BMO raises self-storage estimates after second quarter results

Investing.com -- BMO has raised its estimates for the self-storage sector following second quarter 2026 results that beat expectations, marking the second consecutive quarter of upward revisions.

The firm increased its 2026 same-store revenue and net operating income forecasts by 30 and 60 basis points to 1.1% and 0.7% year-over-year growth, which aligns with Street estimates and exceeds guidance from real estate investment trusts. Updated 2026 funds from operations estimates now stand 10 basis points above Street expectations and 20 basis points above REIT guidance.

For 2027, BMO's FFO estimates sit 100 basis points below the Street, assuming same-store revenue accelerates to 2.1%.

BMO upgraded Extra Space Storage to outperform, making it a top pick in place of CubeSmart, which remains at outperform. SmartStop was downgraded to market perform due to increased caution on Canada, which represents 9.4% of net operating income.

Move-in rate growth remains modest at an average of 1.5% year-over-year in the second quarter, excluding SmartStop. Public Storage turned positive at 1.6% year-over-year. The sector continues to face negative releasing spreads averaging -28.6%, though lower move-out rates have helped offset this impact.

Supply conditions continue to improve. Yardi data shows national third quarter 2026 in-process supply at 2.4% of inventory, down 30 basis points quarter-over-quarter. Deliveries for 2026 are expected to fall 23% year-over-year, with a further 17% decline projected for 2027.

Placer.ai foot traffic data shows a 0.5% year-over-year decline in the third quarter to date, an improvement from the 1.5% drop in the second quarter.

Housing market weakness continues to limit demand, keeping it stable but modest. BMO noted that regulatory scrutiny remains a concern in an election year.

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