CubeSmart (CUBE) Q4 2025: New Supply Headwinds Drop to 19%, Unlocking Path to Revenue Growth
CubeSmart enters 2026 with stabilized fundamentals and a marked reduction in new supply headwinds, positioning the REIT for a gradual return to historical growth rates. Urban core markets continue to outperform, while the Sun Belt and West Coast show early signs of improvement as supply pressures recede. Management is shifting capital allocation toward share repurchases and creative joint ventures, signaling a flexible approach to value creation as public-private valuation gaps persist.
Summary
- Supply Headwind Eases Sharply: Only 19% of the same-store portfolio faces new supply, the lowest since 2017.
- Urban Market Outperformance: Northeast and Midwest assets drive portfolio stability, while Sun Belt fundamentals begin to recover.
- Capital Allocation Flexibility: Expanded buyback authorization and JV mandates prioritize shareholder value amid limited acquisition opportunities.
Performance Analysis
CubeSmart’s Q4 2025 results reflect a business in transition from stabilization to early-stage growth resumption. Same-store revenue growth accelerated sequentially, nearly reaching flat, as move-in rates turned positive and occupancy gaps narrowed. The company’s Northeast and Midwest urban markets continue to outperform, benefiting from lower new supply and resilient demand, while supply-impacted Sun Belt and West Coast regions are seeing the first signs of recovery.
Expense growth remains a focus area, with same-store expenses up 2.9% in the quarter, pressured by real estate taxes, insurance, and weather-related costs, partially offset by continued discipline in personnel and marketing spend. Free cash flow generation remains robust, supporting both a 1.9% dividend increase and active share repurchases. The balance sheet is healthy, with net debt to EBITDA at 4.8 times and ample liquidity for opportunistic capital deployment.
- Move-In Rate Inflection: Year-over-year move-in rates improved from negative to positive territory, supporting revenue stabilization.
- Expense Drag: Real estate taxes and severe weather drove higher expenses, but management flagged these as largely timing-related.
- Share Repurchases Ramp: $475 million in buyback capacity now authorized, reflecting management’s view of relative value versus private market asset pricing.
Operational momentum is expected to build gradually through 2026 as only 5% of storage units typically turn monthly, setting the stage for a steady, not sudden, financial improvement.
Executive Commentary
"Our more stable urban markets in the Northeast and Midwest continue to outperform, while our more transient supply impacted markets across the Sun Belt and the West Coast are beginning to see green shoots in the form of second derivative improvement."
Chris Marr, President and Chief Executive Officer
"On the external growth front, It's been a challenging couple of years to find accretive on-balance sheet opportunities to deploy capital, especially on marketed transactions... Our board has recently expanded the share repurchase authorization, giving us approximately $475 million in capacity to repurchase shares based on current valuation levels."
Tim Martin, Chief Financial Officer
Strategic Positioning
1. Supply Pressure Relief
Only 19% of the same-store portfolio will face new supply competition in 2026, down from 24% last year and a peak of 50% in 2019. CubeSmart tracks supply impact on a three-year rolling basis, and as older deliveries mature, their headwind lessens. This structural shift is expected to support both pricing power and occupancy stabilization, particularly in core markets.
2. Urban Core Strength and Portfolio Quality
Urban markets in the Northeast and Midwest anchor portfolio performance, with New York City and surrounding MSAs highlighted for above-average revenue growth, stable occupancy, and long customer stays. These markets are less exposed to housing turnover cycles and benefit from brand awareness and supply constraints, providing ballast as more volatile Sun Belt markets recover.
3. Flexible Capital Deployment
With public and private market valuations misaligned, leadership is prioritizing share repurchases over traditional acquisitions, while also expanding joint venture (JV) activity. The newly announced $250 million JV with CBRE Investment Management targets high-growth markets and value-add opportunities, offering an alternative path to portfolio expansion and fee income without stretching balance sheet risk.
4. Expense Discipline and Inflationary Pressures
CubeSmart has led the sector in expense control over multi-year periods, but 2026 guidance embeds higher real estate taxes, weather-related costs, and a normalization of personnel expense growth after years of flat to negative trends. Management expects these pressures to moderate after Q1, with most cost increases tied to timing or one-off events.
