In the course of the coronavirus outbreak, a number of REIT (real estate investment trusts) sectors got hammered. Hospitality REITs, for example, took a beating as hotel occupancy rates plunged to record lows. And a number of office REITs did poorly as buildings remained shuttered and employees did their jobs from home.
But if there's one sector that's managed to thrive in the course of the pandemic, it's self-storage.
As of June 30, total returns from self-storage REITs reached 36%, bouncing ahead of other REIT sectors with the exception of shopping centers and malls. In fact, now's a good time for real estate investors to consider putting money into self-storage REITs due to the following trends.
It's estimated that close to 16 million people have moved in the course of the pandemic, according to USPS data that relies on change of address requests. As people now figure out their return to office plans, we're likely to see relocation activity hold steady or pick up. And nothing spurs the need for self-storage like moving activity.
Incidentally, an uptick in self-storage demand could be good news for cities that experienced a host of exits during the pandemic. In New York City, for example, countless residents chose to flee early on in the outbreak, swapping their shoebox-sized apartments for larger suburban spaces nearby. And in major metro areas across the country, residents abandoned overpriced hotspots and took up residence in smaller cities and vacation destinations, which have since been dubbed Zoom towns.
But because the self-storage business has been good, investors in those cities can take it as a sign that those same residents who fled initially will eventually make their return. After all, when people rent a storage unit upon leaving a city, it's often a sign that they're leaving temporarily but will eventually be back.
2. Remote work
At this point during the pandemic, a lot of companies are finalizing their plans to bring employees back to the office. But some won't be doing that at all. Instead, they'll be giving employees the green light to work remotely on a permanent basis. That could, in turn, spur an uptick in moves and a need for storage.
Furthermore, long-term remote workers who opt not to move may instead seek to reconfigure their living space. And that could mean putting belongings into storage to carve out more room for office equipment.
During the pandemic -- particularly its earlier stages -- a lot of people locked themselves in their homes for fear of contracting COVID-19 while out in public. And that also meant that a lot of people spent their evenings and weekends cooped up going stir crazy. Those people may have increased their online shopping simply because they had nothing better to do. The result? Too many items to keep on hand and a need to have someplace to put them.
The Millionacres bottom line
In the coming years, there's a good chance office REITs will stage a comeback and hospitality REITs will recover as both leisure and business travel pick up. But those who want to invest in a currently thriving industry should consider looking at self-storage. It's a sector that's only poised to grow as people adjust and readjust their plans in the wake of the pandemic.