Self-storage REITs own and operate self-storage facilities like rooms, lockers, containers, and outdoor space. Self-storage REIT tenants normally include businesses and individuals. It’s important to note that 70% of the tenants are individuals. These facilities are normally rented to tenants on a monthly basis. In some cases, the lease period may extend up to six months.
The market is highly fragmented
A typical storage facility contains around 60,000–70,000 square feet of rentable space. Over the last few years, a number of small players have entered the market. The investment that’s required to start a self-storage facility is comparatively lower. Small players dominate the market with a share of around 90% of the total self-storage facilities. In contrast, the five public self-storage REITs owned around 10% of the self-storage industry’s facilities.
There are five REITs in the self-storage sector with a combined market capitalization of $46.8 billion. They account for 5.26% of the total REITs market capitalization. Public Storage (PSA) is the largest with a market capitalization of $31.8 billion. It’s followed by Extra Space Storage (EXR) with $7.8 billion and CubeSmart (CUBE) with $3.9 billion. The average dividend yield of the self-storage REITs is one of the lowest at 2.95% as of June 2015. Public Storage provided the highest dividend yield in the sector at 3.69%.
Investors looking for diversification in the REIT sector can get exposure to REIT ETFs like the Vanguard REIT ETF (VNQ), the iShares U.S. Real Estate ETF (IYR), and the iShares Cohen & Steers REIT ETF (ICF).