Three Reasons Why You Should Invest in the Self Storage Industry

My recent cross-country move from Vermont to Colorado didn’t involve any moving trucks. Instead, I took four trips in my less-than-spacious hybrid. As such, my slow transition to Colorado has only been possible because I rent a storage unit at a self storage facility in Vermont.
I’m not alone, either.
9% of American households currently rent a storage unit and a self storage facility can be found in 84% of American communities. With both capacity and occupancy rates rising, this is a great time to own storage units.

Here are three reasons why you should invest in self storage.

1. Market consolidation

According to the Self Storage Association, there are roughly 53,000 self storage facilities in the United States. Between the properties already owned by management groups and the four publicly traded REITs, there are still roughly 20,000 storage facilities that are ripe for consolidation.
Considering that REITs exist to pay dividends to shareholders, maintain current properties and invest in new ones, it seems likely that the majority of this consolidation will be at the hands of the four REITs.
Considering that these four REITs currently own around 4,200 self storage facilities, consolidation could allow this group of REITs to grow by as much at five times.

2. Dividend Yield and Growth

The four major REITs in the self storage industry are Public Storage (NYSE: PSA), CubeSmart (NYSE: CUBE), Sovran Self Storage (NYSE: SSS) and Extra Space Storage (NYSE: EXR).
The stocks yield 3.28%, 2.82%, 3.53% and 3.54% respectively. This is considerably higher than the S&P 500’s average yield of 1.89%.
The S&P 500 has an average dividend growth rate of 12.82% this year. As you can see in the table above, all four REITs have increased their dividends by double-digits over the past few years, though Public Storage’s 10.87%dividend hike was below the S&P 500 average. Still, this industry offers better yield and better dividend growth than the S&P 500.

3. International Markets

The Self Storage Association reports that there are around 59,500 self storage facilities in the entire world. Clearly the US represents the vast majority of that market. In addition to American self storage facilities, there are more than 3,000 in Canada and 1,000 in Australia.
This industry is ripe for international growth. Consumerism is spreading across the globe, the same consumerism that led Americans to have so much stuff that they needed a place to keep it all. This will likely drive the market for self storage facilities in other countries.
Sure, there are minimalist cultures where demand for self storage could very well never materialize. But I would argue there are many cultures with a glut of material goods that people don’t want to part with but don’t have room to store at home.
I expect self storage trends to spread across the globe and that the major publicly traded self storage companies will benefit the most from this trend.

The Bottom Line

With strong market conditions and an industry ripe for consolidation, this is an excellent time to invest in self storage. Significant international growth potential as well as strong dividend growth are just icing on the cake.
These great reasons why you should invest in self storage are only the beginning. Next I’ll share with you the specific stocks that give you exposure to the self storage industry.

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