Goldman Sachs downgrades Extra Space Storage on slow demand recovery

Investing.com -- Goldman Sachs downgraded Extra Space Storage (NYSE: EXR) Inc. to Neutral from Buy, saying a sluggish recovery in storage demand and limited earnings growth leave the stock with fewer drivers after a strong run.

The brokerage said Extra Space is trading at about 16.7 times expected 2025 funds from operations, slightly below the real estate investment trust sector, a shift from the stock’s typical premium.

It now expects the company to grow earnings by about 2.5% a year through 2027, compared with faster rates in the past.

“Without a more meaningful pickup in earnings, we do not expect a meaningful improvement in valuation,” Goldman said, setting a 12-month price target of $146.


Since being added to its Buy list in September 2023, Extra Space shares have risen 15.9%, trailing the broader REIT index and far behind the S&P 500’s 50% gain.

Storage demand has been weaker than Goldman expected, held back by elevated supply and low housing turnover, which has slowed rental growth from new move-ins.

Existing customer rate increases remain solid, but new lease rents, a key driver of revenue are improving only gradually, the brokerage said.

Goldman said new storage supply will moderate in 2026 and 2027, but competition remains high after nearly a decade of heavy building.

Housing turnover is also unlikely to rebound sharply in the near term. The bank added that Extra Space has fewer opportunities to buy properties at attractive prices and less exposure to Los Angeles than some peers, limiting potential upside.

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