Thesis
Storage REITs are a great business to own. That's been true for a long time, but especially since the Global Financial Crisis. People need storage space, and it makes logical sense that they would because people are consumers.
Consumers buy things. Consumers are also hoarders. There is a psychological barrier when it comes to throwing things out, driven by sentimentality and an attachment to objects.
Take a look around your own house. Do a 15-minute scan of everything you own. How much would you absolutely need to hold onto if you downsized, and how much could you put in storage? You’ll surprise yourself about how few things you really do need day-to-day.
Now look around and ask yourself what you wouldn’t miss if you threw it out. That’s not such an easy task. As humans, we hold onto things “just in case we need it”, or simply because it is emotionally meaningful. That’s yet another reason why storage REITs are great investments.
This is all true in normal times. What about when people must downsize? Downsizing is what drove big gains in the self-storage space after the Global Financial Crisis. Many people lost their homes and had to put belongings into storage as they shifted into apartments.
If you thought that crisis was bad, the COVID-19 crisis may very well be worse. This time it won’t just be people losing homes. People will lose apartments.
Once eviction moratoriums expire, landlords will need rent. People will have to move. That means going from 2-bedroom apartments to 1-bedroom ones, and from 1-bedroom apartments to studios, and from studios to parents’ homes.
Meanwhile, storage construction only continues to explode. Self-Storage Almanac reports some 45,000 U.S. facilities and IBISWorld reports 60,000.
Self-storage is a commoditized business, so brand name matters, along with service and pricing.
