Welcome back to Exit & Equity, the email for serious self storage owners.
This week, we’re digging into a fundamental truth that explains why the industry narrative is shattering right in front of us.
Let’s go!
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IN THE KNOW
The Great Decoupling of 2026
For the better part of two decades, the prevailing narrative in the self-storage industry has been singular, deafening, and seemingly irrefutable: consolidation is inevitable, and scale is the only moat that matters.
The "Big Four" Real Estate Investment Trusts (REITs)—Public Storage (PSA), Extra Space Storage (EXR), CubeSmart (CUBE), and National Storage Affiliates (NSA) were viewed not just as market leaders, but as the apex predators of the asset class. The logic was seductive in its simplicity: their cost of capital was lower, their data aggregation was superior, their marketing budgets were bottomless, and their operational platforms were impenetrable fortresses of efficiency. Independent operators, affectionately or dismissively termed "Mom & Pops," were cast as vestiges of a bygone era.
However, as we stand firmly in 2026, a rigorous analysis of market performance from 2022 through the third quarter of 2025 reveals a structural fracture in this narrative.
We are witnessing a "Great Decoupling" of fortunes. While the REITs have struggled with compressing Net Operating Income (NOI), primary market saturation, and diminishing returns on aggressive revenue management strategies, agile independent operators have carved out a distinct, verifiable advantage.
The data suggests that the very attributes once cited as REIT strengths—massive scale, rigid brand standards, and algorithmic pricing—have metastasized into liabilities. Conversely, the "unsophisticated" independent operator is now the beneficiary of a democratization of enterprise-grade technology and a "flight to yield" in tertiary markets.
The Titan’s Stumble: A Forensic Audit (2022-2026)
To understand the magnitude of the opportunity for independent operators in 2026, one must first strip away the investor relations polish and conduct a forensic audit of the public sector's performance over the last four years.
The Illusion of Growth
The self-storage industry experienced a "Golden Age" during the pandemic (2020-2021). However, as the Federal Reserve embarked on an aggressive rate-hiking cycle, the housing market, a primary driver of storage demand, froze. The subsequent years have been a case study in reversion to the mean.
By Q3 2025, the sector entered a period of distinct operational friction.
Public Storage (PSA): While net income rose, it was driven by foreign currency gains and non-same-store assets. The "same-store" pool—the truest measure of operational health—saw revenue increase by a negligible 0.1% in early 2025.
Extra Space Storage (EXR): Historically the operational gold standard, EXR reported a 2.5% decrease in same-store NOI in Q3 2025. When a storage operator makes significant money acting as a lender (bridge loans) rather than a landlord, it suggests the core business is facing headwinds.
NSA & CubeSmart: NSA posted a troubling 5.7% decrease in same-store NOI, with occupancy plummeting to 84.5%.
The "Expense Bloat" Thesis
REITs claimed that spreading General and Administrative (G&A) expenses across thousands of stores created unmatched efficiency. The 2024-2025 data refutes this.
G&A Trap: Public Storage’s G&A expenses reached $112 million (up 15.35% YoY) in 2025.
Marketing Efficiency: Extra Space’s marketing spend increased 27.6% in Q3 2025, yet revenue contracted. This indicates a plummeting Return on Ad Spend (ROAS).
Primary Market Saturation
The REIT model is predicated on density in top 50 MSAs. By 2026, this strength has mutated into a liability. Markets like Phoenix and Las Vegas are significantly oversupplied, leading to cannibalization where REITs must trade rate for occupancy.
The Pricing War & The Consumer Revolt
Regular readers know I am a staunch advocate of dynamic pricing and aggressive revenue management. I have argued in previous issues, and maintain today, that failing to push rates to market levels is operational malpractice. The model works.
However, there is a profound difference between optimizing revenue and exploiting customer friction.
If financial metrics are the "hardware," pricing strategy is the "software." And right now, the REITs are running a corrupted version of that software. They have confused "pricing power" with a "churn and burn" hostility that is finally catching up to them.
The "Bait and Switch" vs. Strategic Growth By 2025, the spread between REIT "street rates" and "in-place rates" widened to a staggering 48%. The strategy has become cynical and algorithmic: entice a customer with a $50 teaser rate, then slam them with a 50% hike in month four.
We still believe in the ECRI (Existing Customer Rate Increase) model, but it must be strategic and purposeful.
The REIT Way: A blunt-force trauma approach. A massive spike that forces a move-out decision.
The Independent Way: Surgical precision. We raise rates, but we do it based on data, tenant longevity, and replacement cost. We recognize that a 10% increase that keeps a tenant is infinitely more profitable than a 40% increase that forces a vacancy.
The Backlash is Measurable Trustpilot scores for major REITs hover in the 1.8 to 2.3 star range because customers feel tricked. Independent operators, leveraging what I call "Revenue Management with a Heart," are winning the retention game.
The Math of Retention: A tenant who stays for 24 months at a fair, market-adjusted rate is mathematically more valuable than a churned tenant who pays an exorbitant rate for 3 months and leaves in anger in month 6. In 2026, the smart money is betting on Lifetime Value (LTV), not just the short-term pop.
