Public Storage Just Flexed Its Muscles: Is the Self-Storage Industry in for an Arms Race?

To no one’s surprise, Public Storage Inc. made it’s first big move this week since the closing of rival real estate investment trust (REIT) Extra Space Storage Inc.’s historic acquisition of Life Storage Inc. In case you missed it, Public Storage has agreed to purchase Simply Self Storage for $2.2 billion from Blackstone Real Estate Income Trust Inc. That transaction will add 127 owned facilities comprising 9 million rentable square feet into its primary portfolio, along with 25 properties into its management platform.

A few weeks ago, the Simply deal would have raised eyebrows as one of the largest self-storage acquisitions in recent memory, but with Extra Space’s massive power move to become the industry’s No. 1 operator still reverberating across the nation, the Simply transaction feels more symbolic than mighty but just may be a signal for what’s to come next.

On its face, the Simply acquisition is a big one. Anytime 9 million rentable square feet changes hands, it’s significant. But with the Extra Space portfolio now around 270 million rentable square feet, Public Storage is suddenly looking at a 35-million-square-foot wall between it and the industry’s largest total portfolio of owned and managed properties. It’d take about four more similar transactions to regain its perch in the industry’s top spot, and that’s assuming Extra Space sits still.

For perspective, Public Storage added about 9.8 million rentable square feet between June 2022 and June 2023, based on the data it reported for this year’s ISS Top-Operators Lists. In announcing the Simply acquisition, Public Storage officials said the REIT had added 55 million rentable square feet since 2019, which equals about 13.75 million square feet annually over the last four years.

In addition, Public Storage CEO Joe Russell’s released statement on the Simply deal included some interesting, carefully chosen language. “This acquisition reflects the continued execution of our multi-factor external growth platform,” Russell said. “We are pleased to complete this important transaction with Blackstone, which further demonstrates our position as an acquirer of choice in the industry.”

“Multi-factor external growth platform” is a mouthful. While this most likely refers to the REIT’s total growth strategy of acquisitions, development, expansion projects and third-party management contracts, the quickest way to add significant square footage—other than large portfolio acquisitions—is via its management program, which launched in 2019. In four short years, it’s already the industry’s seventh largest third-party management firm.

The other interesting turn of phrase Russell used was “acquirer of choice.” Without hearing inflection and tone of voice, it’s difficult to grasp the forcefulness he may have chosen to use in a speech setting, but this seems like a clear indication that Public Storage won’t be sitting idle. It also feels like a vague-but-pointed remark made in the general direction of Life Storage, which spurred Public’s unsolicited, $11 billion bid in February.

Of course, all of this makes for some interesting speculation about how things will shape up over the next few months. All of the REITs pursue acquisitions with shareholders in mind, so strategic purchases and growth are always at the forefront of actions. Whether or not we’re in for an arms race is difficult to tell, but it’s doubtful Extra Space will be content with its last salvo.

A tectonic shift like the Life Storage acquisition creates a lot of energy, so I imagine we’ll see some sizable portfolios trading hands. Large regional operators will most likely be in line for overtures, but that doesn’t mean smaller, local portfolios won’t garner interest.

Now’s the time to make sure you’re maximizing each facility to create as much net operating income and property value as possible. Opportunity and a lucrative exit may soon be knocking.