Real estate companies were expected to be one of the worst-hit during the COVID pandemic. The industry has relatively higher debt levels and the demand-side sentiment was also expected to take a hit due to job losses and lockdowns. However, home sales have been setting records lately and certain pockets of the real estate sector are looking up. Investors looking for the best real estate stocks to buy now may want to consider REITs. Not only are some REITs performing well, but they also pay healthy dividends.
Extra Space Storage Is One Of The Best Real Estate Stocks To Buy Now
Some interesting industries have been gaining as a result of the changing economic situation due to the pandemic. E-commerce has done quite well and logistics REITs have reaped the benefits. Homebuilders have also been on a roll as house sales have been hitting record highs in the past few months. Investors also seem to be quite bullish on the self-storage segment. In fact, the segment has grown at high rates in the last few years. Extra Space Storage has seen its earnings grow 16X over the past 10 years. It is believed that one in ten households rent at least one self-storage unit.
The self-storage sector outlook
When people move, or when there are transitions in life due to job changes, death in the family, marriage, or other events, self-storage demand goes up. Self-storage REITs have delivered stable returns and fairly reasonable stock performances during the pandemic. Public Storage and Extra Space Storage are two of the largest self-storage REITs in the US. The self-storage sector has high operational efficiency with NOI margins averaging close to 70%. CapEx requirements are also relatively lower as compared to other sectors. The runway for growth also appears to be long because the top 5 self-storage REITs own about 20% of the total self-storage square footage in the US.