Wolfe Research has downgraded Public Storage and CubeSmart, citing a delayed recovery for U.S. self-storage REITs. The firm now anticipates a rebound in earnings to 2027, instead of earlier projections. This revision reflects softer near-term fundamentals within the self-storage sector, mirroring trends in other commercial real estate segments.

Several factors contribute to the revised outlook. Demand is closely tied to employment, which remains subdued. While supply is easing, it isn't at historic lows. The firm also upgraded National Storage Affiliates to Peer Perform. Despite the long-term performance of storage REITs, valuations leave little room for disappointment, according to Wolfe's analysis.

Wolfe suggests that a more attractive entry point might emerge later in 2026, contingent on earnings trends stabilizing and growth commencing as expected. The firm's analysis indicates modest two-year growth profiles for Public Storage and CubeSmart. Investors should monitor employment data and housing market activity for insights into future performance.

The storage REIT sector, typically considered a safe haven, is facing headwinds. Elevated interest rates and a cooling economy have put pressure on the sector. Any positive catalysts, such as increased housing turnover or a boost in employment, could lead to a faster recovery for the REITs than currently anticipated.