August 1, 2025 • 38 mins
In this episode, we're giving you the inside scoop on the latest earnings from Public Storage and Extra Space. We'll talk about why the market reacted so strongly, what's happening with self-storage rates, and the bigger picture of how things like rising property taxes and global economics are affecting the industry.
We're also diving into a fascinating stat about the speed of AI adoption and how it's changing how consumers search for storage. Plus, we'll get into why some markets are hot and others are struggling, and we'll share why we still believe in a long-term bullish outlook for self-storage.
In this episode, you'll hear about:
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The recent stock drops for Public Storage and Extra Space and the reasons behind them.
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Why development costs are so high, with some projects costing over $300 a square foot.
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The different strategies of the industry's biggest players: Public Storage focusing on ground-up development, and Extra Space on loans.
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An in-depth look at regional market performance, with some surprising NOI numbers.
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A mind-boggling example of oversaturation in a Florida market.
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Why we're seeing fewer massive residential projects getting built and the potential economic pain that could follow.
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A statistic that reveals AI-driven searches have surged from 15% to 60% in the last six months.
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The importance of being a responsible developer and why "easy" development isn't always your friend.
Tune in for a candid, data-driven chat that helps you stay ahead in the self-storage game!
Connect with Us:
Thaddeus Campbell:
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Website: https://s3.partners/
Chris Berg:
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Website: https://abernatheydev.com/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:14):
you
(00:51):
Welcome to the Self Storage Report.
I'm your host, Chris Berg, otherwise known as the AI Storage Guide, the land acquisitionfor Abernathy Development.
Joining us here today as always, the one and only Rad Thad, Thaddeus Campbell was S3partner.
Say that 10 times fast.
I'll see you here and then host some other great podcasts as well.
(01:12):
Literally just wrapped up listed in the Public Storage Earnings Report for Q2 2025.
Extra Space is actually doing their earnings call.
as we speak.
So, Eric, I don't know if it's possible for you to sort of find that.
Maybe we can bring that up live or I can try to do my best if we want to jump into thatcall as well.
But I do want to share something with you, Thad.
Did you get a chance to listen to the call at all or go through the earnings report?
(01:32):
I tuned into your LinkedIn for a few seconds.
Unfortunately, I've been on a bunch of calls this morning, had an OAC call that took up anhour and a half of my morning.
So I didn't get to listen to it as much as I'd like to.
Since you get the news background like I do, here's my headline from the public storage.
I thought Joe Russell public storage was Tupac, bro.
California love, man.
(01:55):
It was awesome to hear them talk about, the West Coast is banging right now, LA's gonna beall good, it's a little bit down just because of uh the fire stuff, but I was like, wow, I
was waiting for Joe and the team there to start playing some California love from Tupac inthe background because they love what has happened in California now.
Atlanta, Dallas, let's see, Florida, not so much.
(02:20):
What say you, my friend?
I listen, we're gonna look at a little later at our friends at Track IQ, our data partner,I was on their platform earlier this week looking at a site in St.
Lucie County, just north of Miami, Fort Lauderdale area in a town called Fort Pierce,Florida.
And you see some of the saturation and I'll pull it up on Track IQ a little bit later.
(02:43):
But yeah, there's parts of the country where the saturation has definitely taken a massivetoll.
Are we starting to see a little bit of a bounce back?
I think that, you
we certainly have seen rates start to upwards again.
That being said, I think as you look at live stock prices, the CEOs can be as happy asthey want on the earnings call.
(03:04):
Investors are not overly excited with what they've seen from the extra space in publicreports.
you just look from a straight, what's happened to their stock price in the wake ofyesterday's announcements.
Yeah, and think I'll bring those up just so we can kind of presence those for people.
But I think you bring up a really good point, know, extra space and I overall was downaround 3%, which I think is a pretty.
(03:26):
Pretty interesting, if not shocking number.
It's very rare you see negative NOI, obviously, within the self-storage space.
Now, there could be a myriad of raisins.
think one of the reasons, if you dive into their actual earnings report, and we'll seewhat Joe Margolis says on the call there today, but it managing expenses.
You property taxes are up on a lot of their sites.
Obviously, we hear a lot about insurance, what's going on.
But I also think, at least what we've seen that, because public storage manages our stuff,is that Extra typically has a few more managers or people on-site, employees on-site, and
(03:54):
so you're going to have a little bit higher...
there and it started to impact their NOI and I think as you and I have talked about withwhat's happening with AI and speaking of stocks if you see what's going on with Microsoft
and Meta today they had just unbelievable earnings shot up 8, 9, 10, 12, 15 percent afterhours
(04:16):
I'm going to suggest a big part of that is because of what's going on.
We talked about earlier where Microsoft laid off 6,000 and it was 9,000.
They've been laying off a lot of people because of what AI is doing obviously to relaysome of these warm bodies and you're hearing it from Amazon and different companies.
That's the case.
So I just share that.
don't want to get too speculative here but I share that where you want to start to look atearnings per share with some of these tech companies and everyone's like, my gosh, like
(04:41):
look at what Nvidia is doing and
They may still have room to run as they start cutting headcount.
What were you gonna say?
I just was gonna say, 15,000 people, many of whom are software engineers, which is not thelowest cost employee in the pipeline of a company like that.
So we're seeing cutbacks and we've talked about this over the last few weeks thatgraduating with a computer engineering degree has a higher rate of a software engineer,
(05:08):
higher rate of unemployment than art history.
uh On a bottom line basis, it's great news for those companies.
I guess the overall question becomes, and we haven't seen it yet, is it gonna have amassive impact on the overall economy as we see some of these jobs getting slashed?
It's gonna be an interesting thing to play out.
And then of course, how does that then affect self-storage?
(05:30):
Obviously we've talked pretty consistently about how those life events tend to actually bea good thing for storage.
People have a life event that forces them to downsize or find a new location and they tendto use self-storage.
Yes, Joe Russell, it's funny that it's Joe Margolis, Joe Russell for Public Stories.
He said, hey, renters are being a big part of their group.
(05:52):
I do want to go into diving to some mini markets here in a moment that you and I can takea look at and just see, look at.
I'm a big believer.
Hey, let's look at NRI.
In my opinion, that's the number that really, really matters at the end of the day.
But as you mentioned about the stocks, I'll share that.
And then I do have the call that we can bring up here from Extra Space.
But this is Extra Space right now.
You can see, know, big drop
(06:13):
today, clearly the street not really enjoying what they're hearing or at least seeing fromthese earnings.
This is public storage, know, kind of the same thing.
These stocks have not been outperforming by any stretch of the imagination anyway.
So I guess we'll see what this, you know, leans into for the rest of 2025, which it's whenI looked at the earnings, I didn't dive into the speculation as much, but you know, it's
(06:35):
pretty soft.
I think because you and I talk about the real estate cycle so much, this one is aninteresting
chart in my opinion because we've talked so much about housing stocks and how those can bekey indicators and key leaders of what's coming up over the next 24 months.
Well ITB is like the housing ETF right so if you look at uh this is DR Horton recentlyabove the 200 day you know moving average which is always a really important trend you
(07:01):
think that was good well now they're coming back down below that because they justrecently announced decent earnings uh same thing here but I do want to go back to the ITB
as the the ETF and you can see
here they couldn't break that 200 day moving average mark which is obviously always animportant point of resistance which for me as you and I talked about there's that kind of
that peak that happened in September of 24 then it goes down and then it tries to hit apeak again and just can't quite do there I'm not saying this is it I'm just saying hey
(07:30):
this is a really interesting resistance point to be you know keep your eye on and go
Is this thing going to bear out the way you and I have discussed where housing stocks justdon't regain esteem and thus the economy starts to go in another direction?
What say you, my friend?
