Self-Storage REITs own and operate self-storage facilities, leasing out storage space to customers on a short-term basis.
REITs of this type can be wonderful from a risk-reward perspective. Although leases are typically on a month-to-month basis, leading to some instability on the part of the property owners, the facilities themselves are incredibly low-cost. With minimal construction, little necessary ongoing maintenance and few operational costs, self-storage REITs are an incredibly slim operation. Some REITs of this type claim they can break even with as little as 30% of its available capacity occupied.
Despite this favorable cost structure, self-storage REITs are not without risk. Storage of this kind is a discretionary expense, meaning they usually face more vacancies than other classes of REITs during economic recession.
There are 6 self-storage REITs traded on major US stock exchanges. Widely known storage REITs are Public Storage (NYSE: PSA), Extra Space Storage Inc. (NYSE: EXR) and CubeSmart (NYSE: CUBE).