Public Storage REIT – Strategic Asset Analysis for Investors, Developers, and Lenders

RV & Boat Storage - Illustrative facility, WA

Introduction: Public Storage (NYSE: PSA) is the largest self-storage real estate investment trust (REIT) and a market leader with a broad national portfolio. This report provides a deep-dive analysis of Public Storage’s asset strategies – including redevelopment, stabilization, ground-up development, and opportunistic acquisitions – framed for three key stakeholder perspectives: REIT investors, private equity developers/investors, and lenders. Drawing on the latest operational data and MMCG’s proprietary market database, we examine Public Storage’s market positioning, operational performance, recent acquisition trends, and tenant dynamics. The goal is to offer board-level insights in a natural, insight-driven style, supporting strategic decision-making for investors and partners.

REIT Investors: Long-Term Strategy and Portfolio Performance

Public Storage’s performance and strategy reflect its role as a bellwether in the self-storage REIT sector. Market Positioning: PSA commands a dominant position in a fragmented industry – roughly 78% of U.S. self-storage square footage is still owned by private operators, leaving only ~22% held by large public operators.[1] This fragmentation underpins Public Storage’s ongoing consolidation opportunity. The company’s nationwide portfolio (over 3,100 facilities as of Q3 2025) gives it unmatched scale and brand recognition. Public Storage leverages a resilient demand base; self-storage needs are driven by life events and small-business storage needs, which tend to be “needs-based” and relatively inelastic even in economic swings.[2]

According to MMCG’s proprietary data, national self-storage occupancies have stabilized in the low 90% range in 2025, reflecting steady demand even as pandemic-era spikes normalize.[7] Public Storage’s Q3 2025 same-store occupancy stood around 90.7% (down slightly from 91.4% a year prior), indicating minor normalization but overall stability.[1] Rent rates have seen modest pressure – PSA’s annual contract rent per occupied square foot was essentially flat (+0.1% YoY) at $22.88, as the company balances rate increases with occupancy retention.[1]

Operational Performance: Public Storage continues to deliver sector-leading operating margins and solid cash flow, which is crucial for REIT shareholders focused on dividend and FFO growth. In Q3 2025, PSA’s same-store direct net operating income margin was about 78.5%, an exceptionally high profitability level that outpaces most real estate sectors.[1] The company’s focus on cost control and technology-driven efficiencies has contained expense growth even as revenue growth moderated. In Q1 2025 Public Storage held same-store expense growth nearly flat (just +0.1% YoY) by optimizing its operating model and reducing marketing costs, reinforcing its sector-leading margins.[2]

Management highlights an ongoing “operating model transformation” designed to enhance customer experience while bolstering profitability.[2] This includes streamlined operations (e.g., centralized digital marketing, call centers, and automation) and an eRental platform that simplifies move-ins. These initiatives have improved efficiency (contributing to margins) and customer retention. Tenant dynamics remain healthy: tenants are predominantly individual consumers and small businesses using storage for transitional needs, and PSA notes that its rents remain affordable relative to alternatives (housing or commercial space).[2]

During 2025, street rental rates were adjusted downward in some markets to sustain occupancy – Public Storage acknowledged new lease rates fell to levels “not seen since 2013,” which boosted move-in volumes by making units more price-competitive.[4] For REIT investors, these trends indicate that PSA is proactively managing revenue through the cycle: sacrificing some short-term rent growth for occupancy stability, which protects its cash flows and market share.

Redevelopment & Portfolio Optimization: As a long-term owner, Public Storage employs redevelopment selectively to enhance its existing assets. Redevelopment for PSA often means expanding or upgrading older facilities to increase rentable square footage or add climate-controlled units in mature markets. The company’s in-house development and construction team gives it a unique capability to execute expansions efficiently.[2] For example, in the first nine months of 2025, Public Storage completed expansions adding roughly 1.1 million square feet to high-demand facilities.[1]

Such projects often involve building new floors on single-story properties or converting underutilized space – a strategy that can yield high incremental returns on capital. Public Storage prioritizes redevelopment in urban, supply-constrained markets where zoning makes new construction difficult; this turns real estate scarcity into a competitive advantage. MMCG’s market data shows that in many top MSAs (e.g., Los Angeles, San Francisco), local permitting limits on new self-storage have kept supply growth below 1–2% annually, creating upside for redeveloping existing sites.[7] By reinvesting in its older properties, PSA protects its market-leading presence and unlocks additional NOI with relatively low risk.