Yeah, listen, I think we've laid this out pretty clearly over the last three, four, fiveweeks and nothing that's been happening in the overall situation has lent any data to
(07:54):
suggest otherwise.
And quite frankly, it's a big deal for me as I'm daily at sites, whether to look for astorage build or to look for a small bay industrial flex, there's a lot of markets in the
country where there's literally billions of dollars of residential development in a threemile, five mile.
you know, radius, the question becomes, those sites that are in conceptual phase, that arein design phase, are we actually gonna see them go through and get to actual construction?
(08:25):
I'm putting a lot more weight today on sites that are already in a bidding process oralready under construction than I am something that's conceptual or something that's in a
design phase.
Whereas a few years ago, you know, if something's in a conceptual or a design phase,
You know, you have a much more high level of belief that it's gonna get down the road.
(08:46):
I think today you have to take everything that's not actually all the way through toconstruction.
Even things that we're seeing this in self storage all the time, things that are fullypermitted sites that aren't going anywhere, right?
They're sitting there, know, fallow for lack of a better term.
It's like a field that's not getting planted.
uh And I, you know, I tend to believe that that's what we're gonna see played out over thecourse of the.
(09:10):
I had to use a little farm reference.
You're from North Dakota, man.
You should be used to some farm references.
you just bring out the word fallow?
My dad grew up on a potato farm, yeah.
Gotta use the language every once in a while, for sure.
thing I love about the Self Storage Report, we could just call it the SAT test.
You are incredible, man.
I have no idea what Fallow...
(09:32):
A field sits fallow, but it's not planted yet.
I gotta, I get to use that in a sentence.
So somebody knows what the heck I'm talking about.
Yeah.
Listen, I, to the point, I think we're going to see a lot of that over the next couple ofyears.
You're to see some pretty massive, massive residential housing projects that don't getbuilt because there's just not enough demand to move those units.
(09:52):
and listen, that puts people when you're talking about hundreds of millions of dollarprojects, the design phase.
cost hundreds of thousands, millions of dollars and that money's going nowhere.
And so do I feel like there's gonna be some more pain in the economy?
I certainly do.
I'll tell you this, I wanna call up a uh graphic real quick that just illuminates how evenmaybe a little more starkly how the market responded to public storage today.
(10:22):
This is the five day, just a simple line graph five day of public storage.
And you can see yesterday at
thirty.
Right when they release their earnings report and see the cliff that the stock price felloff of you know.
Very instantly you know lost fourteen dollars to now just to illuminate extra space yep goahead.
(10:45):
I'm looking at 2755 Midway, so I'm not seeing a five day trend.
the wrong, I'm glad you told me, cause I shared the wrong screen.
Let's do this again.
Stare my screen and choose Chrome.
Entire screen, that's what I needed to do.
Let's do this.
There we go.
(11:05):
Now you can see public storage, right?
And just to illuminate your point, just a one line graph to keep it simple.
288 at 4.30 yesterday.
down to 274, right?
So you've had a $14 drop in their stock price, extra space, even more stark, right?
Almost the same price drop, 149 down to 136, but a much lower stock price.
(11:28):
So a much higher percentage drop.
They're down almost 10 % on that earnings report.
You and I still feel the same way though.
I think this is a short-term hit.
There's been a few things that have happened over the course of the last year, year and ahalf.
Things that, you know,
Extra space and public have no real control over uh and are affecting.
(11:49):
You can't control what happens on a municipal level with property taxes.
You can't control as public storage and extra space what's going on with your propertytaxes when there's wildfires on the West Coast and there's tornadoes in the Midwest and
the Sunbelt and there's hurricanes in Florida, which is a strong percentage of theirpresence.
and those increased costs on the bottom line, at the same time when there's been somenegative pressure on pricing, we're seeing it play out with the way the market's
(12:16):
perceiving these stock prices.
I'm gonna stop sharing my screen and come back to you now.
you know, the one nice thing about storage and Joe Margolis mentioned this in Newport is,look, it's always been a long term investment.
It's not a five day weekly, even on a year to year basis.
Right.
You're kind of like, you know, OK, this thing moves pretty slow.
It's just a big picture to me.
(12:36):
the more I get educated in this space is like, OK, what's the supply at?
And can we keep digging away, plugging away?
Because even today, Joe Russell from Public said, look,
We still love like the highest return on capital for us right now.
I don't want to misquote everybody.
was pretty much this like the highest is are still our development deals.
We still love the return on capital.
We're getting our development deal.
(12:57):
So I say that because they see it.
We continue to see it here at Abernathy.
And hey, what can I do to continue to just find the right pieces of dirt, get someonecreative and build these things in really low supply areas.
So if you don't mind, Max, I've got this brought up.
want to.
Dude, it's so funny because you've got your news background.
feel like you and I are about to...
(13:17):
Okay, let's go live right now to the Extra Space, Quarter 2, 2025 Ernie.
Right?
Let's go to our reporter online.
Fad, Fad's live on the scene at the Extra Space Quarter.
Let's jump in and see what they have to say.
(15:22):
I mean, obviously this was by total accident that we brought it up.
I'm just gonna say, man, I mean, the fact that we just said, hey, look, this isn't a monthto month, but it's a light, and there's CEO of Extra Space.
You know, they got the most, yeah.
that up and decided to go at exactly that point.
As you could probably tell, because we queued it up, we wouldn't have gone in the last 15seconds of an answer that we had no context for.
(15:48):
Worked out absolutely perfect.
And he says exactly the quote you just quoted from public storage, Joe Russell.
That was very well done, my friend.
That was just absolutely so so again you can see I think what's interesting though is itand again I don't have the right context here But I will share just some things having a
(16:08):
conversation yesterday with a broker is that it sounded like in Joe's earlier comments Youknow this transition with life storage and that acquisition maybe has been a little bit
more challenging than they anticipated To the point what I heard yesterday and then alsosaw a LinkedIn post on it where They're starting to maybe sell off some of those assets
And I think they're starting to look again at their portfolio I think Joe Margolis isphenomenal at mitigating risk and they're going yeah
(16:31):
you know, maybe we've got a little bit too much of a footprint in this particular regionalarea.
Let's sell some of these assets and reallocate that money.
Again, we can get a higher return on capital.
So I don't want to put words in their mouth.
Again, I have not had a chance to dive into this.
I'm just doing some speculation based on some things I'm hearing and reading the earnings.
interesting factoids I've discovered as I'm digging into the earnings reports andhistorically going back and kind of, you know, looking at not something I did a year, year
(17:00):
and a half ago before we started this report.
So thanks for that, because it's made me a much better investigator of what's going on inour industry.
But if you compare 2024 second quarter to 2025 second quarter for Extra Space, the thingthat jumps out immediately is they took a $57 million right down.
on their valuation of life storage last year in the second quarter.
(17:20):
So they actually showed a significant increase in overall net operating incomecompany-wide this quarter versus a year ago is like 37 % or something like that.
Why?
Well, because they had to write down $57 million of unrealized, you know, it wasn't money,but it was their overvaluation of life storage when they did the merger that they then had
(17:43):
to go to investors and say, Hey, we've got to account for this somewhere.
They took a massive hit second quarter to your point about those assets now, you know, howthey're how they're understanding.
that to say the merger was uh not long term going to be fruitful for them?
I think we're still going to see that play out.
But definitely you've seen that it's created some short term pain.
(18:08):
Maybe the you know, the timing of that merger certainly didn't help anything when you seewhat happened to occupancy shortly thereafter.
and how that really changed how the algorithm was setting pricing structures.
listen, we've talked about this also when you're refinancing a project at 6 % versus 2.5%,3%, how that affects the overall valuation of an individual facility.
(18:33):
All these things are coming to play in terms of the overall valuation of what's going on.
