Is the self-storage sector moving toward consolidation? (Part 1/2)

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In the United States, there are more than 50,000 self-storage facilities and 30,000 operators that account for $24 billion in annual revenue. While around 11% of the industry’s total rentable square footage are self-storage REITs, the other 89% are privately owned and run by operators. Although these statistics indicate that there is significant potential for consolidation in this profitable industry, it remains to be seen whether or not this will actually take place.

In all honesty, it will take considerable effort to make any changes in the industry. Outside of the ten leading operators, there is no single operator with the power to make big changes in the industry’s landscape. Any that do attempt growth will have to do so a little bit at a time through development or the acquisition of smaller players.

chart02Currently, Public Storage, a $43 billion market cap company, is in the industry’s top spot as the largest company. In the United States and Europe, they operate 142 million net rentable square feet of real estate. No other company is anywhere near this. Public Storage has aggressively gobbled up private operators, but, in recent years, due to increasing acquisition competition, they have ramped up a development process. Even if the remaining REITs combine together, they would have no chance of overcoming Public Storage.

In second, Extra Space Storage has an $11 billion market cap with 87 million square feet of rentable space. In September 2015, Extra Space Storage closed on the acquisition of SmartStop Self Storage, which had been the 7th largest operator in the industry, for $1.4 billion USD.

Additional players in the self-storage sector include REITs CubeSmart, Sovran, and W.P. Carey (minority self-storage), as well as recently publicly traded REIT National Storage Affiliates, Amerco (the publicly traded company that operates U-Haul International), and two additional private operators, Simply Self Storage and StorageMart.

So, which companies have the potential to alter the self-storage landscape? Let’s look at the options tomorrow.

Source: Public Storage (NYSE:PSA), Extra Space Storage, Inc. (NYSE:EXR), CubeSmart Common Shares (NYSE:CUBE), Sovran Self Storage Inc. (NYSE:SSS), National Storage Affiliates Trust (NYSE:NSA), Amerco (NASDAQ:UHAL), W.P. Carey, Inc. (NYSE:WPC).

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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