New construction worries sap momentum in once-hot storage sector
Construction of new self-storage facilities has dramatically accelerated in recent years, sapping momentum from owners and operators of existing properties and weakening publicly traded storage REITs’ earnings and stock performance.
The shift reflects a greater availability of construction financing as the effects of the last decade’s financial crisis fade, industry observers said. Before the latest construction wave, storage owners benefitted from a scarcity of competition, and publicly traded storage REITs were among the best performers in commercial real estate.
In general, the storage REITs are still expected to post stronger-than-average growth in net operating income and funds from operations, relative to REITs in general. Yet the prospect of regional oversupply, coupled with whispers of renter fatigue over regular price increases, has sapped the companies’ earnings and share-price momentum and left some in the industry wondering when fundamentals will stabilize.
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