Second interesting fact to it I wanna share that I discovered that I thought wasfascinating was,
The US dollars actually gained strength against the Euro over the last six to eightmonths.
That actually cost public storage a significant amount of money.
They took a hundred million dollar loss on the valuation of the US dollar versus the Euro.
(19:00):
SureGuard storage in Europe that they're heavily invested in, they have loans to, youknow, it costs them more money to service that loan now because...
the dollar is stronger against the euro.
So one of those things where just looking from a global perspective, where some eventsthat the incredible leadership of these two companies have no control over, right?
(19:21):
Like Joe Russell is not affecting the value of the euro versus the dollar in any way, orform, but has a staggering impact on public storages, uh overall income level, a hundred
million dollar hit, I don't care what you're dealing with, is a pretty massive impact.
to our point.
Go ahead, go ahead.
(19:42):
SureGuard in Australia or is that in Europe?
they have a different company.
I can't remember the name of the company.
I'd have to go back and look at my thing, but they're heavily invested in one.
think sure guard is, in Europe, mostly in Western Europe.
That's my understanding of it could be completely wrong, but you know, that's aninvestment that public storage involved in.
And then there's a separate entity, I think in, in Australia, I'd have to go back andlook, I didn't keep my notes in front of me.
(20:09):
If I was as good of a news reporter as you were.
But I think you're right as I'm trying to do just a quick Google search here.
But you bring up a really interesting point that I forgot to mention, the fact that theloss of capital just from the euro versus the USD was like, oh, that's an interesting
dynamic right there, which again, I think.
(20:29):
to look at, and I did not get a chance to peruse extra space as well, but if you look athow public is managing expenses, it seems like they're doing a pretty darn good job, even
with that $100 million transition from the Euro to the dollar, to minimize theiroperations.
And their NOI was pretty much flat from, I think, year over year, at least quarter overquarter.
So anything else you want to add there at that?
(20:51):
of things that jumped out at me too.
First of all, you you talked about public storage building ground up development.
Obviously, that's what we do at S3 Partners.
You know, we're heavily involved in that side of it.
200,000 square feet of ground up development that they have in the works in the secondquarter.
$64 million for those 200,000 square feet, which works out to somewhere north of $300 asquare foot to build, which
(21:17):
That jumped off the page to me.
I don't know where they're building those.
mean, if they're in downtown LA and downtown San Francisco, then God bless that makes alittle bit of sense because the cost of the land and build costs are going to be a little
higher.
But the fact that they're moving forward on $64 million on two projects tells you thereturn they believe they're going to get on ground up development.
(21:38):
The other thing I wanted to point out very quickly is that extra space put another 100plus million dollars of loans out last quarter.
and they only sold off 7 million of loans.
you know, deployed net over $100 million out into to bridge mezzanine, whatever thoseloans might look like in their structure oh out into the loan field.
(22:00):
we talked about this a couple of weeks ago that it's very clear that the two companieshave a little bit of a differing strategy as far as how they're moving forward with their
capital.
Yeah, you brought up the development aspect.
This is from public storage.
You can see here an asset in California, 229 bucks a foot.
This one was just, we were looking at it today with my team, like 400 bucks a foot inHawaii is like, okay, that's a different game right there.
(22:27):
Getting steel to Hawaii is a little different than getting steel to Georgia.
uh 100%.
But still, what the rates need to be to make the thing actually underwrite and work islike, all right.
Real quickly, just to run through this, because I think it's interesting to take a look atkind of the dynamics that are happening across the country.
And I wanted to use year to date through June 30th, 2025.
(22:48):
But you can see LA here from an NOI perspective again, up just a little bit.
They talked about it a ton on the earnings call.
Big part was because of the caps due to the fires, but then San Francisco has beenperforming well.
They talked about DC.
uh
I think that what's really interesting
to me that they're losing NOI in New York City.
(23:09):
I would like to dig into that a little more because it's certainly not because of uh amassive increase in supply.
That's a very hard place to get things built.
Yeah, I couldn't put a finger on that, but I think that the Dallas Fort Worth ones, Imean, 7.8 % and you've got West Palm Beach, obviously in Florida, Tampa down 4.3.
(23:32):
You know, there's some pretty staggering NOI numbers in my opinion.
San Diego 1.1, which is great to see.
Phoenix, you know, we've got some great assets in Phoenix and I thought this was going tobe a much bigger negative number than 0.6.
So,
That actually I think Phoenix is sucking up the supply a little bit more efficiently thanI maybe originally anticipated.
(23:52):
just some interesting, the one thing that's missing here that I was hoping, I think Armanddoes a good job of jumping into this.
So maybe he knows where it's at, but I was hoping to see Vegas and maybe I'm just missingit, but I'm not seeing Vegas on here.
And I'm curious how the Vegas market's performing.
So.
Fascinating to look through that and see some of the places where you would think.
(24:14):
Shout out to my buddy, Tony Artizzoni, by the way, a legacy built out of Phoenix, Arizonahas built a good chunk of the self storage facilities that have been built in that market
over the years.
I know that number has to make him feel pretty good.
yeah, I don't know what's going on in Las Vegas.
I'm interested.
teased earlier that I'm gonna show and I actually put it on the screen thinking I wassharing a different page, but.
(24:38):
I want to show you Fort Pierce, which is outside that Fort Lauderdale market.
We'll give a little light on to why some of that Southern Florida market is struggling somuch.
Here's Vegas in extra space.
Let's do it real quickly before you go.
So down 1.1, again, not great, but not as horrendous as it could be.
Phoenix 0.5, but they talked about it in the public.
(25:01):
Dallas is just not performing well.
And I want to share with people, when I first came into the biz, how do I get you back uphere?
Everyone, even today, people are like,
Hey man, are you in Texas?
you in Texas?
And I said, well, I said, know, Texas scared us.
And you know, I've talked about this.
We're just any Tom, Dick, and Harry can be like, I can build that.
And they're like, well, do you have a license?
(25:21):
No.
Okay, let's build it.
You know, and you're just like, wait, that's not good from a supply perspective or atleast having any kind of moat.
And a lot of people kind of laughed at us.
Like, what are you afraid of Texas for, man?
which again, Texas may end up being fine, but when I see minus 12.8 NOI over the last sixmonths in Dallas, Fort Worth, it's like, whew, glad we're not dealing with that.
as I'm looking at flex as an alternative to storage, Dallas and Houston have massiveamounts of small bay flex being built relative to the rest of the country.
(25:51):
And one of the reasons I believe that is there is because those two markets have beenoversaturated for storage for a long time.
it's, listen, Dallas not so much as Houston, Houston literally has no zoning code.
So if you have a parcel of land, you've got to follow rules.
but you can build whatever you want on that parcel land as long as it fits within thestrictures of height requirements and setbacks and FAR.
(26:15):
So Dallas, little bit more, you know, tough zoning challenges, but to the point, it's,ease is not always your friend when it comes to development, right?
Some people seek that, hey, I wanna go find a site that's use approved and it's gonna beeasier.
That doesn't always mean that in the long run that you're going to have a better, youknow, I looked at it.
(26:36):
If you looked at San Francisco, I think they were up 3.9 or something like that, right?
One of the hardest areas of the country to go get zoning taken care of.
And so, you know, to illuminate your point about Texas and, and yes, easier to get thingsdone.
Does that necessarily translate to profit at the end of a project?
You know, look at the numbers and they speak for themselves for sure.
(27:00):
I want to pull this up.
not in Europe, Florida, yeah.
want to pull this up real quick and share.
This is Fort Pierce, Florida, a site I actually was not looking for for storage.
I was looking for at it for a small Bay industrial flex, but it really illuminates some ofthe point we've been talking about.
(27:20):
This is obviously a one to three and a five mile radius around it.
