Alex Pettee, CFA
Storage REITs: Urban Exodus Catalyzes Rebound
Give Me Space! The pre-pandemic trends towards minimalism and smaller homes in dense urban markets have been reversed by the pandemic as households seek additional space and more at-home amenities.
The "urban exodus" has been a boon for self-storage REITs, which had entered the pandemic as perennial underperformers with challenged fundamentals and a strained outlook amid oversupply headwinds.
Catalyzed by the suburban housing boom and the desire for more space, self-storage demand has rebounded sharply since mid-2020, and so too has the performance and outlook for storage REITs.
Storage demand is driven by "change" and there will be no shortage of that as mobility rates normalize post-pandemic. The demographic-driven housing boom bodes well for a sustained recovery into the mid-2020s.
Supply growth remains a concern, but construction spending has normalized as development yields compress. Rental rates surged in late 2020 while external growth opportunities should remain plentiful.
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