Real estate investment trust-related ETFs have strengthened this year, partly due to the rising demand for properties that allow consumers to store away their growing accumulation of stuff.
For example, the iShares Residential Real Estate Capped ETF (NYSEArca: REZ) , which includes large exposures to self-storage companies like 9.7% in Public Storage REIT (PSA), gained 6.4% year-to-date while the S&P 500 declined 5.9%.
Self-storage stocks have been rallying since the economy bounced back from the 2008 housing collapse, with shares of some of the largest self-storage owners quadrupling or more since bottoming out and outperforming the S&P 500 on a total return basis over the past decade, the Wall Street Journal reports.
Storage Companies Beat the Market
Companies like Public Storage, CubeSmart, Life Storage and Extra Space Storage continue to beat the market, but some are concerned that increased construction or expansion of storage space will challenge the market share and cap rents from rising like they have in recent years.
“The fundamentals had been phenomenal for years during the economic recovery, much better than any other sector,” Eric Frankel, senior analyst at Green Street Advisors, told the WSJ. “Developers and institutional investors caught on to it so there’s been a lot of supply coming online.”
For instance, Executives with Public Storage, the industry’s 161-million-square-foot player, told investors on a conference call that about $4 billion worth of new facilities have been built this year and that there will probably be about that much more added in the year ahead. To put this in perspective, for the decade leading up to 2016, about $1 billion worth of new construction per year was typical.
Nevertheless, demand does not seem to be abating anytime soon. Green Street projects that 8% of the U.S. population uses self storage, compared to 3% a decade ago.
“People always need some place to store their junk,” Alice Chung, a commercial real-estate analyst at Moody’s Investors Service, told the WSJ. “No one is going to start moving their stuff out just to save $3 or $4 a month.”
For more information on real estate investment trusts, visit our REITs category.