Storage REITs: Zero To Hero
Storage REITs stumbled into the pandemic with challenged fundamentals and an outlook for near-zero growth amid oversupply challenges. Catalyzed by the suburban housing boom, self-storage demand is suddenly insatiable.
Like a phoenix rising from the ashes, storage REITs have continued their incredible turnaround this year. Consistent with trends across the housing sector, storage rents are soaring across the country.
Storage REITs delivered the most comprehensive "beat and raise" quarter of any REIT sector in recent memory. Every storage REIT now expects double-digit FFO and NOI growth this year.
Forward-looking indicators and interim updates suggest that third quarter results should be similarly strong. The demographic-driven housing boom bodes well for a sustained recovery into the mid-2020s.
Despite the rally, valuations remain compelling as the sector's strong balance sheets, low cap-ex profile, and above-average external growth potential warrant a premium multiple relative to other REIT sectors.
Disclosure: Hoya Capital Real Estate advises two Exchange-Traded Funds listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index and in the Hoya Capital High Dividend Yield Index. Index definitions and a complete list of holdings are available on our website.
Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.