I want to shut off the housing development toggle that I had turned on.
and I'm gonna turn on, of course, the little window with you in it is sitting exactlywhere I don't want it to be to hit other buttons on the screen.
That's the fun of video conferencing in 2025.
You can see how many yellow pins there are on this map.
(27:45):
It's absolutely unfathomable.
So if I go into this three mile and I see 8.57 square foot per capita, not immediately aturnoff in Florida where a lot of places there are.
people from the Northeast that go down there and have second houses.
They don't necessarily count in the population.
So that's not an immediate no-go.
(28:05):
43,000 population, not exactly as strong as I might like to see it, but again, it'sFlorida.
So how much of the population is unaccounted for as people that have second houses downthere?
69,000 median income, again, not terrible in any way, shape or form, especially when youfactor in people that are retired that aren't earning any income and pulling that average
down.
(28:26):
This is where it starts to get really crazy.
Look at the number.
I'm going to go back up again and I'm just going to highlight total gross existing squarefootage in the three miles, 409,372 net rentable.
Let's look at the development pipeline.
By the way, yesterday when I were two days ago, when I looked at this, this was four.
There's since been a fifth development added into the pipeline.
(28:49):
I kid you not.
This was four when I looked at it two days ago and it was 430,000.
And like 320,000 of net rentable, there's since been another 130,000 net rentable and160,000 square foot facility.
There's more square footage in the pipeline than there is in the three mile radiusexisting, by the way, a population of under 50,000 people.
(29:16):
Now, for those of you guys that aren't really familiar with development, I figure I needabout 6,000 people to fill a hundred thousand square foot facility based on.
square foot per capita national average, right?
If I have 6,000 people that don't currently have good access to storage, I feel prettycomfortable.
Well, here's the reality in this market, without any new development, there aren't 6,000people that need storage today.
(29:40):
And I've got 600,000 square feet in the pipeline.
Now let's go down to a 10 by 10 rental rate, $1.38 for climate control, right?
So if you play that over the course of a year, you're under 17 bucks a square foot.
Right now, as a rough number for me to think something's gonna pencil as a ground updevelopment in a place where I can build economically, which is not necessarily the
(30:06):
southeast coast of Florida, I need to be at 22, 23, 24, even $25 a square foot per year.
I need this number to be at $2 and it's at a buck 38.
And yet I have five different development deals in a three mile radius.
Quite frankly, Chris, it's mind boggling.
I'm excited next week.
Noah star is going to make his debut on the show with us next Thursday at one o'clock.
(30:31):
And we're going to talk about this a little bit because you know, I talked to some of thepeople that have been in this game for a long time.
Obviously my partner, Barry Sherman, we're going to the 50th anniversary of SSA show.
It will be his 28th SSA show that he's been to 28th year of SSA shows, right?
Even better than that, Mike Burnham, who I'm actually meeting with later this afternoonfrom Storage Mart, was at the very first SSA show.
(30:57):
I talked to these people that have been in the industry for a very long time, and we talkabout this asset class and how cool people are and how nice they are.
And one of the things Mike Burnham said to me many years ago, he was on the podcast, andhe said, that I'm nice to people because it hurts my business if they do the wrong thing.
I'm gonna give them good advice and I'm gonna share every bit of knowledge I have becauseif they open the wrong store in the wrong place with the wrong unit mix, it has a negative
(31:24):
effect on my asset.
So I don't know how much more strongly to say this to the people out there that aredeveloping.
talk to the other people that are around.
Do your due diligence, call other developers, and if you look at a map and you see a bunchof new development in the pipeline, there's a reason that the markets that you showed that
(31:46):
are having negative NOI growth are having NOI growth, negative NOI growth.
It's because of overdevelopment.
It's because people are bringing facilities into that market where they don't need it.
And you know how you know very quickly.
the prices that people are paying to rent their stuff will tell you almost immediatelywhether or not that market needs new storage or not.
(32:07):
That's enough.
getting down off of my pulpit.
Now I'm gonna step back.
uh
But I mean, it makes it a basic game.
We've talked about it many times here before.
Sam Zell, Supply and Demand, if you can just sort of follow that.
And I want to make one quick anecdote to help people understand.
think one of the things that helped Brett Henry and I build a relationship is that we weregoing to build an asset in Elk Grove.
(32:30):
We ended up saying no because he had a giant store opening just across the, literallyacross the street of like 250,000 square feet.
I saw him in Napa and it's like, man, great asset in Elk Grove.
We were going to build right next door.
We said, no, we don't have that one.
that fight and you can tell he's just kind of like, okay, thank you.
And I think that was sort of an endearing moment where he was like, all right, this guy'sokay.
(32:51):
I can talk to this guy.
Okay.
Cause oh so I think it's important that you just understand you got to really have along-term game just like Joe Margolis said a few moments ago in this space.
So I want to give you the last word that anything else you want to add or share.
I'm going to just beat this dead horse.
I was looking at a site in New Jersey and a buddy of mine is developing another site aboutsix miles away.
(33:12):
The last thing this area needs is more storage.
And the guy trying to sell me the site when I tell him that I'm not going to build itbecause my friend's building a facility down the road says, well, what price would we have
to sell it to you at to make it worth your time?
I'm like,
No, you're just not understanding what I'm saying here, right?
Like I'm not building this site that the area just doesn't need more storage.
(33:35):
There's already more supply on the way.
You know, I, I, I've said it enough, but I'll say it again, just be responsible in yourdevelopment, just because there's hundreds of thousands of dollars of fees that you can
gain, just because there's potential for profit doesn't mean it's the right thing to do.
Amen.
Let's just jump one last minute here into the extra space, Colin, to see if there'sanything interesting that we may want to expand upon.
(34:41):
We'll see what this is like and then we'll wrap.
(37:53):
How about our guy from Citi dropping a couple of good questions right there, man?
You gonna be buying back some stock?
I thought that was a very fitting way to end the show today with the AI storage guy at myside with the question about AI, fascinating statistic, right?
And Joe dropped it quickly.
15 % of searches coming from AI driven search engines at the beginning of the year, 60 %in six months.
(38:18):
Talk about the speed of change that we're seeing in our world.
It's, it's, you know,
It's gonna be interesting to see and I certainly agree with Joe.
If I'm gonna trust somebody on the technology front, Extra Space has proven to be verystrong there.
think you said, we've got a higher conversion rate.
And one of my great marketing mentors always said, he who educates the market dominatesthe market.
(38:38):
So this AI to Google thing, mean, I think Google's, they've got so much data, theypotentially could be well positioned to, you know, go and, speaking of stock, watch their
stock do something and get non investment advice.
But OpenAI just did such a great job of being that first in your mind, right?
Like, I'm going to take that position in your brain.
So that dynamic as far as, let me let me finish, let me finish.
(39:00):
When you think of search and AI, that's just gonna completely change the game of howthings are gonna be done.
so that dynamic to me is gonna be a really, really interesting one because right now AI isnot monetized, excuse me, chatGDP is not monetizing that.
So if I can go there, do get the information I want and then just click on a button and goright to the website, I think that dynamic is gonna change pretty dramatically.
(39:22):
Yeah, agree wholeheartedly one way or the other.
It's going to be absolutely fascinating to watch.
Chris, as always, thank you.
I just want to give a plug again.
Our data partner, Tract IQ Noah star is going to be appearing with us once a month nextweek, Thursday, 1 p.m.
Eastern, 10 a.m.
Pacific will be his first journey into the self storage report world.
Very excited about that.
(39:44):
The following time he's going to come on is actually going to be live at the Self StorageAssociation fall event in Las Vegas.
So.
That's gonna be a lot of fun.
Chris Berg and I will be live from the show floor in the SSA in Las Vegas.
Still working out a little bit of logistics about that, but we'll get that all figured outin another, it's hard to believe it's only five weeks away.
