BMO Capital Markets raised its outlook for the U.S. self-storage sector following second-quarter results that exceeded expectations, while also adjusting ratings and price targets for key players. The firm upgraded Extra Space Storage to outperform, naming it the top pick in the segment, replacing CubeSmart, which retained its outperform rating.
BMO lifted its 2026 same-store revenue growth estimate by 30 basis points to 1.1% and raised net operating income growth by 60 basis points to 0.7%. Funds from operations estimates for 2026 were increased by 20 basis points above REIT guidance and 10 basis points above consensus. For 2027, BMO projects FFO growth 100 basis points below market expectations, assuming same-store revenue accelerates to 2.1%.
The firm downgraded SmartStop to market perform, citing heightened caution over its Canadian exposure, which accounts for 9.4% of the company’s net operating income. BMO noted that move-in tariff growth remained modest at 1.5% annually in the second quarter, excluding SmartStop, while Public Storage reported a 1.6% year-over-year tariff increase, returning to positive territory.
Renewal spreads in the sector remained negative at an average of -28.6%, though lower customer move-out rates have helped mitigate the impact. Supply dynamics showed improvement, with Yardi data indicating national inventory under construction at 2.4% in the third quarter, down 30 basis points from the prior period. Projected deliveries are expected to decline 23% year-over-year in 2026 and an additional 17% in 2027.
Foot traffic data from Placer.ai showed a 0.5% year-over-year decline in the third quarter, an improvement from the 1.5% contraction recorded in the second quarter, signaling a gradual stabilization in demand.
