Public Storage 4.0 — The Bet That Could Reshape Self-Storage Forever

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Public Storage 4.0 — The Bet That Could Reshape Self-Storage Forever Host: Chris Berg — Abernathey Development Recorded: March 3, 2026 Video: https://www.youtube.com/watch?v=1ECfPoXaxZY Key topics: Public Storage 4.0 and the PSA Q4 2025 earnings call; Yardi Matrix self-storage national report; 54% drop in immigration; 93% drop in Florida net migration; 2026 supply forecast raised 6% and 2027 completions raised 4.8%; Joe Russell disputing a supply reacceleration; Joe Margolis and Extra Space taking the same position; the Andover CEO on sidelined projects at the New York SSA; 12% yield on cost in PSA's development pipeline; $7 billion underwritten versus $1 billion acquired; bid-ask tension into 2026 and 2027; the tech-and-AI versus warm-bodies bifurcation between Public Storage and Extra Space; SB 79 and New York City's lawsuit against Extra Space; ECRI pricing scrutiny; Public Storage expanding third-party management; Laveen, Arizona lease-up. Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Public Storage 4.0. That was the big announcement coming out of the PSQ4 2025 earnings call. Today, I'm going to share with you the most important things you need to know from this call, what it means for you and the industry. Welcome to the Self Storage Report. I'm Chris Berg with Abernathey Holdings. Before we jump into the PSQ4 2025 earnings call, I do want to start with the most recent Yardi Matrix self-storage national report. A couple things I think that are really, really important to note from this report. Number 1, we talked about it recently here on the show. Self-storage demand is cratering right now. And if you view real estate the way Sam Zell, one of the greatest real estate investors ever, he always talked about the day he walked into his intro to econ class, University of Michigan, said, "Look, let's keep it simple on the whiteboard. Supply and demand." If you want to keep things simple, because my opinion, simple good, complex bad. That is the self-storage business. Supply and demand. It's really most businesses, but let's keep self-storage really simple today. And this is where the Yardi Matrix report started. As you can see here, um they basically are talking about demand and how it's cratering because the Census Bureau population talks about how um it's actually gone down. One of the big things you can see here, 54% drop in immigration. We talked about that recently on the show as well. State-to-state migration um cooled dramatically, especially when we look at a state like Florida. You had a 93% drop in net migration in Florida. Thus, why you're seeing the housing situation in Florida starting to turn and and actually go down where Florida homes are becoming more and more affordable. Unless, of course, you're going to go and live on the island with Zuck and those guys. I mean, Zuck just bought a place for what was almost $200 million. So that obviously is an anomaly, but for the most part um you're seeing that migration to Florida is diminishing maybe except for like that West Palm Beach, Miami area. The other piece that I want to talk about because both um self both public storage and extra space this was brought up on both earnings call and that was this report from Yardi Matrix started to talk about how they believe supply is beginning to shift meaning that they are changing their supply in an upward fashion for the upcoming year. So they're saying hey therefore in 2026 uh forecasts have been increased by 6%, 2027 completions by 4.8%. Um, and they're forecasting for later years 28 through 30 to increase by approximately 10 to 15%. Again, if we're going to keep it simple, supply and demand, this increase in supply, not good for the industry, clearly a headwind when you talk about lower demand and increased supply. What's interesting though when you think about the biggest REITs out there in the space uh public storage and extra space — dispute might be a little bit too strong of a word to use here but I'm going to use it. Basically disputed what Yardi Matrix is suggesting. So I'm going to play a clip for you here. This is Joe Russell being actually asked about this Yardi Matrix report. Here is what the now former or soon to be former as of April 1st, 2026 um CEO public storage had to say. Joe Russell: Yeah, one um you know I think we've been more right than wrong on the trajectory literally over the last 4 or 5 years debating you know some of the external tracking data sets out there. Um I think more often than not they seem to um overemphasize or overplay uh potential momentum coming into markets. We don't really see a trend or a change in the trajectory this uh been going on now for the last 4 or 5 years which is year-by-year decelerated um deliveries. So um you know hard to justify what kind of data they're looking at to say there's a reacceleration. By all accounts the development business continues to be quite complicated, quite commanding approval levels, costs, underwriting um issues. Um there certainly are a handful of markets that may see uh supply as they have over the last year or two, but we're not seeing any acceleration and you know, as you know, we have a um you know, a very strong team out in the markets nationally. Um we're being very judicious and we're putting — Chris Berg: So, as you can hear there, they're saying we're not seeing a big shift where there's going to be an increase in supply. So that's the perspective from Joe Russell. Joe Margolis, the CEO of Extra Space said basically the same thing and his earnings calls as well. I will add one caveat. When I was at the New York SSA, the CEO from Andover does a great job. They've got a great portfolio. He suggested that look um if the dynamics in the industry were to change, meaning you had lower rates from an interest rate perspective, so your money was cheaper, your capital was cheaper, and or you start to see rental rates go up, so things were underwriting more effectively. Um he says, "Look, there's probably a lot of projects on the sidelines that no one's really talking about that could very easily be brought back into play, back, put on the playing field if the dynamics in the industry were to change based on the lower demand we're seeing." That's probably not going to happen in the real near future. Although from an anecdotal standpoint again I will say that our asset in Laveen, Arizona performing very, very well in lease-up. It's, you know, it's early for us and yet we've seen demand