The slowing in Canada's housing demand is beginning to affect one of country's largest publicly traded self-storage companies that just reported an increase in earnings but sees challenges for its industry.
StorageVault said this week that both its net operating income and revenue grew in the second quarter the ended June 30. The company that owns and operates 249 storage locations across Canada also said it will increase its dividend by 0.5% in the third quarter.
For the second quarter, Toronto-based StorageVault's revenue increased to $74.1 million, up from $71.3 million a year ago, the company said. Its net operating income grew to $49.9 million from $48.4 million for the same period last year. StorageVault has also said it more than doubled its projected acquisitions this year, with $204.5 million announced or closed at midyear.
However, Chief Financial Officer Iqbal Khan said the company is not immune to the impact of slowing sales in the residential sector.
"While we have growth in leads and move-ins, the current environment faces headwinds from slow housing sales and renovations, and as people are watching their spending," Kahn said in a statement. "In the second half of the year, we will continue to focus on maximizing free cash flow by increasing revenues and NOI and controlling costs."
This month, the Canadian Real Estate Association scaled back its outlook for the existing homes market but said it still sees sales climbing 6.1% this year over last.
Brad Sturges, an analyst with Raymond James, said in a note that reduced housing mobility could have a cooling effect on Canadian storage leasing demand. People often rent storage units when the move and relocate.
Sturges said average occupancy levels across StorageVault's Canadian storage portfolio were down about 190 basis points year over year as of June 30. Occupancy was down 100 basis points year over year in the first quarter.
Falling occupancy numbers were the result of "slower Canadian housing mobility, reduced home renovation activity, and a decrease in Canadian consumer discretionary spending habits," he said. "Given StorageVault's average occupancy rate headwinds this year, StorageVault has also noted that its ability to push through rent increases has been constrained."