But Chris, as always, incredible preparation.
(40:06):
Thanks for bringing so much data and so much knowledge to the show.
You too, can you maybe whisper in Mike's ear and say, hey, you want to join us on the SelfStorage Report and see what he says?
Who's that?
Mike Burnham?
yeah, absolutely.
I will.
By the way, I don't mean to name drop, but I got two meetings this afternoon.
One's with Mike Burnham, the other one's with Brett Henry.
(40:26):
So I thought that was kind of funny that you brought him up.
dude, tell Brian I say wait, what's up and everyone thank you for joining us here again.
This is a self storage report.
Please share this with colleagues, family, friends.
We'll see you back here next Thursday.
God bless and have a great day.
you
(00:51):
Welcome to the Self Storage Report.
I'm your host, Chris Berg, otherwise known as the AI Storage Guide, the land acquisitionfor Abernathy Development.
Joining us here today as always, the one and only Rad Thad, Thaddeus Campbell was S3partner.
Say that 10 times fast.
I'll see you here and then host some other great podcasts as well.
(01:12):
Literally just wrapped up listed in the Public Storage Earnings Report for Q2 2025.
Extra Space is actually doing their earnings call.
as we speak.
So, Eric, I don't know if it's possible for you to sort of find that.
Maybe we can bring that up live or I can try to do my best if we want to jump into thatcall as well.
But I do want to share something with you, Thad.
Did you get a chance to listen to the call at all or go through the earnings report?
(01:32):
I tuned into your LinkedIn for a few seconds.
Unfortunately, I've been on a bunch of calls this morning, had an OAC call that took up anhour and a half of my morning.
So I didn't get to listen to it as much as I'd like to.
Since you get the news background like I do, here's my headline from the public storage.
I thought Joe Russell public storage was Tupac, bro.
California love, man.
(01:55):
It was awesome to hear them talk about, the West Coast is banging right now, LA's gonna beall good, it's a little bit down just because of uh the fire stuff, but I was like, wow, I
was waiting for Joe and the team there to start playing some California love from Tupac inthe background because they love what has happened in California now.
Atlanta, Dallas, let's see, Florida, not so much.
(02:20):
What say you, my friend?
I listen, we're gonna look at a little later at our friends at Track IQ, our data partner,I was on their platform earlier this week looking at a site in St.
Lucie County, just north of Miami, Fort Lauderdale area in a town called Fort Pierce,Florida.
And you see some of the saturation and I'll pull it up on Track IQ a little bit later.
(02:43):
But yeah, there's parts of the country where the saturation has definitely taken a massivetoll.
Are we starting to see a little bit of a bounce back?
I think that, you
we certainly have seen rates start to upwards again.
That being said, I think as you look at live stock prices, the CEOs can be as happy asthey want on the earnings call.
(03:04):
Investors are not overly excited with what they've seen from the extra space in publicreports.
you just look from a straight, what's happened to their stock price in the wake ofyesterday's announcements.
Yeah, and think I'll bring those up just so we can kind of presence those for people.
But I think you bring up a really good point, know, extra space and I overall was downaround 3%, which I think is a pretty.
(03:26):
Pretty interesting, if not shocking number.
It's very rare you see negative NOI, obviously, within the self-storage space.
Now, there could be a myriad of raisins.
think one of the reasons, if you dive into their actual earnings report, and we'll seewhat Joe Margolis says on the call there today, but it managing expenses.
You property taxes are up on a lot of their sites.
Obviously, we hear a lot about insurance, what's going on.
But I also think, at least what we've seen that, because public storage manages our stuff,is that Extra typically has a few more managers or people on-site, employees on-site, and
(03:54):
so you're going to have a little bit higher...
there and it started to impact their NOI and I think as you and I have talked about withwhat's happening with AI and speaking of stocks if you see what's going on with Microsoft
and Meta today they had just unbelievable earnings shot up 8, 9, 10, 12, 15 percent afterhours
(04:16):
I'm going to suggest a big part of that is because of what's going on.
We talked about earlier where Microsoft laid off 6,000 and it was 9,000.
They've been laying off a lot of people because of what AI is doing obviously to relaysome of these warm bodies and you're hearing it from Amazon and different companies.
That's the case.
So I just share that.
don't want to get too speculative here but I share that where you want to start to look atearnings per share with some of these tech companies and everyone's like, my gosh, like
(04:41):
look at what Nvidia is doing and
They may still have room to run as they start cutting headcount.
What were you gonna say?
I just was gonna say, 15,000 people, many of whom are software engineers, which is not thelowest cost employee in the pipeline of a company like that.
So we're seeing cutbacks and we've talked about this over the last few weeks thatgraduating with a computer engineering degree has a higher rate of a software engineer,
(05:08):
higher rate of unemployment than art history.
uh On a bottom line basis, it's great news for those companies.
I guess the overall question becomes, and we haven't seen it yet, is it gonna have amassive impact on the overall economy as we see some of these jobs getting slashed?
It's gonna be an interesting thing to play out.
And then of course, how does that then affect self-storage?
(05:30):
Obviously we've talked pretty consistently about how those life events tend to actually bea good thing for storage.
People have a life event that forces them to downsize or find a new location and they tendto use self-storage.
Yes, Joe Russell, it's funny that it's Joe Margolis, Joe Russell for Public Stories.
He said, hey, renters are being a big part of their group.
(05:52):
I do want to go into diving to some mini markets here in a moment that you and I can takea look at and just see, look at.
I'm a big believer.
Hey, let's look at NRI.
In my opinion, that's the number that really, really matters at the end of the day.
But as you mentioned about the stocks, I'll share that.
And then I do have the call that we can bring up here from Extra Space.
But this is Extra Space right now.
You can see, know, big drop
(06:13):
today, clearly the street not really enjoying what they're hearing or at least seeing fromthese earnings.
This is public storage, know, kind of the same thing.
These stocks have not been outperforming by any stretch of the imagination anyway.
So I guess we'll see what this, you know, leans into for the rest of 2025, which it's whenI looked at the earnings, I didn't dive into the speculation as much, but you know, it's
(06:35):
pretty soft.
I think because you and I talk about the real estate cycle so much, this one is aninteresting
chart in my opinion because we've talked so much about housing stocks and how those can bekey indicators and key leaders of what's coming up over the next 24 months.
Well ITB is like the housing ETF right so if you look at uh this is DR Horton recentlyabove the 200 day you know moving average which is always a really important trend you
(07:01):
think that was good well now they're coming back down below that because they justrecently announced decent earnings uh same thing here but I do want to go back to the ITB
as the the ETF and you can see
here they couldn't break that 200 day moving average mark which is obviously always animportant point of resistance which for me as you and I talked about there's that kind of
that peak that happened in September of 24 then it goes down and then it tries to hit apeak again and just can't quite do there I'm not saying this is it I'm just saying hey
(07:30):
this is a really interesting resistance point to be you know keep your eye on and go
Is this thing going to bear out the way you and I have discussed where housing stocks justdon't regain esteem and thus the economy starts to go in another direction?
What say you, my friend?
Yeah, listen, I think we've laid this out pretty clearly over the last three, four, fiveweeks and nothing that's been happening in the overall situation has lent any data to
(07:54):
suggest otherwise.
And quite frankly, it's a big deal for me as I'm daily at sites, whether to look for astorage build or to look for a small bay industrial flex, there's a lot of markets in the
country where there's literally billions of dollars of residential development in a threemile, five mile.
you know, radius, the question becomes, those sites that are in conceptual phase, that arein design phase, are we actually gonna see them go through and get to actual construction?
(08:25):
I'm putting a lot more weight today on sites that are already in a bidding process oralready under construction than I am something that's conceptual or something that's in a
design phase.