Stabilization & Operations of New Assets: Public Storage’s growth strategy involves acquiring and developing new facilities, which then go through a lease-up (stabilization) phase. The company’s operational platform excels at driving occupancy in newly opened or acquired properties. As of Q3 2025, PSA had about 587 non-stabilized facilities in its portfolio – these include recently acquired properties and new developments undergoing lease-up.[1] The scale of PSA’s marketing reach and its web presence allow it to funnel prospective tenants to these new locations quickly.

In practice, Public Storage often prices new facilities aggressively (with introductory promotions) to achieve occupancy targets, then gradually increases rents on those tenants over time. This approach has led to robust NOI contributions from “Non-Same Store” facilities: in Q3 2025, PSA’s NOI growth was driven entirely by new acquisitions and developments, while same-store NOI was roughly flat.[1] The ability to absorb new supply internally is a competitive edge – for REIT investors, it means PSA can continue portfolio expansion without dragging down overall financial performance.

By the time assets stabilize (typically reaching ~90% occupancy, which lenders define as stabilized range), the company has usually implemented market-rate rents, boosting revenues.[6] Public Storage’s track record shows stabilization periods can vary, but MMCG’s proprietary data indicates most new PSA facilities achieve ~85%+ occupancy within 18–24 months, depending on local competition.[7] The firm’s high same-store occupancy and stable tenant retention underscore effective lease-up and customer service strategies.[4]

Ground-Up Development Pipeline: Unlike many REIT peers, Public Storage has a robust in-house development program, which it uses to supplement acquisitions in growing markets. Ground-up development is inherently a longer-term, higher-risk strategy, but PSA’s financial strength (low leverage, strong cash flow) allows it to pursue development without straining the balance sheet. As of Q3 2025, PSA had roughly 3.9 million square feet of new facilities under development or expansion at a total expected cost of about $649 million.[1]

Public Storage targets development in undersupplied submarkets – often fast-growing metros in the Sunbelt and coastal cities with high barriers to entry. These ground-up developments typically aim for a stabilized yield on cost in the high-7% to 8% range, according to MMCG’s internal analysis.[7] Such yields are compelling in the current environment where stabilized acquisition cap rates for self-storage are around 6.5–7%.[3] In effect, PSA is creating core assets at a cost basis below market value, which is value-accretive for shareholders.

Industry-wide new construction has been moderating: Capright reports that limited new construction and elevated replacement costs will continue to support market stability going forward.[3] This trend bodes well for PSA’s new projects, as they are less likely to face a glut of competing facilities upon completion.

Opportunistic Acquisitions: Public Storage’s acquisition strategy is central to its growth, and it has been highly active in 2025 as market opportunities improve. As a REIT with one of the lowest leverage levels and significant liquidity, PSA can act opportunistically to acquire existing facilities from smaller operators. Industry fundamentals in 2024–2025 (higher interest rates, some regional oversupply) put pressure on many private owners, expanding the pool of acquisition targets.

