What's Incremental To Our View

In November 2016, net rents (includes changes in street rates and promotions) decreased by -3.7% YoY, weaker than last month’s -0.3% YoY result. This month, Street rates decreased -2.9% YoY and promotions usage increased +0.8% YoY. Overall, we believe the storyline of a noticeable deceleration in pricing power remains vastly unchanged. Weakness continues to be driven by key markets such as New York, Denver, Houston, D.C. and Chicago, which is in-line with 3Q16 results. As a reminder, we are not as much concerned with the magnitude of deceleration; rather we look more at our data directionally.

Overall, we continue to be cautious on the sector as a whole after continued weakness in third-quarter results. For the second quarter in a row, PSA explicitly mentioned the increasing use of promotional discounts to new tenants in their 10Q. Congruent with PSA’s language, we noticed a 1.6% increase in promotional usage this month in our survey. Today and tomorrow at NAREIT, we will look for more clarity into the particular types of promotion usage as well as how their peers plan to compete for the remainder of the year and into 2017.