The Rising Dividend Power of Self-Storage REITs in a High-Inflation Era

In an era marked by persistent inflation and economic uncertainty, self-storage real estate investment trusts (REITs) have emerged as a compelling asset class. Unlike traditional commercial real estate (CRE) sectors-such as office, retail, and industrial-self-storage REITs have demonstrated superior cash flow stability, pricing power, and recession-resistant demand. This resilience is particularly evident in the performance of industry leaders like Public Storage (PSA) and Extra Space Storage (EXR), which have leveraged high-margin business models, digital innovation, and disciplined capital allocation to outperform broader CRE markets.

A Sector Built for Inflation

Self-storage REITs have historically thrived during inflationary periods due to their unique value proposition. Unlike traditional CRE, which is often tied to cyclical demand (e.g., office leasing tied to corporate expansion or retail tied to consumer spending), self-storage caters to a universal need: the storage of personal and business goods. As noted by a 2025 CNBC analysis, the sector's "agnostic nature" ensures demand remains resilient regardless of economic conditions.

This dynamic was on full display in 2025, when self-storage REITs navigated a challenging macroeconomic environment. While occupancy levels dipped to their lowest since 2017, pricing power began to stabilize. For instance, SmartStop Self Storage reported a 2.5% year-over-year increase in same-store revenue, driven by occupancy and rate recovery. Similarly, Extra Space Storage (EXR) saw new-customer rate growth of over 3% year-over-year, marking the first sustained period of rate growth in nearly three years. In contrast, traditional CRE sectors faced sharper declines in net operating income (NOI), with industrial, office, and retail properties struggling to offset rising operating costs and softening demand.

High-Margin Business Models and Digital Innovation

The financial strength of self-storage REITs is underpinned by their high-margin business models. Public Storage (PSA), for example, reported a net margin of 44.13% in 2024, with EBITDA and EBIT margins of 74.9% and 50.6%, respectively. While PSA faced margin compression (a 5.22% decline in net margin from prior years), its operational scale and automation-driven cost discipline allowed it to maintain profitability. Meanwhile, EXR's net profit margin expanded from 24.4% to 27.7% in recent years, with analysts projecting further growth to 34.9% over the next three years.

Digital innovation has been a key driver of these margins. PSA's extensive digital infrastructure, including automated customer service and property management systems, has reduced payroll costs by 12.4% and enabled 85% of interactions to occur digitally. EXR, on the other hand, has invested in proprietary tools such as a dynamic pricing model that reprices millions of units nightly and a bidding algorithm to optimize Google search terms. These innovations not only enhance operational efficiency but also allow both REITs to respond swiftly to inflationary pressures by adjusting pricing in real time.

Traditional CRE, by contrast, lags in digital adoption. A 2025 report by Cushman Wakefield highlighted that self-storage REITs outperformed industrial, multifamily, retail, and office sectors in NOI growth over the past 15 years. This gap is widening as self-storage REITs continue to prioritize technology-driven cost management, while traditional CRE operators grapple with legacy systems and higher overhead costs.

Recession-Resistant Demand and Dividend Power

The self-storage sector's demand trends further underscore its appeal in a high-inflation environment. During the 2020–2025 period, customer behavior shifted toward "space-constrained" renters-individuals or businesses seeking long-term storage solutions rather than short-term, move-related units. This shift has stabilized revenue streams, as long-term tenants are less sensitive to economic downturns. For example, EXR's 94.6% same-store occupancy in Q2 2025 reflected strong demand despite macroeconomic headwinds.

This resilience is mirrored in the sector's dividend performance. PSA and EXR have maintained consistent dividend payouts for decades, with PSA's latest cash dividend of $3 per share (annualized at $12) yielding 4.41%. EXR's 5.01% yield, supported by a $6.48 annual dividend, further cements its appeal to income-focused investors. While both REITs operate with high payout ratios (PSA at 124.4%, EXR at 144.97%), their strong cash flow generation and disciplined capital allocation provide a buffer against dividend cuts.

A Bright Outlook for 2026

Looking ahead, the self-storage sector is poised for a rebound. Limited new supply-projected to grow at just 1.5% annually from 2025 to 2027-has improved the supply-demand balance. Elevated construction costs and constrained credit access have further curtailed new developments, creating tailwinds for existing REITs. As a result, PSA and EXR are optimistic about 2026, citing potential for improved demand and pricing power as interest rates stabilize and housing market conditions improve.

Conclusion

In a high-inflation era, self-storage REITs like PSA and EXR offer a compelling combination of cash flow stability, pricing power, and recession-resistant demand. Their high-margin business models, digital innovations, and disciplined capital allocation position them as top picks for investors seeking both income and long-term growth. As traditional CRE sectors struggle with macroeconomic headwinds, self-storage REITs stand out as a resilient and increasingly attractive asset class.