PSA stepped up its pace: in the first nine months of 2025, the company acquired about 74 self-storage facilities across 17 states, totaling roughly 5.2 million square feet for $814.6 million.[1] In Q3 alone, 49 facilities were purchased – a sharp acceleration from earlier in the year – indicating that acquisition deal flow has returned as bid-ask spreads narrow. Management noted acquisition market activity is increasing amid stabilizing fundamentals, and PSA has been able to negotiate favorable pricing.[1]

On average, Public Storage paid roughly $160–$170 per square foot for acquisitions year-to-date, which is significantly below replacement cost in many markets.[7] This pricing translates into initial yield opportunities in the mid-6% cap rate range, with further upside as PSA integrates the properties. In some cases, PSA acquires facilities that are under-managed or in lease-up, allowing it to apply its branding and revenue management to improve performance – a truly opportunistic approach. Public Storage’s reputation as a “preferred acquirer” with surety of close gives it an edge in sourcing deals from developers and smaller firms looking to exit.[2]

For long-term shareholders, PSA’s M&A strategy – avoiding overpriced large platform acquisitions in favor of one-off property buys – should continue compounding value. The fragmented market provides a long runway: despite PSA’s size, it still holds only an estimated ~9–10% of total U.S. self-storage facilities, leaving ample consolidation potential.[1][7]

Summary for REIT Investors: Public Storage’s all-around strategy positions it for resilient growth and value creation. The company balances internal growth (high-margin operations, expansions, developments) with external growth (acquisitions) to deliver compounding returns.[1] In the current environment of stabilizing self-storage fundamentals – occupancies steady, rents adjusting mildly, and new supply slowing – PSA is outperforming by leveraging its strengths.

Private Equity and Developers: Value-Add Opportunities and Asset Strategy Feasibility

From the perspective of private equity investors and developers in the self-storage space, Public Storage’s strategy provides both a roadmap and a competitive backdrop. Private investors – including specialized storage operators, real estate private equity funds, and entrepreneurial developers – are typically seeking value creation opportunities in the same four strategy areas: redevelopment, stabilization plays, ground-up development, and opportunistic acquisitions. However, their approach and requirements differ from a large REIT’s, given differences in scale, return targets, and capital structure.

Market Context and Positioning: It is important to note that the overall self-storage market remains attractive to private capital. Institutional investors and funds are actively allocating to the sector, drawn by its recession-resistant demand and cash flow profile. Recent headlines include new storage-focused funds and even global interest such as major private equity bids for European storage operators.[3][5]

The long-term outlook is positive, as limited new construction, elevated replacement costs, and persistent demand continue to support market stability.[3] That said, short-term moderation is evident: rent growth has flattened or slightly declined in many markets in 2024–25, and operating expenses (especially property taxes and insurance) are rising.[3]

MMCG’s proprietary data indicates that on average, 2025 same-store NOI growth for the top storage owners is around -1% to 0%, essentially a breather after the high-growth years of 2021–22.[7] Occupancies have stabilized, so the game has shifted to competitive pricing and value-add strategies rather than rising tides lifting all boats.

Opportunistic Acquisitions & Value-Add Plays: Private equity investors often seek acquisitions where they can add value – for example, buying an under-managed facility at a discount, then improving operations or expanding it. Public Storage’s acquisition spree signals that attractive deals exist, but it also means competition for quality assets has intensified. Private buyers may find the best opportunities in niches or local markets that are below the radar of REITs.

Valuation trends are more favorable than a few years ago: cap rates for stabilized self-storage have expanded to the mid-6% to low-7% range by 2025, up from sub-5% levels two years prior.[3] According to MMCG data, many private deals in 2025 are trading around a 7% cap rate on in-place NOI, and even higher for facilities with occupancy or operational issues (value-add deals).[7]

One common strategy is to buy an unstabilized property (e.g., 50–70% occupied) at a favorable per-square-foot price, then drive lease-up and increase rents – essentially a stabilization play. Industry data shows that acquisition yields for properties in lease-up often start as low as ~2.5% but can stabilize in the upper 6% range once occupancy and rents ramp up.[3] This spread is the core of the value-add thesis.

Redevelopment & Conversions: Redevelopment is another arena where private developers can create significant value, though it requires expertise and often patience through zoning and construction. Public Storage’s success with expansions highlights the payoff of adding square footage in constrained markets. Private investors can pursue similar strategies on a smaller scale: for instance, acquiring an older single-story facility on a large parcel and adding a multi-story building or climate-controlled expansion.

