Storage REITs: The Hotel California Of Real Estate

August 29, 2019 | Hoya Capital

Storage REITs: The Hotel California Of Real Estate Uncategorized Aug 29 Written By To read the full report, click here to visit Seeking Alpha! Self-storage units are the "Hotel California" of the real estate sector: once you’re checked-in, "you can never leave." A sticky tenant base has supported the sector despite record supply growth. For self-storage REITs, the business is almost too good. Developers and new operators have flocked to the sector in recent years, adding new supply at a furious rate, weakening fundamentals.

The operating efficiency and relative simplicity of the self-storage business are second to none in the real estate sector, where properties can break even at sub-50% occupancy rates with sub-par management. Storage REITs hit "rock bottom" in 2018 and have turned the corner since then. Storage REITs have jumped nearly 30% this year as 2Q19 earnings continued the positive momentum. Essentially an extension of the residential REIT sector, the demographic-driven reacceleration in multifamily and single-family rent growth since bodes well for a continued recovery into the 2020s.

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