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Should You Retain Extra Space Storage Stock in Your Portfolio Now?
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Key Takeaways
EXR is expanding via acquisitions, joint ventures and third-party management to fuel long-term growth.
A diversified portfolio and solid financials help EXR leverage the industry's recession-resilient nature.
High supply and customer price sensitivity are limiting EXR's pricing power and pressuring revenue growth.
Extra Space Storage (EXR - Free Report) is well-positioned to gain from its high brand value, geographically diversified portfolio and the self-storage industry’s need-based and recession-resilient nature. The company’s focus on store expansion through accretive buyouts bodes well for long-term growth.
However, EXR is likely to face headwinds from lower new customer rates. The development boom of self-storage units in many markets is likely to continue affecting its pricing power.
In the past three months, shares of this Zacks Rank #3 (Hold) company have risen 1.1% compared to the industry’s fall of 1.4%. Analysts seem bullish on this stock, with the Zacks Consensus Estimate for its 2025 funds from operations (FFO) being revised marginally northward over the past month to $8.17.
Image Source: Zacks Investment Research
What’s Aiding EXR?
Extra Space Storage is the largest operator of self-storage properties in the United States. The company has significantly expanded its business in recent years, growing its branded store count from 1,029 in 2013 to 4,099 as of March 31, 2025 in 43 states and Washington, D.C. With a geographically diversified portfolio and significant scale, EXR is poised for long-term growth. We expect a year-over-year rise of 2.8% in the company’s total revenues in 2025.
The company is focused on consistently growing its business and achieving geographical diversity through accretive acquisitions, mutually beneficial joint venture partnerships and third-party management services. In addition to the buyouts, Extra Space Storage is making strategic investments through other channels in the storage sector, including preferred equity investments and a bridge loan program.
The self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. For 2025, we estimate year-over-year growth of 2.7% in property rental revenues.
Extra Space Storage is focused on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. As of March 31, 2025, the company's net debt to EBITDA was 5.3X. The percentage of unencumbered asset value to total asset value was 83.4%. With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities.
EXR remains committed to increasing shareholders’ wealth through consistent dividend payouts. In the past five years, the company has increased its dividend six times, and the five-year annualized dividend growth rate is 12.61% (Check Extra Space Storage dividend history). With a robust operating platform and a healthy financial position, we expect the dividend payout to be sustainable in the upcoming period.
What’s Hurting EXR?
Extra Space Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there has been a development boom of self-storage units in many markets in recent years. This high supply has fueled competition, affecting its power to raise rents and turn on more discounting.
Particularly, the company continues to see new customer price sensitivity and, therefore, is likely to face headwinds from lower new customer rates in the near term.
Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Extra Space Storage. EXR has a substantial debt of around $12.81 billion as of March 31, 2025. Our estimate indicates a year-over-year rise of 4.6% in interest expenses in 2025.
Image: Shutterstock
Should You Retain Extra Space Storage Stock in Your Portfolio Now?
Key Takeaways
Extra Space Storage (EXR - Free Report) is well-positioned to gain from its high brand value, geographically diversified portfolio and the self-storage industry’s need-based and recession-resilient nature. The company’s focus on store expansion through accretive buyouts bodes well for long-term growth.
However, EXR is likely to face headwinds from lower new customer rates. The development boom of self-storage units in many markets is likely to continue affecting its pricing power.
In the past three months, shares of this Zacks Rank #3 (Hold) company have risen 1.1% compared to the industry’s fall of 1.4%. Analysts seem bullish on this stock, with the Zacks Consensus Estimate for its 2025 funds from operations (FFO) being revised marginally northward over the past month to $8.17.
Image Source: Zacks Investment Research
What’s Aiding EXR?
Extra Space Storage is the largest operator of self-storage properties in the United States. The company has significantly expanded its business in recent years, growing its branded store count from 1,029 in 2013 to 4,099 as of March 31, 2025 in 43 states and Washington, D.C. With a geographically diversified portfolio and significant scale, EXR is poised for long-term growth. We expect a year-over-year rise of 2.8% in the company’s total revenues in 2025.
The company is focused on consistently growing its business and achieving geographical diversity through accretive acquisitions, mutually beneficial joint venture partnerships and third-party management services. In addition to the buyouts, Extra Space Storage is making strategic investments through other channels in the storage sector, including preferred equity investments and a bridge loan program.
The self-storage asset category is need-based and recession-resilient in nature. This asset class has low capital expenditure requirements and generates high operating margins. The self-storage industry continues to benefit from favorable demographic changes. For 2025, we estimate year-over-year growth of 2.7% in property rental revenues.
Extra Space Storage is focused on improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. As of March 31, 2025, the company's net debt to EBITDA was 5.3X. The percentage of unencumbered asset value to total asset value was 83.4%. With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities.
EXR remains committed to increasing shareholders’ wealth through consistent dividend payouts. In the past five years, the company has increased its dividend six times, and the five-year annualized dividend growth rate is 12.61% (Check Extra Space Storage dividend history). With a robust operating platform and a healthy financial position, we expect the dividend payout to be sustainable in the upcoming period.
What’s Hurting EXR?
Extra Space Storage operates in a highly fragmented market in the United States, with intense competition from numerous private, regional and local operators. In addition, there has been a development boom of self-storage units in many markets in recent years. This high supply has fueled competition, affecting its power to raise rents and turn on more discounting.
Particularly, the company continues to see new customer price sensitivity and, therefore, is likely to face headwinds from lower new customer rates in the near term.
Despite the Federal Reserve announcing rate cuts late in 2024, the interest rate is still high and is a concern for Extra Space Storage. EXR has a substantial debt of around $12.81 billion as of March 31, 2025. Our estimate indicates a year-over-year rise of 4.6% in interest expenses in 2025.
Stocks to Consider
Some better-ranked stocks from the broader REIT sector are VICI Properties (VICI - Free Report) and W.P. Carey (WPC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ 2025 FFO per share has been raised marginally over the past two months to $2.34.
The consensus estimate for W.P. Carey’s current-year FFO per share has moved northward 1.2% in the past two months to $4.88.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.