MMCG’s experience data shows that redevelopment yields can be very attractive: projects converting vacant retail big-box stores or industrial buildings into storage often see stabilized yields above 9% on cost, given the low basis of the existing structure.[7] Industry case studies, including conversions of office/warehouse properties into storage that were subsequently acquired by institutional buyers, illustrate this model.[5]

Ground-Up Development: Private developers remain active in ground-up self-storage development, albeit at a more measured pace than a few years ago. The landscape has shifted: construction financing is tighter and more expensive in 2025, and lenders now require more equity and higher pre-stabilization debt yields.[6]

The volume of new self-storage projects started in 2024–25 declined by roughly 40% compared to the peak a few years prior, according to MMCG’s tracking of planned supply.[7] This reduction in pipeline supports the feasibility of well-located new developments that will deliver into a more balanced market in 2026–2027.

Financially, private developers often aim for a development yield (NOI/Cost) of 8% or higher to justify the risks. With cap rates ~6.5–7%, this still provides a healthy development spread of roughly 150 basis points or more, which can translate to substantial profit if the project is sold or refinanced upon stabilization.[3][7]

Stabilization & Operations (for Private Owners): Once a facility is acquired or developed, the stabilization phase is where private operators must excel operationally. The goal is to reach stabilized occupancy (typically 90%+ in storage) and optimized rental rates as quickly as practical without sacrificing long-term revenue. Lenders often consider a property stabilized when occupancy is in the 85–92% range and trending upward.[6]

The spread between street (new customer) rents and in-place rents has widened dramatically to around 48%, meaning operators frequently offer discounted intro rates and then raise existing tenant rates over time.[3] Private operators can leverage this dynamic by attracting customers with promotions and then managing rate increases to boost revenue – the same practice used by the REITs, but it requires careful data tracking to avoid excessive churn.

MMCG’s benchmarking shows well-run private facilities can achieve NOI margins in the 60–65% range, versus roughly 75–80% for the largest REITs.[7] The gap is partly due to scale, but closing even part of it adds significant value.

Lenders: Credit Perspective on Public Storage and Self-Storage Strategies

From the viewpoint of lenders – banks, life insurance companies, CMBS lenders, and debt funds – the self-storage sector and Public Storage in particular present a generally favorable credit profile. Historically, self-storage loans have had one of the lowest default rates in commercial real estate, thanks to the asset class’s steady cash flows and granular tenant base.[6]

Portfolio and Performance Strength: Public Storage, as an A-rated REIT, is a top-tier borrower with significant unsecured debt issuance. For lenders, PSA’s financial strength – low leverage and billions in unencumbered assets – provides comfort; however, at the asset-level, lenders still look at property cash flows and market conditions.

The stabilizing fundamentals in 2025 mean that most storage properties are maintaining high occupancy and cash flow coverage. Capright notes that occupancies are stabilizing and NOI growth for 2025 is mildly negative for top REITs on average, reflecting a near plateau but not a severe decline.[3] Lenders will typically stress-test that cash flow can cover debt service under modest downside scenarios.

Debt Service Coverage Ratios (DSCR) of ~1.25x to 1.35x are common underwriting hurdles, and debt yields around 8–9% for storage loans.[6] Many PSA facilities, if mortgaged, would show debt yields well above that due to strong NOI per square foot. Moreover, self-storage’s month-to-month leases allow for quicker operational adjustments, which lenders view as a plus for managing through economic cycles.

Lender Appetite and Terms: In 2025, lenders are actively competing for self-storage deals.[6] Banks, in particular, have returned to the market for new loans, drawn by storage’s performance. As such, lenders are offering relatively favorable terms for strong deals: for stabilized, Class A self-storage, loan-to-value (LTV) ratios of 55% up to ~65% are common, with interest rates in the mid-6% range.[6] Life insurance companies might advance slightly lower leverage but at low fixed rates for long terms. Banks are more willing to go towards 70–75% LTV for top sponsors, sometimes offering interest-only periods.[6]

Construction lending is also available: loan-to-cost (LTC) for construction can reach 70–75% for solid projects, especially with debt funds or banks that have self-storage expertise.[6] The rationale is that storage development has a faster lease-up and lower break-even occupancy than many other property types.

