Whether it’s a new job, divorce or going to college, life has a way of making extra storage space a necessity.
Those life transitions help keep self-storage buildings full and rents going up. Among the biggest landlords of self-storage space are publicly traded real estate investment trusts, or REITs.
Investors flocked to these REITs in recent years as demand for storage space surged, exceeding supply, said Brad Schwer, equity analyst at Morningstar.
Shares in the two largest – Public Storage and Extra Space Storage – notched big gains until this year. Both are down nearly 15 percent so far, part of a broader slide in self-storage REITs. The sector posted a negative annual return of 8.3 percent through the first three quarters of 2016, according to the National Association of Real Estate Investment Trusts. Still, the factors that often prompt people to rent storage space remain, as do the ultra-low vacancy rates and rising rents, particularly in California. And population trends are in their favor. “Downsizing baby boomers should fuel demand for self-storage,” said Schwer. That could help revive shares in the two REITs, both of which are trading below Schwer’s estimates of their fair value price. That suggests they’re undervalued. Here’s a look at the two biggest self-storage REITs: