23 Jun

Public Storage Is Expected to Ride High on Robust Revenue Growth

WRITTEN BY Jennifer Mathews

Self-storage experiences high demand

Macroeconomic factors such as high rent and demographic changes have resulted in high demand for self-storage facilities.

Moreover, facility owners have embarked on the redevelopment of their facilities so that they’re equipped with modern amenities such as climate control and security systems. These factors have spiked demand for self-storage facilities, increasing revenue for owners such as Public Storage (PSA).

Public Storage Is Expected to Ride High on Robust Revenue Growth

PSA is expected to maintain its revenue growth

Driven by aggressive acquisitions and a locational advantage, Public Storage is expected to maintain its revenue growth in the upcoming quarters.

Although the company hasn’t provided any guidance for the upcoming quarters, analysts expect it to report revenue rises of 12.1%, 11.4%, 12%, and 2%, respectively, in 2Q17, 3Q17, 4Q17, and 1Q18.

Robust revenue growth in 1Q17

PSA’s same-store revenue rose almost 4% to $538.3 million in 1Q17 backed by higher same-store occupancy. The company’s storage facilities are located in busy metropolitan areas with proximity to multifamily apartments and offices to help it maintain demand for its properties.

While rental income rose 4.3% year-over-year (or YoY), late charges and administrative fees remained flat during the quarter. The same-store pool rose from 2,000 facilities to 2,060 facilities quarter-over-quarter.

On the other hand, non-same-store facilities, representing storage buildings that weren’t stabilized with respect to occupancy, stood at 283 in 1Q17, higher than their level of 220 in 2016. Revenue for non-same-store facilities rose 21.5% during the quarter. Square foot occupancy fell to 82.7%, compared to 88.2% in 2016. Net rentable square feet rose 35.7% to $22.9 million during the quarter.

Shurgard’s same-store revenue rose 1.7% as higher rents were partially offset by lower occupancies, which fell 90 basis points YoY.

Public Storage reported a five-year compound annual growth rate (or CAGR) of 8.4%. Other close competitors Life Storage (LSI), Macerich Company (MAC), and Extra Space Storage (EXR) reported five-year CAGRs of 17%, 5.3%, and 21.3%, respectively.

Public Storage and Extra Space Storage occupy almost 9% of the iShares Cohen & Steers REIT ETF (ICF). ICF’s broadly diversified portfolio provides a cushion against industrial and macroeconomic headwinds as well as volatility in the national market.

In the next article, we’ll see how PSA maintains its business momentum.

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