Risk Factors and Mitigants (Redevelopment & Stabilization): For loans on properties undergoing redevelopment or in stabilization phase, lenders pay close attention to current cash flow and sponsor strength. In cases of substantial redevelopment, the loan might be structured as a construction or bridge loan, with future funding releases as milestones are met. However, because self-storage projects are often phased, some income continues, which lenders like.

Stabilization risk is another focus: a property that is newly opened or recently acquired will have lower occupancy and possibly negative cash flow initially. Bridge lenders want to see an exit debt yield of around 8.5% or more – meaning by the time the loan matures, the NOI should yield 8.5% on the loan amount, ensuring refinanceability.[6] Many lenders recognize that self-storage lease-up has lengthened somewhat because move-in rates were cut and some markets had a lot of new supply in recent years, so they underwrite a slower absorption pace.[4][6]

Collateral Quality and Sponsor Analysis: For lenders, Public Storage’s properties are high-quality collateral – typically well-located with modern design and strong branding. If lending to PSA, the sponsor strength is a major mitigant. But when storage properties are financed by other owners, lenders often require meaningful sponsor experience and financial wherewithal.

Lenders require owners with some experience in the operation of these assets; for a new owner, using an experienced management company is helpful.[6] They also look for net worth and liquidity of guarantors. In the case of Public Storage, these metrics are a non-issue; for smaller investors, it can be a hurdle.

Macro Considerations: Lenders are cognizant of macro factors like interest rate trends and property-type cycles. As of late 2025, with interest rates elevated but potentially peaking, there’s optimism that financing conditions will improve. Crittenden’s finance report expects lower fixed and floating rates, which will improve cash flows and likely tighten loan spreads next year.[6]

They are currently attentive to oversupplied pockets, but they are eager to lend in high-growth markets where demand tailwinds exist.[3][6] Public Storage’s geographic diversification and focus on many high-growth states align well with lender preferences.

Conclusion

Across all three perspectives – REIT investors, private equity/developers, and lenders – the analysis of Public Storage REIT reveals a robust asset strategy aligned with market realities. Public Storage’s focus on redevelopment, stabilization, ground-up development, and opportunistic acquisitions has enabled it to maintain leadership in an evolving self-storage sector. The company’s strategic moves in 2025, supported by data-driven insights and operational excellence, demonstrate the feasibility and success of these approaches: high-margin operations for investors, ample value-add opportunities for developers, and resilient collateral for lenders.

The self-storage industry’s fundamentals, while normalizing after a high-growth period, remain solid with stable occupancies and moderated supply growth – conditions that validate continued investment and lending. Ultimately, Public Storage’s institutional-grade strategy serves as both a benchmark and an inspiration for stakeholders seeking to capitalize on the enduring demand for self-storage space.

November 14, 2025, by a collective of authors at MMCG Invest, LLC, self-storage and RV & Boat storage feasibility study consultants

Numbered Sources

1. Public Storage – Q3 2025 Earnings Release and Supplemental Financial Information (company filings).

2. Public Storage – Q1 & Q2 2025 Results and Management Commentary (company presentations and transcripts).

3. Capright – Self-Storage REIT Update (October 2025): sector occupancy, NOI, cap-rate and supply trends.

4. SkyView / other industry operational benchmarking reports for self-storage (2024–2025): move-in rates, pricing trends, and demand normalization.

5. Inside Self-Storage and similar trade press case studies (2020–2025): examples of conversions, transactions, and institutional acquisitions.

6. Crittenden – Self-Storage Finance Report (November 2025) and related lender surveys: loan terms, DSCR, debt yields, and underwriting standards.

7. MMCG proprietary self-storage database and internal analytics: market occupancy, pipeline, capex and yield benchmarks across U.S. MSAs.