Is it Wise to Retain Extra Space Storage Stock in Your Portfolio Now?

Extra Space Storage EXR is well-positioned to gain from its high brand value, strategic buyouts, robust presence in key cities and healthy balance sheet. 

However, the company is likely to face headwinds from lower new customer rates. The development boom of self-storage units in many markets is expected to continue affecting its pricing power.

Last month, EXR reported third-quarter 2025 core funds from operations (FFO) per share of $2.08, surpassing the Zacks Consensus Estimate of $2.06. The figure increased 0.48% from the prior-year quarter. Results reflected a year-over-year rise in revenues due to growth in occupancy. However, high same-store expenses and interest expenses during the quarter were a spoilsport.

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 4,238 as of Sept. 30, 2025, in 43 states and Washington, D.C. With a geographically diversified portfolio and significant scale, the company is poised for long-term growth. We expect a year-over-year rise of 3.6% in the company’s total revenues in 2025.

EXR 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, the company is making strategic investments through other channels in the storage sector, including preferred equity investments and a bridge loan program. Such expansionary efforts will yield benefits in the long run.

Extra Space Storage emphasizes improving its balance sheet, reducing secured debt and increasing the size of its unencumbered pool. As of Sept. 30, 2025, the company's net debt to EBITDA was 5.2X. The percentage of unencumbered asset value to total asset value was 84.9%. With solid balance sheet strength, the company is well-poised to capitalize on external growth opportunities.

Furthermore, the industry is characterized by fragmented ownership. Per the company’s September presentation, the top six self-storage companies in the United States operated roughly 40% of the total U.S. stores by square footage. This creates ample scope for consolidation at some level in the future, and with a solid scale, decent balance sheet strength and technology advantage, Extra Space Storage remains well-poised to compete for acquisitions.

Solid dividend payouts are arguably the biggest enticement for REIT investors, and Extra Space Storage remains committed to increasing shareholders’ wealth. In the past five years, the company has increased its dividend six times, and the five-year annualized dividend growth rate is 10.02%. With a robust operating platform and a healthy financial position, we expect the dividend payout to be sustainable in the upcoming period. Check Extra Space Storage’s dividend history.

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. As such, the reacceleration in revenue growth is expected to be challenging until the company regains pricing power with new customers.

The company has a substantial debt burden, and its total debt as of Sept. 30, 2025 was approximately $13.16 billion. With a high level of debt, interest expenses are likely to remain elevated. Interest expenses for the third quarter of 2025 jumped 4.8% year over year to $149.7 million.

Shares of EXR have fallen 6.5% in the past three months against the industry's 0.1% growth. However, analysts seem bullish on this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2025 FFO per share indicates a favorable outlook as it has moved upward by a cent over the past month to $8.16.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Digital Realty Trust DLR and W.P. Carey WPC, 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 DLR’s 2025 FFO per share is pegged at $7.35, which indicates year-over-year growth of 9.5%.

The Zacks Consensus Estimate for WPC’s full-year FFO per share is pinned at $4.92, which calls for an increase of 4.7% from the year-ago period.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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