5. Shareholder Return Focus
Dividend growth and buybacks are central to CubeSmart’s capital return strategy, with a 5.3% yield at quarter-end and a willingness to sell or contribute assets to fund repurchases if the valuation gap persists. Leadership signals that capital allocation will remain dynamic, adjusting to market conditions and relative value opportunities.
Key Considerations
CubeSmart’s 2025 exit sets up a year of gradual improvement, but the pace and breadth of recovery will depend on several interlocking drivers. Investors should weigh the following:
- Supply Impact Trajectory: Continued decline in new deliveries should incrementally benefit pricing and occupancy, especially in previously pressured Sun Belt and West Coast markets.
- Urban Market Resilience: Northeast and Midwest urban assets remain a defensive anchor, with New York City showing broad-based strength across boroughs and adjacent counties.
- Expense Growth Normalization: After sector-leading cost control, 2026 brings tougher comps and unavoidable inflation in taxes and weather-related costs, but management expects this to be transitory.
- Capital Allocation Optionality: Expanded buyback authorization and new JV mandates provide flexibility to respond to shifting public and private market dynamics.
- Revenue Mix and Ancillary Income: Merchandise, fee, and truck rental income are being actively managed for incremental cash flow, with 2026 guidance assuming stable or modestly rising contributions from these lines.
Risks
Regulatory scrutiny is rising, particularly in New York City, where CubeSmart faces a lawsuit over pricing practices. While management asserts compliance and flexibility, further regulation could impact pricing power or operating practices. Expense growth, especially in real estate taxes and weather impacts, presents near-term margin risk, and any resurgence in new supply could slow the recovery trajectory. Finally, the public-private market valuation gap could limit accretive acquisition opportunities, constraining external growth if it persists.
Forward Outlook
For Q1 2026, CubeSmart guided to:
- Continued positive move-in rates and narrowing occupancy gaps, with a gradual financial improvement expected through the year.
- Elevated expense growth in Q1 due to severe winter weather, with normalization expected in subsequent quarters.
For full-year 2026, management maintained guidance:
- FFO per share range of $2.52 to $2.60, reflecting stable macro conditions, reduced supply headwinds, and steady improvement in core operating metrics.
Management highlighted:
- “Steady, gradual improvement” as occupancy and pricing benefit from reduced supply competition.
- Flexibility to deploy capital via buybacks, JVs, or selective acquisitions depending on market conditions and relative value.
Takeaways
CubeSmart is at a structural inflection point, with supply headwinds at multi-year lows and urban core strength supporting a gradual return to growth. The company’s capital allocation strategy is notably flexible, adapting to persistent valuation gaps and market volatility.
- Supply relief is a material tailwind: The drop to 19% of assets facing new supply unlocks incremental pricing power and occupancy gains, especially as older deliveries mature and competitive intensity fades.
- Urban market performance remains a differentiator: New York City and other core markets continue to deliver above-average results, providing defensive ballast and upside as housing turnover and consumer confidence improve.
- Capital allocation will drive relative returns: With limited accretive acquisition opportunities, buybacks and JVs are the primary levers for shareholder value creation in the near term, with management ready to pivot as market conditions evolve.
Conclusion
CubeSmart exits 2025 with a clear path to growth, anchored by easing supply headwinds and urban market resilience. The company’s capital allocation agility and disciplined expense management position it well for a steady, if unspectacular, recovery in 2026 and beyond. Investors should watch for sustained improvement in move-in rates and occupancy, as well as regulatory developments and further shifts in capital deployment strategy.
Industry Read-Through
CubeSmart’s experience underscores a sector-wide inflection as new supply wanes and stabilized assets regain pricing power. Other storage REITs and operators with urban exposure are likely to see similar benefits, while Sun Belt recovery will depend on the pace of supply absorption. The public-private valuation disconnect remains a key theme, influencing capital allocation and M&A activity across the sector. Regulatory risk, particularly around pricing transparency, is an emerging watchpoint for all operators in major urban markets. The sector’s defensive characteristics are again on display, but expense pressures and market-specific headwinds will require continued discipline and adaptability.