RBC Flags Emerging Recovery Prospects for Storage REIT Sector

Key Moments

Pricing Shows Early Signs of Recovery

Storage-focused real estate investment trusts are beginning to see the first indications of a turnaround after several years of pricing pressure. RBC Capital Markets believes that “most things are in place for a storage recovery,” signaling that the backdrop for the sector is starting to stabilize.

According to analysts led by Brad Heffern, market rents, which had slipped into negative territory in late 2022, have now crossed back into positive territory. This shift is reinforcing RBC’s view that “the storage sector has seen a trough.”

Move-In Rates and Occupancy Dynamics

RBC notes that move-in rate trends have improved meaningfully. Move-in rates had returned to neutral by mid-2025 and then moved modestly higher between August and October. This improvement was supported by 3% rate gains at CubeSmart and Extra Space in the third quarter.

However, this pricing momentum has coincided with softer occupancy levels, illustrating heightened customer sensitivity to rate increases. RBC argues that, even with this trade-off, the sector’s inflection point is coming into better focus. The main uncertainty, in the firm’s view, is how quickly stronger pricing can feed through into same-store revenue growth.

Demand Still Constrained by Housing Market Weakness

While life-event-driven storage use has held steady, RBC sees no clear catalyst yet to drive a broad-based demand rebound. The housing market remains a significant drag on the sector.

Home sales are running about 25% below 2019 levels, which is limiting demand related to household moves. RBC also points out that mortgage rates, despite being below levels from a year earlier, “are still not at a level that would encourage a significant increase in moving velocity,” the analysts wrote. The firm estimates that the housing slowdown has resulted in approximately a 5% demand headwind for storage.

Supply Overhang Continues to Pressure Fundamentals

On the supply side, conditions remain challenging. RBC finds that the volume of new rentable square footage under construction has fallen only 15-20% from peak activity. Even after this decline, current construction levels are still comparable to the oversupply environment seen in 2019.

With new properties taking three to four years to reach stabilized occupancy, RBC cautions that “the negative impact from supply will continue to be felt for years.” This persistent supply overhang is expected to weigh on fundamentals even as pricing gradually firms.

Valuations and Outlook for 2026

Despite ongoing demand and supply headwinds, RBC views current valuations in the storage REIT universe as more compelling than they have been for some time. The firm notes that storage REITs are trading at implied capitalization rates in the high-5% range and at discounts relative to private-market benchmarks.

Analysts suggest these valuation levels provide some downside cushion as growth slowly improves, even if the sector’s traditional premium to net asset value (NAV) has not yet returned to prior norms.

Looking ahead to 2026, RBC maintains a “mildly positive” stance on the group. This outlook is based on a more favorable pricing trajectory, better relative value, and an expectation of gradually improving occupancy trends.

CubeSmart Stands Out as Preferred Idea

Within the storage REIT space, CubeSmart remains RBC’s preferred name. The firm cites the company’s urban-oriented portfolio, its exposure to New York City, and its valuation discount compared with peers as key positives.

RBC also points to CubeSmart’s lower current occupancy as a source of potential upside, given the opportunity to fill more space over time. In addition, the broker highlights the possibility of “more meaningful upside from potential third-party management wins” as another driver for the stock.

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