Thriving Amid Challenges: A Closer Look at Q1 2023 Self-Storage REIT Performance

‍Patriot's 2 Min Drive: State Of The Industry

The performance of the Self-Storage REITs for Quarter 1, 2023.

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Recently, the leading U.S.-based self-storage REITs, namely CubeSmart, Extra Space Storage Inc., Life Storage Inc., and Public Storage Inc. released their financials for Quarter 1, 2023.

The results demonstrate the self-storage industry's resilience and sustained growth with significant gains in Revenue and Net Operating Income (NOI), even amidst minor declines in occupancy rates.

Let's dive into the performance updates:

CubeSmart reported a 6.9% increase in revenues, year over year, with same-store NOI (Net Operating Income) at its 593 facilities growing by an impressive 9.1%.

Extra Space Storage Inc. exhibited a 7.4% and 8.7% increase in same-store revenue and NOI, respectively.

Life Storage Inc.'s same-store revenue for the company's 664 wholly owned, stabilized facilities increased 10.5% year over year, driven by a 13.6% bump in rental rates. This resulted in an impressive 12.8% rise in same-store NOI.

Public Storage Inc. saw a 9.8% surge in revenue for the same-store facilities over the same quarter in 2022, with a corresponding 10.2% increase in Net Operating Income (NOI).

What are the main drivers behind this solid performance and growth, what unique competitive advantages does Patriot have, and why does the self-storage market appear attractive over the next 3 to 5 years and beyond?

The answer lies in the confluence of several market trends and factors:

1. Growing Population: The USA population grew by 1,256,003 in 2021 alone. Ongoing population growth increases demand for storage solutions. As life's circumstances change - moves, downsizing, or expanding families - the need for additional storage space escalates.
2. Increasing Demand: The demand for self-storage facilities is increasing due to urbanization, a trend towards smaller living spaces, work from home, and local businesses using these spaces for storage needs. The average self-storage use per capita has increased from 2 sqft/capita just over 20 years ago to 8 sqft/capita now, a 400% increase in per capita usage.
3. Resilience in Uncertain Economies: Self-storage has proven to withstand economic downturns and adverse conditions such as the Covid Pandemic. Our month-to-month lease structure gives us the flexibility to adjust pricing in response to inflation, with over 70% of customers on autopay.
4. Value-Add Acquisitions by Patriot Holdings: Our team excels in acquiring value-add assets off-market. Our expertise in acquisition analysis, operations, marketing, remote management, and revenue management allows us to maximize asset revenues and NOI, thus producing attractive investor returns.
5. Cost-Efficient Development: Our in-house capability to expand or develop facilities below the cost of acquiring an existing facility gives us an edge, and brand new product in the market. Expanding a facility (often financed using the existing cash flows in place) results in greatly increased revenues, NOI, and eventual sale value of an asset.

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