CubeSmart is packing in more renters, and that could mean higher rents ahead. RBC Capital Markets, a global investment bank, says the self-storage real estate investment trust (REIT) is now positioned to regain pricing power as recently opened facilities get absorbed by demand.
The key number: CubeSmart's occupancy rose 90 basis points year over year at the end of the third quarter. That's a clear improvement from the second quarter, when occupancy was flat compared with the prior year. RBC notes that operators are pulling back on discounts now that new sites are filling up, which it calls a “constructive” competitive environment.
What's driving the turnaround
Self-storage is a business built on occupancy and pricing. When occupancy is high, operators can charge more for units. When it's low, they often offer promotions to attract renters. For the past couple of years, many self-storage companies, including CubeSmart, have been dealing with a wave of new supply. Developers built a lot of storage facilities during the pandemic-era boom, and those new units needed to be filled. That led to discounting and pressure on rental rates.
Now, RBC says that dynamic is shifting. As the new facilities fill up, operators are easing off on promotions. That's a sign that the market is moving back toward balance, and it gives companies like CubeSmart more leverage to raise rents.
CubeSmart is one of the largest self-storage REITs in the U.S., with properties across the country. REITs are companies that own and operate income-producing real estate and are required to distribute most of their taxable income to shareholders as dividends. For investors, occupancy and rental rates are the two biggest drivers of a storage REIT's performance.
What it means for investors
RBC's note is a positive signal for CubeSmart's earnings. The firm raised its 2026 and 2027 core funds from operations (FFO) estimates by $0.02 per share. FFO is a key metric for REITs because it adjusts earnings for depreciation and other non-cash items, giving a clearer picture of cash flow from operations.
For everyday investors, the takeaway is that CubeSmart's business appears to be improving. Higher occupancy and less discounting typically translate into stronger revenue and, eventually, higher dividends. But it's worth remembering that the self-storage sector is cyclical. Demand can soften if the economy slows, and new supply can still come online in certain markets.
RBC's view is also a broader comment on the self-storage industry. If CubeSmart is seeing better pricing power, competitors like Public Storage and Extra Space Storage may be experiencing similar trends. Investors who own any of these stocks should watch occupancy and rental rate trends in coming quarters.
What to watch next
The next big test will be CubeSmart's full third-quarter earnings report, which will include more detail on occupancy, rental rates, and management's outlook. Investors will also be watching whether the company can sustain the occupancy gains and start raising rents without losing customers.
Another factor to consider is interest rates. REITs are often sensitive to rate moves because they borrow to buy properties, and higher rates raise their financing costs. If rates stay elevated, that could offset some of the benefit from stronger pricing power.
For those looking at the broader market, the theme of pricing power is showing up in other sectors too. For example, FedEx Freight's strong holiday outlook signals pricing power, and Henkel lifted its 2026 sales outlook as pricing power beat expectations. When companies across industries can raise prices, it often points to a healthy economy, but it can also feed into inflation concerns.
For CubeSmart specifically, the story is about a company that went through a rough patch and is now seeing the light at the end of the tunnel. The question is how much pricing power it can regain and how quickly that flows to the bottom line.
As always, past performance is not a guarantee of future results. Investors should consider their own financial situation and risk tolerance before making any decisions. This article is for informational purposes only and does not constitute investment advice.
