Executives at self-storage REIT CubeSmart are starting to breathe a sigh of relief about the ongoing new-supply crunch.

During the company’s third-quarter earnings call Oct. 25, President and CEO Chris Marr said new-supply deliveries in CubeSmart’s top 12 markets are projected to drop from a range of 300 to 360 facilities this year to a range of 110 to 150 next year. Those 12 markets represent about 70 percent of the REIT’s revenue.

Markets where Malvern, PA-based CubeSmart expects the biggest decline in deliveries next year are Chicago, IL; Dallas and Houston, TX; and Miami, FL, according to Marr. Still, the company anticipates pricing pressure from new supply will weigh down revenue growth in 2020, he said.

“We’re just starting to see [the] rental rate climb back from its lows, and [that] gives us some optimism as we go into 2020 that those markets will continue to show improvement,” Marr told Wall Street analysts.

A recent report from data provider Yardi Matrix shows that in the face of new ground-up projects, along with conversions and expansions, self-storage street rates fell this September in about 85 percent of the top markets that the company tracks compared with last September. Going forward, self-storage operators are “in for a rough slog” due to elevated delivery levels coupled with lower rental rates, Yardi Matrix says.

From August to September, the new-supply pipeline as a share of existing inventory barely budged (0.1 percent), according to Yardi Matrix.

Other highlights of CubeSmart’s third quarter:

  • Same-store revenue grew 1.5 percent compared with the same period last year.
  • Same-store NOI increased 0.1 percent compared with the same period last year.
  • Same-store occupancy averaged 93.1 percent.
  • The company expects to end 2019 with just one facility sale. After the end of the third quarter, CubeSmart sold a facility in Texas for $4.1 million.
  • CubeSmart bought wholly owned two facilities for slightly less than $18 million. The facilities are in Atlanta, GA, and Charleston, SC. Year to date, the REIT has spent $189 million on wholly owned acquisitions, with another $88 million in deals under contract.
  • The company’s HVP IV joint venture with Chicago-based real estate investment manager Heitman LLC bought two facilities for $46 million. Two more facilities are set to be purchased by the joint venture in the fourth quarter at a cost of about $34 million.
  • Five facilities are in CubeSmart’s development pipeline, with deliveries scheduled during through 2021.
  • The REIT’s third-party management platform signed up 48 facilities, bringing the platform to 652 properties under management.
John Egan