Contributing Editors



Tide Turning in Real Estate Markets; Self-Storage to Outperform the Rest

by Winnie Hsiu December 30, 2009 7:32 AM
The Wall Street Journal this morning predicted a much more stable real estate market for 2010 than the wild ride the market took investors for in 2009.... the WSJ reports that the Dow Jones Equity All REIT (Real Estate Investment Trust) Total Return Index is up 31% this year, which means that it has improved over its 2008 performance, when it was down 38%. In 2009, the real estate market showed its strongest performance since 2006. It even outdid the Standard & Poor's 500-stock index, which posted a 25% return. "It's been very much a roller coaster ride this year," noted Goldfarb. "And we're about to end this year on a high note."
....Lucas told the WSJ that he expected self-storage to be one of three types of REITS that will outperform the rest of the market (the other two are industrial and student-housing REITs). Self-storage can be expected to do well because it does not depend on the creation of new jobs. The recession has been less damaging to the self-storage industry, in general, than it has been for other real estate businesses. According to Inside Self Storage, this is partly because self-storage owners use 30-day leases, and therefore have the flexibility to change their rates immediately in response to changes in the market and to changes in demand. ISS also attributes the stability of self-storage companies to the fact that self-storage business owners, unlike the REITs Kirby refers to, tend not to over-leverage their businesses -- they are more likely to keep their leverage within responsible limits. As a result, they are less vulnerable to sudden shifts in the market.... [More]
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