For investors, the self-storage sector is sizzling. It’s so hot, in fact, that the four publicly traded self-storage REITs topped Bloomberg Markets magazine’s second annual ranking of top alternative investments.
The magazine points out that the three-year annualized return for the four REITs — CubeSmart, Extra Space Storage, Public Storage and Sovran Self Storage (Uncle Bob’s) — was 21.2 percent from March 2011 to March 2014. The one-year return: 16 percent from March 2013 to March 2014. Extra Space led both categories.
Here’s the breakdown by REIT.
CubeSmart
Three-year annualized return: 21.3 percent
One-year return: 11.7 percent
Extra Space
Three-year annualized return: 36.7 percent
One-year return: 27.9 percent
Public Storage
Three-year annualized return: 18.7 percent
One-year return: 14.3 percent
Sovran
Three-year annualized return: 27.2 percent
One-year return: 17.4 percent
‘People are not upsizing their homes’
Devin Banerjee, U.S. investing reporter at Bloomberg Markets, told NPR that in the industrial REIT sector, three of the five top performers identified by the magazine were self-storage REITs. He said three-year investment returns for industrial REITs exceeded those for the overall stock, bond and private equity markets. Among other alternative investments highlighted by the magazine were private equity, classic cars and “lean hogs.”
One of the trends driving growth in self-storage is the dip in home ownership in the U.S., according to Banerjee. He noted that home ownership rate sits at its lowest point, 64.8 percent, since 1995.
“People are not upsizing their homes,” Banerjee said. “People are trying to save money after the recession … .”
That means many people are turning to self-storage to keep toys, books and other belongings that don’t fit into their homes, he said.
Two other trends triggering more demand for self-storage, according to Banerjee:
- Volatility in the job market, prompting many Americans to move for their careers and propelling the need for more storage.
- The rise in urban living in apartments, resulting in less space for renters’ possessions.
