Monday Morning Quarterback (03/15/2021)

March 15, 2021


February Street Rates

Yardi released its monthly national self-storage report for February on Wednesday, March 10. The report found that nationwide non-climate-controlled (Non-CC) and climate-controlled (CC) self-storage street rates improved annually for 10×10 units for the fifth consecutive month. Additionally, the report showed that street rates for 10×10 CC units rose by 3.1% y/y—the most significant year-over-year (y/y) growth since 2017. Non-CC 10×10 unit rates from February 2020 also rose 2.6%. While year-over-year performance was un-seasonally strong this winter, month-over-month rates for 10×10 non-CC and CC units have remained flat since November.

Chart of February 2021 Year-over-Year Rent Change for 10'x10' Units

February New Supply

In February, self-storage properties in the planning stages or under construction comprised 8.4% of existing inventory, which is an increase of 10 basis points (bps) from January. Despite the abandonment of 17 self-storage projects last month, development activity continued to remain stable across the nation, with most markets not yet reflecting a substantial decline in the new supply pipeline. Self-storage’s robust performance in 2020 has so far continued into 2021. Nonetheless, as the pandemic’s effect on activity weakens and core markets start recovering, demand remains uncertain against the seemingly never-ending new supply pipeline.


chart of Under Construction & Planned Percent of Existing Inventory


$1.9 Trillion Stimulus Package: 

On Thursday, President Biden signed a $1.9 trillion COVID-aid bill into law. The most significant provisions of the stimulus package include: 1) a year of enhanced unemployment insurance of an additional $300/week, 2) a year-long extension of the child tax credit, 3) one-time direct stimulus check of $1,400 to qualified Americans, 4) federal funding for state and local governments, and 5) more capital for U.S. vaccination efforts. Regarding the $1,400 check, only individuals with ‘adjusted gross incomes’ (AGI) of $75,000 or less and married couples with AGI of up to $150,000 meet the complete payment requirements. The critical point to stimulating the economy is providing more support for lower-income households, who quickly re-inject that money back into the economy.


Consumer Price Inflation

Last week, the U.S. Department of Labor reported the Consumer Price Index (CPI), an essential measure of consumer price inflation, rose 40 bps from January to February, in line with Bloomberg’s survey of economists. Over the prior 12 months, the all-items index increased by 1.7%, driven chiefly by volatile food and energy prices, which gained 3.6% and 2.4%, respectively. During that same period, core CPI, which excludes volatile energy and food costs, only grew by 1.3%—comprising 30% of core CPI, homeowners’ equivalent rent inflated by 2.0% over the last 12 months. From January to February, core CPI rose only rose 10 bps, missing the Bloomberg survey’s median estimate of 20 bps. According to Chief Economist Stephen Stanley of Amherst Pierpont Securities, core inflation “is being buffeted around erratically by the pandemic, causing strange movements in prices for several categories in any given month.” Looking ahead, Mr. Stanley advises investors that “the first signs of fundamentals returning will likely be when airlines and hotels start to nudge up their prices in the face of improving demand.”


Chart of Muted Price Pressures

Produce Price Index

From January to February, the overall Producer Price Index (PPI) gained 50 bps. In the past 12 months, PPI rose 2.8%, the most significant increase since October 2018 and 10 bps higher than Bloomberg’s survey of economists’ median estimate of 2.7% y/y. Core PPI, which excludes energy, food, and trade services, grew by 20 bps m/m and by 2.2% for the twelve months ended in February. With prices paid to producers expanding by the most since October 2018, economists and investors are divided mainly on inflation. Some forecast price pressures continuing to build amidst additional fiscal stimulus and robust demand. Others believe the gain in inflation will be temporary. Nonetheless, it requires a tremendous increase in commodity prices even to have a moderate impact on consumer prices.


Chart of Producer Price Index

Economic Calendar

On Tuesday, February’s industrial production reports and retail sales will likely reflect last month’s bad weather—particularly in Texas. On Wednesday, the FOMC (Federal Open Market Committee) is broadly anticipated to continue acquiring $80 billion in Treasury bonds and $40 billion in MBS (mortgage-back securities) a month while keeping the federal funds rate at 0-to-25 basis points. The central bank will also revise its projections for economic growth, inflation, and employment, releasing an updated dot plot that illustrates individual official’s estimates of the future federal funds rate.


President Biden presented a plan for reigning in the pandemic during an evening address on March 11. A vital component of that plan included a directive to state governments to make every American adult eligible for COVID inoculations by May 1. As of Sunday, U.S. cases stand at 29.4 million and American COVID casualties at 533 thousand. From March 7 to March 13, new pandemic cases and deaths both slowed on a week-over-week basis, again, as weekly deaths dropped below five-figures for the first time since early November.    


Chart of New Coronavirus Cases Reported per Day

Chart of New Reported Coronavirus Deaths per Day