Long gone are the days of the abandoned looking string of storage units on the outskirts of town, tucked in behind the coin operated car wash. While no one was looking, the storage industry picked up its bags and moved downtown, right downtown. These glass towers now speckle the urban landscape, glistening beacons of mass consumption. In the largest cities in the country, storage operators are bidding head-to-head with condo developers to purchase the most prized tracks of land available.
Seems absurd you say. Well, let’s take a closer look shall we. The cost of building a multi-level storage facility consisting of concrete floors and steel lockers is far less expensive than building a similar size condo building with all the amenities and residential units finished to today’s high standards. The real kicker is that the rent per square foot for a storage unit in the urban core is probably the same or higher than rent for the condo next door. We looked at one newer facility in Toronto who rents a 10′ x 10′ (100 sq/ft) storage unit for $425/month. This equates to renting a 1000 sq/ft condo for $4250/month. Pretty good numbers for a sleepy industry, right?
Turns out the storage industry is anything but sleepy, and if you haven’t got a piece of storage pie in your investment portfolio you’ve been out to lunch. These sleeping GIANTS have slowly acquiesced their way into every corner of every major city across the country, seemingly unnoticed.
For those awake at the wheel, who saw them coming and jumped on the bandwagon, the financial rewards have been astonishing. Over the past decade, the 5 top producing Storage REITs have averaged a rate of return of 33.46%/year.
Leading the pack like a well-oiled greyhound is ExtraSpace, the second largest US REIT, who has furnished its investors with an average return of 57%/yr over the last ten years and pays a handsome 3.1% dividend to kick. Not far in the rearview mirror are the CubeSmart and Life Storage REIT’s which took silver and bronze medals in a close finish with returns of 28% and 24% respectively. They also pay dividends in the 3.5% range. Public Storage, the Godfather of American storage REITs sat solidly on the sidelines with over 2200 facilities, showing investors a solid return of 11.3%/yr.
The road to REIT richness
Self-Storage REITs – Titans of Industry
While the titans weren’t looking, a newcomer arrived north of the border to take a seat at the big boy table. Storage Vault, a Canadian owned and operated REIT has made big waves in the Canadian storage industry quietly amassing over 150 storage facilities, more than double that of any other operator in the country. Enjoying its own piece of the storage pie, Storage Vault (SVI) has earned its cred on both Wall St and Bay St, showing its loyal investors a juicy return of 47%/yr over the last decade.
Seems storage may be an overlooked investment with some outstanding qualities. Storage has become a household name, needed by consumers in all transitions of life. Death, divorce and downsizing, the industry trifecta, all seem to be on an upward trajectory, lending themselves handily to a robust storage industry.
These storage REIT’s also offer a genius way to diversify your investment over hundreds of storage facilities in numerous different cities. The industry is deemed to be recession resistant, offering strong returns when the economy is rocking and rolling. Afterall space is space, if you haven’t got room for your stuff when things are good, where are you going to put it when things are bad? – it stays put in storage near you.
Some might say these grandiose additions to the local landscape are an eyesore and don’t belong but let us remember why they are here – to house our STUFF, the stuff we can’t quite cram into our basements, garages, dorm rooms and back yards, the stuff it turns out must be worth the monthly rent it demands. As it also turns out, these storage companies don’t just give back big financially, they give to local communities on a large scale as well. Storage Vault recently announced sponsoring the Canadian Olympic team, while its contemporaries in the US each give big to local charities.
These industry leaders are also at the front of the corporate pack environmentally, with a trend towards solar installations, progressive lighting, waste reduction and recycling initiatives as well as reduced water consumption practices.
While these sleepy Giants may not have been on your investment radar in the past, it might be time to rethink a new anchor tenant for your retirement.