Section 2 • Industry Ownership
time to transact due to the low interest rate environment. As more diverse sources of capital seek to enter the sector, cap rates remain low, with signs of further compression ob- served in reported metrics on pending transactions. The announced Blackstone acquisition of Simply Self Storage is symbolic of the institutional investor appetite for what used to be an alternative asset class. The added competition for acquisitions will undoubtedly continue to put pressure on yields and return expectations. While stabilized properties continue to command the most aggressive pricing, interest in high quality lease-up properties in key markets certainly exists as evidenced by the Storage Deluxe transaction; a portfolio of assets in New York’s outer boroughs reported to be a 4.5 percent cap rate on stabilized NOI. Given the sector’s phenomenal operating performance through the pandemic, coupled with extremely low ongoing capital requirements, the self-storage sector continues to benefit against other real estate investment sectors and transaction activity is expect- ed to remain elevated into 2021.
Self-storage is still among the best-performing asset
classes within commercial real estate. Based on recent per- formance and past recession resilience, the self-storage sector remains extremely well positioned to continue to de- liver strong operating metrics on both a relative basis as well as on an actual basis.
The REITs Plus One Glendale, Calif.-based Public Storage, ranked as the largest self-storage operator in the industry, with 2,844 facilities en- compassing 184 million rentable square feet of storage space and 1,865,000 units.
The company also benefited from its expansion ef-
forts through acquisitions, development, and extensions. Moreover, it witnessed a decrease in on-site property man- ager payroll and utility expense, in addition to moderation of growth in property tax and marketing expenses. This was partially due to the impact of COVID-19. However, results were adversely impacted by lower realized annual rent per occupied square foot, reduced late charges, and administra- tive fees.
Extra Space Storage, based in Salt Lake City, ranks num-
ber two on the 2020 Top Operators list with 1,878 facilities. This includes 145,388,852 rentable square feet of storage space and 1,349,956 units.
During the third quarter, Extra Space saw boosts that
were stronger than expected, while the negative impacts of the pandemic were not as significant or have not material- ized. Rental volume remained healthy, while vacate volume remains muted, resulting in an all-time high occupancy of approximately 96 percent.
26 Self-Storage Almanac 2021 CubeSmart, based in Malvern, Pa., is the third largest self-
storage operator in the United States with 1,261 facilities that include more than 145 million net rentable square feet of storage space and 839,962 units.
As with the other REITs, the spread of COVID-19 and the
corresponding government regulations have had an impact on the company’s business since mid-March. In late April, the company launched SmartRental™, its contactless online rental process, thus eliminating the need for face-to-face interaction while supporting efforts to maintain teammate and customer safety. Throughout June and July, CubeSmart began resuming rate increases to existing customers. It also resumed its normal delinquency processes on a jurisdiction by jurisdiction basis, the impact of which had become fully effective as of Sept. 30, 2020.
During the company’s 3Q Earnings Report, President and
Chief Executive Officer Christopher P. Marr stated, “The last few months have showcased the strength and resilience of the entire CubeSmart platform. Performance rebounded across our portfolio, as strong demand trends drove record- high same-store occupancies in September. We also continue to effectively execute on our external growth strategy with a robust pipeline of high-quality acquisitions, including the recently announced Storage Deluxe transaction that repre- sents the culmination of our 10-year New York City portfolio strategy.”
Buffalo, New York-based Life Storage Inc., formerly known
as Sovran Self Storage/Uncle Bob’s, operates 905 facilities encompassing more than 65 million rentable square feet to hold its spot as the fifth largest operator in the self-storage industry.
Through July, occupancy was inflated with nonpaying
customers due to the inability to auction delinquent units. However, as the quarter continued and auctions resumed, Extra Space has been able to maintain its high occupancy, while collections have returned to historically normal levels. Elevated occupancy resulted in the return of pricing power during the third quarter.
Self-storage is still among the best- performing asset classes within
commercial real estate. Based on recent performance and past recession
resilience, the self-storage sector remains extremely well positioned to continue to deliver strong operating metrics ...
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