Whereas a few years ago, you know, if something's in a conceptual or a design phase,
You know, you have a much more high level of belief that it's gonna get down the road.
(08:46):
I think today you have to take everything that's not actually all the way through toconstruction.
Even things that we're seeing this in self storage all the time, things that are fullypermitted sites that aren't going anywhere, right?
They're sitting there, know, fallow for lack of a better term.
It's like a field that's not getting planted.
uh And I, you know, I tend to believe that that's what we're gonna see played out over thecourse of the.
(09:10):
I had to use a little farm reference.
You're from North Dakota, man.
You should be used to some farm references.
you just bring out the word fallow?
My dad grew up on a potato farm, yeah.
Gotta use the language every once in a while, for sure.
thing I love about the Self Storage Report, we could just call it the SAT test.
You are incredible, man.
I have no idea what Fallow...
(09:32):
A field sits fallow, but it's not planted yet.
I gotta, I get to use that in a sentence.
So somebody knows what the heck I'm talking about.
Yeah.
Listen, I, to the point, I think we're going to see a lot of that over the next couple ofyears.
You're to see some pretty massive, massive residential housing projects that don't getbuilt because there's just not enough demand to move those units.
(09:52):
and listen, that puts people when you're talking about hundreds of millions of dollarprojects, the design phase.
cost hundreds of thousands, millions of dollars and that money's going nowhere.
And so do I feel like there's gonna be some more pain in the economy?
I certainly do.
I'll tell you this, I wanna call up a uh graphic real quick that just illuminates how evenmaybe a little more starkly how the market responded to public storage today.
(10:22):
This is the five day, just a simple line graph five day of public storage.
And you can see yesterday at
thirty.
Right when they release their earnings report and see the cliff that the stock price felloff of you know.
Very instantly you know lost fourteen dollars to now just to illuminate extra space yep goahead.
(10:45):
I'm looking at 2755 Midway, so I'm not seeing a five day trend.
the wrong, I'm glad you told me, cause I shared the wrong screen.
Let's do this again.
Stare my screen and choose Chrome.
Entire screen, that's what I needed to do.
Let's do this.
There we go.
(11:05):
Now you can see public storage, right?
And just to illuminate your point, just a one line graph to keep it simple.
288 at 4.30 yesterday.
down to 274, right?
So you've had a $14 drop in their stock price, extra space, even more stark, right?
Almost the same price drop, 149 down to 136, but a much lower stock price.
(11:28):
So a much higher percentage drop.
They're down almost 10 % on that earnings report.
You and I still feel the same way though.
I think this is a short-term hit.
There's been a few things that have happened over the course of the last year, year and ahalf.
Things that, you know,
Extra space and public have no real control over uh and are affecting.
(11:49):
You can't control what happens on a municipal level with property taxes.
You can't control as public storage and extra space what's going on with your propertytaxes when there's wildfires on the West Coast and there's tornadoes in the Midwest and
the Sunbelt and there's hurricanes in Florida, which is a strong percentage of theirpresence.
and those increased costs on the bottom line, at the same time when there's been somenegative pressure on pricing, we're seeing it play out with the way the market's
(12:16):
perceiving these stock prices.
I'm gonna stop sharing my screen and come back to you now.
you know, the one nice thing about storage and Joe Margolis mentioned this in Newport is,look, it's always been a long term investment.
It's not a five day weekly, even on a year to year basis.
Right.
You're kind of like, you know, OK, this thing moves pretty slow.
It's just a big picture to me.
(12:36):
the more I get educated in this space is like, OK, what's the supply at?
And can we keep digging away, plugging away?
Because even today, Joe Russell from Public said, look,
We still love like the highest return on capital for us right now.
I don't want to misquote everybody.
was pretty much this like the highest is are still our development deals.
We still love the return on capital.
We're getting our development deal.
(12:57):
So I say that because they see it.
We continue to see it here at Abernathy.
And hey, what can I do to continue to just find the right pieces of dirt, get someonecreative and build these things in really low supply areas.
So if you don't mind, Max, I've got this brought up.
want to.
Dude, it's so funny because you've got your news background.
feel like you and I are about to...
(13:17):
Okay, let's go live right now to the Extra Space, Quarter 2, 2025 Ernie.
Right?
Let's go to our reporter online.
Fad, Fad's live on the scene at the Extra Space Quarter.
Let's jump in and see what they have to say.
(15:22):
I mean, obviously this was by total accident that we brought it up.
I'm just gonna say, man, I mean, the fact that we just said, hey, look, this isn't a monthto month, but it's a light, and there's CEO of Extra Space.
You know, they got the most, yeah.
that up and decided to go at exactly that point.
As you could probably tell, because we queued it up, we wouldn't have gone in the last 15seconds of an answer that we had no context for.
(15:48):
Worked out absolutely perfect.
And he says exactly the quote you just quoted from public storage, Joe Russell.
That was very well done, my friend.
That was just absolutely so so again you can see I think what's interesting though is itand again I don't have the right context here But I will share just some things having a
(16:08):
conversation yesterday with a broker is that it sounded like in Joe's earlier comments Youknow this transition with life storage and that acquisition maybe has been a little bit
more challenging than they anticipated To the point what I heard yesterday and then alsosaw a LinkedIn post on it where They're starting to maybe sell off some of those assets
And I think they're starting to look again at their portfolio I think Joe Margolis isphenomenal at mitigating risk and they're going yeah
(16:31):
you know, maybe we've got a little bit too much of a footprint in this particular regionalarea.
Let's sell some of these assets and reallocate that money.
Again, we can get a higher return on capital.
So I don't want to put words in their mouth.
Again, I have not had a chance to dive into this.
I'm just doing some speculation based on some things I'm hearing and reading the earnings.
interesting factoids I've discovered as I'm digging into the earnings reports andhistorically going back and kind of, you know, looking at not something I did a year, year
(17:00):
and a half ago before we started this report.
So thanks for that, because it's made me a much better investigator of what's going on inour industry.
But if you compare 2024 second quarter to 2025 second quarter for Extra Space, the thingthat jumps out immediately is they took a $57 million right down.
on their valuation of life storage last year in the second quarter.
(17:20):
So they actually showed a significant increase in overall net operating incomecompany-wide this quarter versus a year ago is like 37 % or something like that.
Why?
Well, because they had to write down $57 million of unrealized, you know, it wasn't money,but it was their overvaluation of life storage when they did the merger that they then had
(17:43):
to go to investors and say, Hey, we've got to account for this somewhere.
They took a massive hit second quarter to your point about those assets now, you know, howthey're how they're understanding.
that to say the merger was uh not long term going to be fruitful for them?
I think we're still going to see that play out.
But definitely you've seen that it's created some short term pain.
(18:08):
Maybe the you know, the timing of that merger certainly didn't help anything when you seewhat happened to occupancy shortly thereafter.
and how that really changed how the algorithm was setting pricing structures.
listen, we've talked about this also when you're refinancing a project at 6 % versus 2.5%,3%, how that affects the overall valuation of an individual facility.
(18:33):
All these things are coming to play in terms of the overall valuation of what's going on.
Second interesting fact to it I wanna share that I discovered that I thought wasfascinating was,
The US dollars actually gained strength against the Euro over the last six to eightmonths.
That actually cost public storage a significant amount of money.
They took a hundred million dollar loss on the valuation of the US dollar versus the Euro.
(19:00):
SureGuard storage in Europe that they're heavily invested in, they have loans to, youknow, it costs them more money to service that loan now because...
the dollar is stronger against the euro.
So one of those things where just looking from a global perspective, where some eventsthat the incredible leadership of these two companies have no control over, right?
(19:21):
Like Joe Russell is not affecting the value of the euro versus the dollar in any way, orform, but has a staggering impact on public storages, uh overall income level, a hundred
million dollar hit, I don't care what you're dealing with, is a pretty massive impact.
to our point.