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The Technology Equalizer
Perhaps the most profound shift in 2026 is the complete democratization of enterprise-grade technology. The "technology gap" that REITs used to cite as a barrier to entry has evaporated.
The "Unmanned" Model: The NOI Superweapon
REITs struggle to implement remote management because their brand promise involves a "smiling face" behind a desk. Independents can bypass this entirely.
Smart Entry: Systems like Nokē allow for total remote access.
Payroll Elimination: By moving to a remote model, the independent operator drops the largest line item expense (payroll) to near zero.
Result: Independent facilities can run at 60-65% NOI margins, while REITs often struggle to break 70% at the store level before corporate G&A load.
The Tertiary Market Thesis: Where the Yield Lives
For the aggressive independent operator, the yield is in the tertiary markets—the towns the REITs forgot.
The Cap Rate Arbitrage
Primary Markets: Class A assets trade at 5.0% – 5.5% Cap Rates. With debt at 7%, this is negative leverage.
Tertiary Markets: Class B/C assets trade at 7.0% – 9.0% Cap Rates.
The Moat In a town of 25,000 people, the demand pool is finite. If you own the only good facility, you have a monopoly moat that Public Storage can never achieve in Atlanta.
The Independent Operator’s Playbook (2026)
Understanding the landscape is only half the battle. Here is the tactical execution for 2026.
Revenue Management 2.0: Do not copy the REIT "churn." Implement tiered pricing based on attributes (e.g., "Platinum" units with power and drive-up access). Offer "12-Month Rate Locks" to capture customers fleeing REIT price hikes.
Target 25% Expense Ratio: Automate collections via SMS. Use remote management. Maximize tenant insurance penetration (aim for 80%+ coverage).
Own the Neighborhood: You cannot outspend PSA on Google Ads. Instead, dominate Google Business Profile (GBP). Reply to every review. Sponsor the local Little League. Hyper-local SEO is your weapon.
Tax Alpha: Utilize Cost Segregation studies to reclassify 30-40% of the building into accelerated depreciation schedules, creating paper losses to offset income.
The Pendulum Swings Back
The self-storage industry is maturing. We have reached the point where "economies of scale" have become "diseconomies of complexity."
The REITs are not going anywhere, but the era of their unchallenged dominance is over. The future belongs to the agile operator who uses technology to strip out costs, prices fairly, and finds yield where institutions miss. The "Mom & Pop" of 2026 is not a retiree with a cash box; they are a data-savvy, tech-enabled entrepreneur with a 60% profit margin and a waiting list.
The giants are stumbling. It is time to run.
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MAKE IT MODERN
The "No-Code" Operator
How to use modern tools to manage your facility, not just monitor it.
As a data engineer turned storage operator, I often see people get intimidated by the word "data." They think they need to learn Python or hire a developer to compete with the REITs.
The truth is, the most powerful tools in 2026 are surprisingly approachable. You don’t need to be a coder; you just need to be a "digital plumber." You need to connect the pipes so information flows to you, rather than you chasing it.
Here is how I use accessible tools to build an operational advantage without writing a single line of code.
Escaping the PMS Silo (Make & Fivetran)
Your Property Management System (PMS)—whether it's Storable, Sitelink, or others—is excellent at storing data, but terrible at sharing it. Most operators are stuck logging in, running a CSV report, and opening Excel. That is the old way.
I use tools like Make (formerly Integromat) or Fivetran. These are "connectors."
The Workflow: You can set up a simple automation where your PMS emails a daily performance report to a specific email address.
The Magic: Make watches that inbox. When the report arrives, it automatically grabs the data, parses it, and drops it into a Google Sheet or Airtable for you.
The Result: You have a live, running dashboard of your business that updates itself while you sleep. No more manual data entry.
Management by Exception (Slack Alerts)
I don’t want to look at a dashboard every day to see that everything is fine. I only want to know when something is wrong. This is called "Management by Exception," and I run it through Slack.
Using those same connectors (Make/Zapier), I set up "triggers" based on specific events in the facility software:
The "Discount" Trigger: If a manager overrides a price by more than 10%, I get a Slack notification instantly on my phone: "Alert: Unit 104 rented with 25% discount."
The "Vacancy" Trigger: If net rentals for the week drop below zero, I get a ping.
This allows me to be "hands-off" without being "eyes-off." I don't micromanage; I just respond to the pings that matter.
The "Vanity Metric" Trap
A word of warning from my data engineering background: Data will confess to anything if you torture it long enough.
It is very easy to combine data sources to make yourself look successful. You can create a chart that shows "Inquiries are up 50%!" while ignoring that "Actual Rentals are down 10%."
Before you build a dashboard or an automation, ask yourself: "What action will this drive?"
If the chart goes up, what do I do?
If the chart goes down, what do I do?
If the answer is "nothing," delete the chart. Don't hoard data for the sake of looking sophisticated. Gather data to make better decisions, faster.
The Bottom Line: These tools—Slack, Make, Google Sheets—are approachable and affordable (often free to start). The barrier to entry isn't money or coding skills anymore; it's simply the curiosity to set it up.
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BEFORE YOU GO
Links I found interesting this week
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FROM THE STOICS
Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.
— Marcus Aurelius
