Self-Storage Rents Drive Sector Growth as Occupancy Softens from Record Highs
May 4, 2022 | Christie Moffat | S&P Global Market Intelligence
U.S. self-storage real estate investment trusts reported strong rental rate growth in the first quarter of 2022, even as occupancy levels dropped slightly from record highs.
Public Storage executives said on a May 4 earnings call that average rental rate growth across its self-storage portfolio was up by 15% year over year. That momentum carried into April, where rental rates for new move-ins rose by 12% from the prior month.
Occupancy averaged 95.1% across the firm’s national portfolio at the end of the first quarter, compared with 95.9% a year prior. At the end of April, occupancy was about 120 basis points lower year over year.
“While occupancy is off year-over-year, we’re still talking about near-record occupancies, which gives us pricing strength when inventory gets tight. We anticipate that inventory will only get tighter from here as we move into the busy season,” Public Storage CFO Tom Boyle said.
Summer is traditionally a busy season for self-storage firms, reflecting seasonal drivers such as elevated home sales and the movement of college students. Other factors, such as declining home affordability, hybrid work environments and a tight commercial market are also contributing to the high demand.
California began lifting self-storage rent restrictions during the quarter, which contributed to rising rental rates, executives said.
Extra Space Storage Inc. also reported that rental rates for new move-ins rose by 15% year over year in the first quarter. At the same time, occupancy averaged 94.5%, down from 95.3% a year prior. April occupancy averaged about 100 basis points lower year over year.
In response to the rate increases, vacate activity doubled from normal levels, but strong demand for self-storage units means that those move-outs have not affected the firm’s performance, Extra Space Storage CEO Joseph Margolis said on a May 4 earnings call.
“Demand is so strong and our ability to backfill those tenants is consistent across the country, that it hasn’t affected us in terms of results, of performance,” Margolis said.