Go ahead, go ahead.
(19:42):
SureGuard in Australia or is that in Europe?
they have a different company.
I can't remember the name of the company.
I'd have to go back and look at my thing, but they're heavily invested in one.
think sure guard is, in Europe, mostly in Western Europe.
That's my understanding of it could be completely wrong, but you know, that's aninvestment that public storage involved in.
And then there's a separate entity, I think in, in Australia, I'd have to go back andlook, I didn't keep my notes in front of me.
(20:09):
If I was as good of a news reporter as you were.
But I think you're right as I'm trying to do just a quick Google search here.
But you bring up a really interesting point that I forgot to mention, the fact that theloss of capital just from the euro versus the USD was like, oh, that's an interesting
dynamic right there, which again, I think.
(20:29):
to look at, and I did not get a chance to peruse extra space as well, but if you look athow public is managing expenses, it seems like they're doing a pretty darn good job, even
with that $100 million transition from the Euro to the dollar, to minimize theiroperations.
And their NOI was pretty much flat from, I think, year over year, at least quarter overquarter.
So anything else you want to add there at that?
(20:51):
of things that jumped out at me too.
First of all, you you talked about public storage building ground up development.
Obviously, that's what we do at S3 Partners.
You know, we're heavily involved in that side of it.
200,000 square feet of ground up development that they have in the works in the secondquarter.
$64 million for those 200,000 square feet, which works out to somewhere north of $300 asquare foot to build, which
(21:17):
That jumped off the page to me.
I don't know where they're building those.
mean, if they're in downtown LA and downtown San Francisco, then God bless that makes alittle bit of sense because the cost of the land and build costs are going to be a little
higher.
But the fact that they're moving forward on $64 million on two projects tells you thereturn they believe they're going to get on ground up development.
(21:38):
The other thing I wanted to point out very quickly is that extra space put another 100plus million dollars of loans out last quarter.
and they only sold off 7 million of loans.
you know, deployed net over $100 million out into to bridge mezzanine, whatever thoseloans might look like in their structure oh out into the loan field.
(22:00):
we talked about this a couple of weeks ago that it's very clear that the two companieshave a little bit of a differing strategy as far as how they're moving forward with their
capital.
Yeah, you brought up the development aspect.
This is from public storage.
You can see here an asset in California, 229 bucks a foot.
This one was just, we were looking at it today with my team, like 400 bucks a foot inHawaii is like, okay, that's a different game right there.
(22:27):
Getting steel to Hawaii is a little different than getting steel to Georgia.
uh 100%.
But still, what the rates need to be to make the thing actually underwrite and work islike, all right.
Real quickly, just to run through this, because I think it's interesting to take a look atkind of the dynamics that are happening across the country.
And I wanted to use year to date through June 30th, 2025.
(22:48):
But you can see LA here from an NOI perspective again, up just a little bit.
They talked about it a ton on the earnings call.
Big part was because of the caps due to the fires, but then San Francisco has beenperforming well.
They talked about DC.
uh
I think that what's really interesting
to me that they're losing NOI in New York City.
(23:09):
I would like to dig into that a little more because it's certainly not because of uh amassive increase in supply.
That's a very hard place to get things built.
Yeah, I couldn't put a finger on that, but I think that the Dallas Fort Worth ones, Imean, 7.8 % and you've got West Palm Beach, obviously in Florida, Tampa down 4.3.
(23:32):
You know, there's some pretty staggering NOI numbers in my opinion.
San Diego 1.1, which is great to see.
Phoenix, you know, we've got some great assets in Phoenix and I thought this was going tobe a much bigger negative number than 0.6.
So,
That actually I think Phoenix is sucking up the supply a little bit more efficiently thanI maybe originally anticipated.
(23:52):
just some interesting, the one thing that's missing here that I was hoping, I think Armanddoes a good job of jumping into this.
So maybe he knows where it's at, but I was hoping to see Vegas and maybe I'm just missingit, but I'm not seeing Vegas on here.
And I'm curious how the Vegas market's performing.
So.
Fascinating to look through that and see some of the places where you would think.
(24:14):
Shout out to my buddy, Tony Artizzoni, by the way, a legacy built out of Phoenix, Arizonahas built a good chunk of the self storage facilities that have been built in that market
over the years.
I know that number has to make him feel pretty good.
yeah, I don't know what's going on in Las Vegas.
I'm interested.
teased earlier that I'm gonna show and I actually put it on the screen thinking I wassharing a different page, but.
(24:38):
I want to show you Fort Pierce, which is outside that Fort Lauderdale market.
We'll give a little light on to why some of that Southern Florida market is struggling somuch.
Here's Vegas in extra space.
Let's do it real quickly before you go.
So down 1.1, again, not great, but not as horrendous as it could be.
Phoenix 0.5, but they talked about it in the public.
(25:01):
Dallas is just not performing well.
And I want to share with people, when I first came into the biz, how do I get you back uphere?
Everyone, even today, people are like,
Hey man, are you in Texas?
you in Texas?
And I said, well, I said, know, Texas scared us.
And you know, I've talked about this.
We're just any Tom, Dick, and Harry can be like, I can build that.
And they're like, well, do you have a license?
(25:21):
No.
Okay, let's build it.
You know, and you're just like, wait, that's not good from a supply perspective or atleast having any kind of moat.
And a lot of people kind of laughed at us.
Like, what are you afraid of Texas for, man?
which again, Texas may end up being fine, but when I see minus 12.8 NOI over the last sixmonths in Dallas, Fort Worth, it's like, whew, glad we're not dealing with that.
as I'm looking at flex as an alternative to storage, Dallas and Houston have massiveamounts of small bay flex being built relative to the rest of the country.
(25:51):
And one of the reasons I believe that is there is because those two markets have beenoversaturated for storage for a long time.
it's, listen, Dallas not so much as Houston, Houston literally has no zoning code.
So if you have a parcel of land, you've got to follow rules.
but you can build whatever you want on that parcel land as long as it fits within thestrictures of height requirements and setbacks and FAR.
(26:15):
So Dallas, little bit more, you know, tough zoning challenges, but to the point, it's,ease is not always your friend when it comes to development, right?
Some people seek that, hey, I wanna go find a site that's use approved and it's gonna beeasier.
That doesn't always mean that in the long run that you're going to have a better, youknow, I looked at it.
(26:36):
If you looked at San Francisco, I think they were up 3.9 or something like that, right?
One of the hardest areas of the country to go get zoning taken care of.
And so, you know, to illuminate your point about Texas and, and yes, easier to get thingsdone.
Does that necessarily translate to profit at the end of a project?
You know, look at the numbers and they speak for themselves for sure.
(27:00):
I want to pull this up.
not in Europe, Florida, yeah.
want to pull this up real quick and share.
This is Fort Pierce, Florida, a site I actually was not looking for for storage.
I was looking for at it for a small Bay industrial flex, but it really illuminates some ofthe point we've been talking about.
(27:20):
This is obviously a one to three and a five mile radius around it.
I want to shut off the housing development toggle that I had turned on.
and I'm gonna turn on, of course, the little window with you in it is sitting exactlywhere I don't want it to be to hit other buttons on the screen.
That's the fun of video conferencing in 2025.
You can see how many yellow pins there are on this map.
(27:45):
It's absolutely unfathomable.
So if I go into this three mile and I see 8.57 square foot per capita, not immediately aturnoff in Florida where a lot of places there are.
people from the Northeast that go down there and have second houses.
They don't necessarily count in the population.
So that's not an immediate no-go.
(28:05):
43,000 population, not exactly as strong as I might like to see it, but again, it'sFlorida.
So how much of the population is unaccounted for as people that have second houses downthere?
