It’s well known that Americans like to buy stuff. I know this first hand being an American with a wife that, I believe, single handedly pulled the United States out of the 2008/2009 Great Recession. Back when my kids were young and we lived in a modest 3 bedroom split-level in a Chicago suburb we rented a storage unit. We stored all our old stuff and seasonal items. We had that unit for about 10 years until we put an addition on to our house which created more space for all our stuff. That broke the cycle of addiction.
Storage is so profitable thanks to two key factors: month-to-month leases, in which the rents can be raised on short notice, and human nature. It doesn’t much matter what someone pays when they move in. Most stays outlast introductory rates.
“Statistically, once a customer stays with us for a year, they end up staying for five years,” Public Storage CEO Joseph Russell Jr. said.
Is There a Limit to Americans’ Self-Storage Addiction? Billions of Dollars Say Nope – WSJ (no paywall)
As a former addict I can affirm it’s much better being on the other side. Instead of paying a storage company to hold my stuff I invest in them others who pay to store their stuff are now paying me. I have a ways to go to break even from a decade of renting a storage unit but every quarter I get a little closer.
Storage owners compete fiercely to get customers in the door. They duke it out online with algorithmic one-upmanship and move-in specials. But once someone signs up, the battle for their business is over.
“The only thing that competes with an existing customer is the trash can,” said Spenser Allaway, storage analyst at real-estate research firm Green Street. “No one says, ‘This sounds like a fun way to spend a weekend, I’ll beg my friend to borrow their truck and move my stuff into another unit to save $10 a month.’ ”
Even savvy storage investors become ensnared. “I’ve had one six years,” said Christopher Merrill, CEO of $56 billion property investor Harrison Street, which owns 119 storage facilities and is looking for more. “I’ve probably paid for the stuff six times over.”
Is There a Limit to Americans’ Self-Storage Addiction? Billions of Dollars Say Nope – WSJ (no paywall)
I bought Public Storage (PSA) back in 2019. While the stock price has held steady, which is my preference, it has paid me roughly 3.5%, on average, in annual dividends over that time. Public Storage is one of the largest self-storage companies in the world and has paid an annual dividend since 1981.
If you’re interested in investing in self-storage REITs there are other companies besides Public Storage. They pay a higher yield but are not as well capitalized and are not as safe a bet. They all look pretty solid though. Check them out.
- Public Storage (PSA) – 4.42%
- CubeSmart (CUBE) – 4.76% yield
- Extra Space Storage (EXR) – 5.13% yield
- National Storage Affiliates Trust (NSA) – 6.91% yield
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Please contact an investment professional if you have any questions regarding an investment.
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