Do You Invest in a Self-Storage REIT?

Concerned About Disruption of the Self-Storage Industry?

If not, perhaps you should be.

Size of the Self-Storage Industry

We’re all familiar with the self-storage industry; in fact, many of us have rented a self-storage unit, storing surplus goods we don’t need immediately or can’t fit into our residence or garage.  But self-storage units are more than a convenience, collectively they constitute a substantial segment in the real estate industry.

Just how substantial is the self-storage segment of the real estate industry?  There are 6 self-storage REITs, with a market cap of over $69 Billion and a Total Return YTD of 21.55%.  The self-storage REITs are: Public Storage; Extra Space Storage, Inc.; National Storage Affiliates; Life Storage, Inc.; Global Self-Storage, Inc.; and CubeSmart.  These stats do not account for the many storage facilities owned by non-REIT entities. Moreover, about 10% of American households rent a self-storage unit.

Is the Self-Storage Industry About to be Disrupted?

“Neighbor” is yet another incarnation of the sharing economy, matching people who have space they don’t need with neighbors who have stuff they don’t want access to immediately (and can’t conveniently store in their residence or garage).

The service has been described as an airbnb for stuff.  Renters reduce those pesky recurring costs, saving money by paying less to a neighbor than they would to a commercial self-storage facility.  People with empty space can generate recurring revenue. Neighbor connects people and handles payment. Neighbor arranges for storage of goods, cars, boats, RVs and more.  Neighbor also helps the parties manage risks, providing host and renter guarantees.

Not only can storage costs be substantial, they are recurring.  Many renters will welcome an opportunity to reduce recurring expenses and direct the savings elsewhere.  One question is whether this additional source of space will have a material impact on the industry.

Neighbor will not be the last company to enter this space.  Property owners with surplus space will welcome an opportunity to generate additional income from space they aren’t using.  This should impact supply, and ultimately margins; large self-storage companies with substantial sunk in costs will have to compete with property owners who can often make spaces suitable for storage with relatively modest expenditures.


Author: Randy Airst, CEO at Exceedant and Team.

Based in the Greater New York region and Tampa, Florida region of the USA, The Exceedant Group is an asset management and financial services firm. Exceedant specializes in private equity, credit and hedge fund investment strategies. Exceedant’s clients have included NYSE and NASDAQ traded companies, hedge funds, private equity firms, commercial real estate firms and other entities.

Randy has been involved in asset strategy and management with clients/investors for many years at Exceedant and its predecessors.

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