Industry Profile • Section 1


self-storage REITs were at the top of the chart. In fact, with re- turns up 101 percent from 2008 to 2011, the self-storage sector has surpassed all other REIT categories. Further evidencing the fact, Bloomberg cited Extra Space


S


Storage as the top performing self-storage REIT with a portfolio of more than 1,000 properties in 38 states and Washington, D.C. The company’s holdings include more than 59 million square feet of self-storage space, making it the nation’s second largest owner/operator of self-storage. Moreover, Extra Space Storage also ranks number one as the largest self-storage management company in the U.S.


While retail and multi-housing REITs have proven to be the most formidable competitors,


outperforming self-storage three years out of the last 10 years for total return, self-storage has been the number one performer for total return since the capital markets recovery took hold in 2010.


The Investment Landscape As far back as 2001, self-storage has outperformed the overall REIT index on average annual return every single year based on both a five-year average hold and a 10-year average hold, as seen in Tables 1.1 and 1.2. Put more simply by Aaron Swerd- lin, Executive Managing Director at NGKF Capital Markets based in Houston, Texas, an investor who invested only in self-storage REITs and held for between five and 10 years has realized a better average annual return every year than an investor who invested in the REIT composite. Moreover, self-storage has consistently outperformed ev-


ery other product type among the REITs on total return and on a standalone annual basis. While retail and multi-housing REITs have proven to be the most formidable competitors, outperforming self-storage three years out of the last 10 years for total return, self-storage has been the number one per- former for total return since the capital markets recovery took hold in 2010. Another important consideration is that during the capital


markets retrenchment between the end of 2007 and the begin- ning of 2010, self-storage declined the least of all product types and began a positive annual rate of return before any other product type. As Swerdlin notes, toward the end of the last cy- cle, self-storage had just begun to attract the top tier level of capital by way of direct investment—a critical distinction, as it means that capital flows to the product type not just by way of investing in REIT stock but directly into the real estate; mostly by way of joint ventures with already-established operators. The retrenchment and subsequent correction halted the expansion of that capital. However, self-storage had found its


elf-storage continues to be an excellent investment—so much so that when Bloomberg published its annual list of best alternative investments this year, the nation’s largest


way onto the radar before the markets froze, as the abundance of sidelined capital was looking for places to deploy when the market signaled that the worst was behind us. The stunning strength displayed by the product type between 2007 and 2010 drew in the sidelined capital immediately. Despite the continued growth of the REITs and other larger


operators, the self-storage industry continues to be as fragment today as it was in the mid-1980s. While the top 50 companies


Chart 1.1 – Average Annual Return 5-Year Hold REIT Composite


Self Storage


20 25 30


10 15


0 5


1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Chart 1.2 – Average Annual Return 10-Year Hold REIT Composite


Self Storage


20 25


10 15


0 5


2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014


Self Storage


-50 -30 -10 10 30 50


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Raw data collected from NAREIT, Graph compiled by NGKF


2015 Self-Storage Almanac 33


Chart 1.3 – Total Annual Returns Equity REITs Composite


Multi Family


Retail


Office


Percent


Percent


Percent


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