actually pretty strong within that Laveen, Arizona market up to this place. Also want to play this clip for you. Um if you're thinking about development look one of the big purposes of this show is to talk about responsible development. There was a time when rates were really up and everything was going crazy in COVID and people were like, "Hey, there's a piece of dirt. I'll just throw some steel on it. Put some storage in there and I'm gonna make money." And now people are like, "Wait a second. Uh, I actually can get my equity wiped out in self storage. I need to be a much more responsible developer." And so, uh, public storage has asked about development because their development pipeline, they typically do really, really well in development. And you're talking about 12 handle yield on cost in some of their development projects when you dive into their um financials. So, I mean, obviously great returns for them and their shareholders. Uh but here's their most recent take as far as the development aspect of their business. Public Storage executive [attribution inferred]: Yeah, sure. So, the development business is one that that we're passionate about internally because of the ability for us to pick that submarket, pick the land site, design the building, create the unit mix, and then ultimately place it into our operating platform where we can earn more cash flow. So, it's one that that uh we have a national team out looking for sites. It's also one that's been navigating through a a challenging development environment, one with rising costs and obviously rents coming down in some of the markets with with strong population growth. And so, as we look at this year, um we're anticipating uh a little less deliveries this year than last year. Uh but we're focused on growing that business over time uh to take advantage of a growing storage demand environment, many of the submarkets around the country and and we view it as a very strong risk adjusted capital return and so as we think of — Chris Berg: There you go. If you're getting a 12% annual yield on cost, of course a very risk-adjusted uh return for your capital there. Um couple of things to note from this call is that one, they they did mention because a big conversation was the part of acquisitions and that they're going to be leaning into tech which I'll talk more about here in a moment, but they actually underwrote $7 billion in assets last year and only acted on a billion. Um, so they were saying, look, there's still this sort of tension between the bid and the ask. We'll see if that dynamic changes heading into 26 and 27. As we've said many times here in the self-storage report, um, my thesis is that the end of 2026, mid to end 2026 is when we're going to see a top on land prices. Um, it's pretty clear that we're actually headed potentially towards a more long-term now hot war. And if you have ever read The Fourth Turning, you're very clear in what that means um, from a dynamics perspective. So, those are a couple variables you just want to be thinking about as you're laying out a more long-term thesis in your investment strategy. Um, the big thing, too, again, from public storage to extra space is that there's this sort of bifurcation, if you will. That's a that's a shout out to my friend Thaddeus, bifurcation, if you will, and from the standpoint that public storage really leaning into tech and AI, extra space, strongly believing that, hey, we want to have warm bodies in our stores. We think that gives us an edge and actually um can help increase our NOI for our assets. We'll see how it plays out long term. Um only time will tell. There's obviously a big conversation as of late in regards to one of the things we've often said here as well in the self storage report is the last place that you want to be as an asset class is on the lips of legislators. So there's been a lot of conversation with SB 79, extra space recently being sued by the city of New York, not a constituent, but the city of New York. So, um, Public Storage was asked about that on the call as well. Analyst [attribution inferred]: There was one of your peers named in a lawsuit with, uh, New York earlier this week. Is stuff like this maybe the canary in the coal mine as it relates to sort of the pricing practices in the industry? I know there have been pushes whether it's you at SSA or the the trade level around greater disclosures but like is there a worry that you know greater I guess regulatory oversight from these municipalities could preclude what has been this ECRI pricing strategy regime we've been in call it over the past couple years? Public Storage executive [attribution inferred]: So I think there's a couple components to that. One, obviously uh we saw some of the New York activity and you know we continue to work with the National Self Storage Association and the state self-storage associations around uh working with regulators and legislators um and and frankly ensuring that they understand the benefits of our business, how affordable our business is um you know how affordable some of our new customer promotional rates are, some of those things that's just uh and you know earlier in the conversation we spoke about how affordable it is versus other space alternatives. So, uh, being able to communicate that and and educate folks. And then obviously part of PS 4.0 is a customer focus and improving the customer experience. Uh, and that goes everything from from pricing all the way through. Chris Berg: So, that's their kind of initial reaction to some of the, um, things that are happening from more of a legislative legal perspective in this industry. Something you want to keep your eye on. I think another good thing that they talked about on the call was they sort they brought up uh their third-party management piece of the business. It's always kind of been in the background for public storage. Um I know because that's one of the partners we work with is public storage is that they're starting to make some investments into the third party management arm. They want to begin to expand that and make that more of a profit center for their business. So we'll keep our eye on that for you as well. As always, just would love to know your point of view, your perspective on what you're seeing in the industry, what you took out of this uh conversation here today. And as always, thank you so much for watching. Please share this with your colleagues. We'll see you back here again soon. Again, I'm Chris Berg with Abernathey Holdings. This is the Self Storage Report. — END OF TRANSCRIPT —