69,000 median income, again, not terrible in any way, shape or form, especially when youfactor in people that are retired that aren't earning any income and pulling that average
down.
(28:26):
This is where it starts to get really crazy.
Look at the number.
I'm going to go back up again and I'm just going to highlight total gross existing squarefootage in the three miles, 409,372 net rentable.
Let's look at the development pipeline.
By the way, yesterday when I were two days ago, when I looked at this, this was four.
There's since been a fifth development added into the pipeline.
(28:49):
I kid you not.
This was four when I looked at it two days ago and it was 430,000.
And like 320,000 of net rentable, there's since been another 130,000 net rentable and160,000 square foot facility.
There's more square footage in the pipeline than there is in the three mile radiusexisting, by the way, a population of under 50,000 people.
(29:16):
Now, for those of you guys that aren't really familiar with development, I figure I needabout 6,000 people to fill a hundred thousand square foot facility based on.
square foot per capita national average, right?
If I have 6,000 people that don't currently have good access to storage, I feel prettycomfortable.
Well, here's the reality in this market, without any new development, there aren't 6,000people that need storage today.
(29:40):
And I've got 600,000 square feet in the pipeline.
Now let's go down to a 10 by 10 rental rate, $1.38 for climate control, right?
So if you play that over the course of a year, you're under 17 bucks a square foot.
Right now, as a rough number for me to think something's gonna pencil as a ground updevelopment in a place where I can build economically, which is not necessarily the
(30:06):
southeast coast of Florida, I need to be at 22, 23, 24, even $25 a square foot per year.
I need this number to be at $2 and it's at a buck 38.
And yet I have five different development deals in a three mile radius.
Quite frankly, Chris, it's mind boggling.
I'm excited next week.
Noah star is going to make his debut on the show with us next Thursday at one o'clock.
(30:31):
And we're going to talk about this a little bit because you know, I talked to some of thepeople that have been in this game for a long time.
Obviously my partner, Barry Sherman, we're going to the 50th anniversary of SSA show.
It will be his 28th SSA show that he's been to 28th year of SSA shows, right?
Even better than that, Mike Burnham, who I'm actually meeting with later this afternoonfrom Storage Mart, was at the very first SSA show.
(30:57):
I talked to these people that have been in the industry for a very long time, and we talkabout this asset class and how cool people are and how nice they are.
And one of the things Mike Burnham said to me many years ago, he was on the podcast, andhe said, that I'm nice to people because it hurts my business if they do the wrong thing.
I'm gonna give them good advice and I'm gonna share every bit of knowledge I have becauseif they open the wrong store in the wrong place with the wrong unit mix, it has a negative
(31:24):
effect on my asset.
So I don't know how much more strongly to say this to the people out there that aredeveloping.
talk to the other people that are around.
Do your due diligence, call other developers, and if you look at a map and you see a bunchof new development in the pipeline, there's a reason that the markets that you showed that
(31:46):
are having negative NOI growth are having NOI growth, negative NOI growth.
It's because of overdevelopment.
It's because people are bringing facilities into that market where they don't need it.
And you know how you know very quickly.
the prices that people are paying to rent their stuff will tell you almost immediatelywhether or not that market needs new storage or not.
(32:07):
That's enough.
getting down off of my pulpit.
Now I'm gonna step back.
uh
But I mean, it makes it a basic game.
We've talked about it many times here before.
Sam Zell, Supply and Demand, if you can just sort of follow that.
And I want to make one quick anecdote to help people understand.
think one of the things that helped Brett Henry and I build a relationship is that we weregoing to build an asset in Elk Grove.
(32:30):
We ended up saying no because he had a giant store opening just across the, literallyacross the street of like 250,000 square feet.
I saw him in Napa and it's like, man, great asset in Elk Grove.
We were going to build right next door.
We said, no, we don't have that one.
that fight and you can tell he's just kind of like, okay, thank you.
And I think that was sort of an endearing moment where he was like, all right, this guy'sokay.
(32:51):
I can talk to this guy.
Okay.
Cause oh so I think it's important that you just understand you got to really have along-term game just like Joe Margolis said a few moments ago in this space.
So I want to give you the last word that anything else you want to add or share.
I'm going to just beat this dead horse.
I was looking at a site in New Jersey and a buddy of mine is developing another site aboutsix miles away.
(33:12):
The last thing this area needs is more storage.
And the guy trying to sell me the site when I tell him that I'm not going to build itbecause my friend's building a facility down the road says, well, what price would we have
to sell it to you at to make it worth your time?
I'm like,
No, you're just not understanding what I'm saying here, right?
Like I'm not building this site that the area just doesn't need more storage.
(33:35):
There's already more supply on the way.
You know, I, I, I've said it enough, but I'll say it again, just be responsible in yourdevelopment, just because there's hundreds of thousands of dollars of fees that you can
gain, just because there's potential for profit doesn't mean it's the right thing to do.
Amen.
Let's just jump one last minute here into the extra space, Colin, to see if there'sanything interesting that we may want to expand upon.
(34:41):
We'll see what this is like and then we'll wrap.
(37:53):
How about our guy from Citi dropping a couple of good questions right there, man?
You gonna be buying back some stock?
I thought that was a very fitting way to end the show today with the AI storage guy at myside with the question about AI, fascinating statistic, right?
And Joe dropped it quickly.
15 % of searches coming from AI driven search engines at the beginning of the year, 60 %in six months.
(38:18):
Talk about the speed of change that we're seeing in our world.
It's, it's, you know,
It's gonna be interesting to see and I certainly agree with Joe.
If I'm gonna trust somebody on the technology front, Extra Space has proven to be verystrong there.
think you said, we've got a higher conversion rate.
And one of my great marketing mentors always said, he who educates the market dominatesthe market.
(38:38):
So this AI to Google thing, mean, I think Google's, they've got so much data, theypotentially could be well positioned to, you know, go and, speaking of stock, watch their
stock do something and get non investment advice.
But OpenAI just did such a great job of being that first in your mind, right?
Like, I'm going to take that position in your brain.
So that dynamic as far as, let me let me finish, let me finish.
(39:00):
When you think of search and AI, that's just gonna completely change the game of howthings are gonna be done.
so that dynamic to me is gonna be a really, really interesting one because right now AI isnot monetized, excuse me, chatGDP is not monetizing that.
So if I can go there, do get the information I want and then just click on a button and goright to the website, I think that dynamic is gonna change pretty dramatically.
(39:22):
Yeah, agree wholeheartedly one way or the other.
It's going to be absolutely fascinating to watch.
Chris, as always, thank you.
I just want to give a plug again.
Our data partner, Tract IQ Noah star is going to be appearing with us once a month nextweek, Thursday, 1 p.m.
Eastern, 10 a.m.
Pacific will be his first journey into the self storage report world.
Very excited about that.
(39:44):
The following time he's going to come on is actually going to be live at the Self StorageAssociation fall event in Las Vegas.
So.
That's gonna be a lot of fun.
Chris Berg and I will be live from the show floor in the SSA in Las Vegas.
Still working out a little bit of logistics about that, but we'll get that all figured outin another, it's hard to believe it's only five weeks away.
But Chris, as always, incredible preparation.
(40:06):
Thanks for bringing so much data and so much knowledge to the show.
You too, can you maybe whisper in Mike's ear and say, hey, you want to join us on the SelfStorage Report and see what he says?
Who's that?
Mike Burnham?
yeah, absolutely.
I will.
By the way, I don't mean to name drop, but I got two meetings this afternoon.
One's with Mike Burnham, the other one's with Brett Henry.
(40:26):
So I thought that was kind of funny that you brought him up.
dude, tell Brian I say wait, what's up and everyone thank you for joining us here again.
This is a self storage report.
Please share this with colleagues, family, friends.
We'll see you back here next Thursday.
God bless and have a great day.
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