the first quarter last year,  coming out at 93.1 percent.  Realized annual rental income climbed however, up 4.9 percent in the first quarter over last year for a total of $16.81 per square foot.

Total revenue climbed more than 5.5 percent during the first quarter compared to last year, generating $645.5 million.  Net income came in at $344 million, an increase of 8.4 percent over the previous year.

Acquisition and development

The company purchased four facilities, located in Minnesota, New York, North Carolina and Ohio, during the quarter for a total of $23 million.  The company had five additional properties under contract or closed subsequent to the quarter end that cost a total of $25 million.

Public Storage completed two new developments during the quarter, totaling 500,000 square feet for a cost of $89 million. The company has four million square feet currently under development at a cost of $470 million, as well as $148 million worth of expansion projects.

The company has been aggressively developing over the last couple years, but is likely to slow down when it comes to adding new projects to the pipeline.

“If rates are coming down that’s going to eliminate a lot of potential product that we might otherwise have underwritten a year or two ago,” Havner said

Alexander Harris