Self-Storage: Buy-side M&A Strategies & Trends

This article is one in a series covering investments and opportunities in the self-storage industry, a sub-sector of commercial real estate investments. The article will present a discussion on the attractive opportunities in buy-side mergers and acquisition (M&A) within the industry. The rationale for investors and self-storage operators to engage in vertical and horizontal M&A is also presented here.

Attractive Opportunities

There are many aspects of the self-storage industry that have attracted M&A buy-side activity in the industry.

High long-term returns have influenced investors to flood into the self-storage industry. According to the National Real Estate Investor, long term returns for self-storage exceed returns from other commercial real estate sectors. The five-year return, ten-year average and the 15-year average of the self-storage industry are at 24.4%, 17.8% and 20.3%, respectively and exceed that of the multifamily sector by approximately 400 basis points for each category. High historical returns have been a motivating factor for investing in the industry.[1]

Recession resilience in the self-storage industry has attracted investors to invest in self-storage properties. As an asset class, the self-storage industry is resistant to economic recession. For example, during the 2008 economic crisis, the self-storage industry was the only real estate investment trust (REIT) that reported positive total returns.[2] Self-storage firms outperformed single family homes and stocks and maintained positive returns.[3]

Source: Garagetown.com

During an economic recession, the industry had lower declines in rental rates and default ratios compared to other real estate sectors.[4] Investors benefited from positive returns during crisis periods. According to the National Real Estate Investor, the number of renters increased during the recession period and influenced investors to invest in the industry as rental prices were increasing.1

Consolidation in the industry creates opportunities for investors to expand their portfolios. Consolidation is a current trend in the industry as demand to acquire storage properties farexceeds the supply of properties available.[5] Many private equity firms and large REITs are purchasing mom-and-pop self-storage properties to increase market share. Mid-sized companies and mom-and-pop operators dominate over 80% of the owned self-storage properties.[6] Consolidation not only addresses industry fragmentation, but also, aids investors to gain more returns on their portfolios.

Vertical M&A

Both vertical and horizontal M&A are increasing in the self-storage industry. Many of the players in the industry as well as REITs are purchasing existing sites and developing others in order to increase overall portfolio size and benefit from operational scale across a varying mix of commercial real estate properties. For example, Extra Space acquired a portfolio of three new self-storage properties from Endeavor Real Estate Group to reduce the overhead costs associated with development resources. Many private equity firms participate in vertical M&A since the risk and liability associated with the development are eliminated. Vertical M&A is also beneficial to REITs given that site development can be completed without incurring expenses and overhead. 1

Horizontal M&A

Self-storage operators engage in horizontal M&A to increase their market share and enhance the long-term growth of companies. For example, in 2015, Public Storage acquired 25 self-storage facilities from Maryland, Florida, New Jersey, North Carolina and Virginia. In 2013, Public Storage acquired 121 self-storage properties. The above-mentioned acquisitions aided in increasing Public Storage’s revenue and improved its long-term growth.[7] Many large operators participate in horizontal M&A due to the accretive impact that acquisitions have on company revenues. For example, Global Self Storage acquired two self-storage properties and a commercial property expecting to increase the store’s revenues and net operating income.[8]

Horizontal M&A also helps operators expand their portfolio, enhance the ability of self-storage companies to source customers and increase their presence in the current market.[9]


The self-storage industry may not be the most glamorous sector in the real estate market, nonetheless, many features of the industry have created attractive opportunities for investors to flood the industry, and to increase acquisition activities. High long-term returns, the recession resistance of the industry as well as consolidation opportunities in the self-storage industry are attractive features that motivate investors to gain equity interest in self-storage companies. Many private equity firms are engaging in vertical M&A to acquire self-storage properties and to reduce the risk and liability associated with site developments and construction work. Horizontal M&A has also gained popularity in the industry as larger operators capitalize on acquisitions to increase their market share and revenue.


[1]Robert Carr, Private Equity Pours Money into Self-Storage Deals, National Real Estate Investor, (Mar 16, 2015), http://www.nreionline.com/self-storage/private-equity-pours-money-self-storage-deals.

[2] Stephen Schwartz, 4 Reasons Self-Storage is Still a Good Investment, (July 28, 2017), https://www.sparefoot.com/self-storage/news/5554-4-reasons-self-storage-is-still-a-good-investment/.

[3] Garagetown, Why Own Your Storage, (2018), http://garagetown.com/why/

[4] R. Christian Sonne, Self-Storage Economics, The Appraisal Journal, (2013).

[5] Alexander Harris, Self-Storage Industry Faces Continued Consolidation, (Sept 15, 2014), https://www.sparefoot.com/self-storage/news/698-consolidation-continues-in-self-storage-industry/

[6] Kirk Pinho, Self-storage market has healthy space, (Updated Nov 6, 2017), http://www.crainsdetroit.com/article/20171105/news/644161/self-storage-market-has-healthy-space.

[7] Zacks Equity Research, Public Storage Grows on Self-Storage Facilities Acquisition, (June 2, 2015), https://www.zacks.com/stock/news/159215/public-storage-grows-on-selfstorage-facilities-acquisition.

[8] GlobeNewswire, Global Self Storage Completes Acquisition of Tuxis Self Storage Facilities in Clinton, Connecticut and Millbrook, New York, (Jan 3, 2017), https://globenewswire.com/news-release/2017/01/03/902987/0/en/Global-Self-Storage-Completes-Acquisition-of-Tuxis-Self-Storage-Facilities-in-Clinton-Connecticut-and-Millbrook-New-York.html.

[9]PR Newswire, Extra Space Storage Inc. Closes Acquisition of SmartStop Self Storage, Inc. (Oct 1, 2015), https://www.prnewswire.com/news-releases/extra-space-storage-inc-closes-acquisition-of-smartstop-self-storage-inc-300152276.html.


Jenn Abban contributed to this report.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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