Sector operating expenses grew roughly four times as fast as revenue in the second quarter, driven by property taxes and payroll, while Extra Space actually cut costs. A look at where the money is going, what the outlier is doing differently, and how owners in Texas and Oklahoma can fight the biggest line on the ledger.

Key takeaways

• Same-store operating expenses across Public Storage, Extra Space and CubeSmart grew 2.6 percent in the second quarter of 2026, against revenue growth of 0.7 percent.
• Property taxes are 40 to 50 percent of a stabilized storage facility’s direct operating costs and rose 4 to 6 percent year over year at all three REITs.
• Extra Space cut same-store expenses 0.5 percent by reducing payroll, marketing and repairs; its property taxes still rose 4.2 percent.
• Texas storage owners must file a protest by May 15 or 30 days after the appraisal notice, whichever is later. Oklahoma protests are due within 30 days of an increase notice, and fair cash value is capped at 5 percent annual growth.

The second-quarter earnings season gave the self-storage industry its best news in three years: move-in rates positive, guidance raised across the board, and occupancy finally growing again. What it did not deliver was any relief on costs. Weighted across the three major U.S. storage REITs, same-store operating expenses grew 2.6 percent in the quarter against revenue growth of 0.7 percent, roughly four times the pace. Public Storage’s same-store direct expenses rose 4.3 percent and CubeSmart’s rose 4.4 percent, enough to push CubeSmart’s same-store NOI negative even with revenue growing. Public Storage raised every line of its full-year guidance except one: the expense outlook, which it nudged higher, to growth of 2 to 3 percent.

The revenue turn is real, but at these expense growth rates it is being handed straight back. For every operator, public or private, the margin story for the next two years will be decided as much on the cost line as on street rates. So it is worth being precise about where the money is actually going, and about the one operator that bucked the trend.

Where self-storage operating costs are going in 2026

Start with the line that dwarfs everything else. Property taxes are the single largest operating expense in self-storage, and it is not close. In the second quarter, property taxes made up roughly 49 percent of Public Storage’s same-store direct costs ($111 million of $228 million), about 42 percent of Extra Space’s ($81 million of $194 million), and about 40 percent of CubeSmart’s ($30 million of $75 million). Call it two fifths to one half of everything these operators spend to run a stabilized store.

That line is also growing faster than almost any other. Public Storage’s same-store property taxes rose 5.9 percent year over year, CubeSmart’s rose 5.3 percent, and even cost-disciplined Extra Space absorbed a 4.2 percent increase. Assessors work on a lag: many jurisdictions are still marking storage values to the peak pricing of 2021 and 2022, and municipal budgets strained by inflation have little incentive to give the money back voluntarily. The result is the industry’s least comfortable arithmetic. When 40 to 50 percent of your cost base compounds at 4 to 6 percent, the rest of the expense stack has to be nearly flat just to hold total growth at inflation.

Payroll is the second pressure point, and here the operators diverge sharply. CubeSmart’s personnel costs jumped 7.5 percent in the quarter, which management attributed alongside property taxes as the main driver of its 4.4 percent expense growth. Public Storage and Extra Space went the other way, cutting on-site payroll 1.8 percent and 2.3 percent respectively, largely through technology: machine-learning staffing models, remote and centralized management, and digital rental flows that need fewer hours at the counter. Public Storage says its staffing models have cut labour hours by more than 30 percent over several years. The gap between a 7.5 percent increase and a 2.3 percent decrease on the same line, in the same quarter, in the same industry, tells you how much of the payroll problem is a choice.

Insurance deserves a more careful reading than the headlines suggest. It was the villain of 2022 through 2024, when premiums on coastal and older product rose 20 to 30 percent a year, but the market has turned. CubeSmart’s property insurance actually fell 15.6 percent in the quarter, and Extra Space, despite showing a 4.5 percent increase for the quarter, completed a favourable mid-year renewal that management says will flow through the rest of this year and into 2027. Insurance is becoming a tailwind for well-managed portfolios. The live problems are taxes and people.

The rest of the stack is noise by comparison, though instructive noise. Marketing is now a strategic weapon rather than a fixed cost: Public Storage spent 6.3 percent more on it while Extra Space spent 4.6 percent less, and both claimed the spend level was optimal. Repairs and maintenance swing with timing (CubeSmart up 26.5 percent, Extra Space down 15.5 percent in the quarter) and tell you little about run rates. Utilities grew roughly 3 percent everywhere, with solar installations partially offsetting rate increases.

How Extra Space cut expenses while its peers grew 4 percent

Extra Space’s same-store expenses fell 0.5 percent in the quarter. Against peers growing 4 percent plus, that is a striking spread, and it was the engine of the company’s sector-leading results: revenue up 2.4 percent, NOI up 3.5 percent, and core FFO growth of 4.9 percent while both peers posted FFO declines. Chief financial officer Jeff Norman said every major expense category came in at or better than internal expectations, and guided to expense growth staying in what he called sub-inflationary ranges.

Break the quarter apart and the outperformance is not one trick. Payroll fell 2.3 percent on staffing optimization. Marketing fell 4.6 percent because improving organic demand let the company buy fewer paid clicks. Property operating costs fell 7.3 percent. Repairs fell 15.5 percent on timing. The insurance renewal came in below the prior year. The only lines that grew were the ones nobody controls: property taxes and, modestly, office expense.

That last observation is the real lesson. Extra Space did not solve the expense problem; it solved the controllable half of it. Its property taxes still rose 4.2 percent, and management flagged taxes as the persistent headwind inside otherwise sub-inflationary guidance. Every operator, from a 4,000-store REIT to a single-facility owner, faces the same split ledger: payroll, marketing, and maintenance respond to management, while the tax bill arrives from the county with a number someone else chose. The good operators are winning the first half. The second half has a lever too, and surprisingly few owners pull it.

Why 2026 is the year to appeal a self-storage property tax assessment

Property tax assessments can be fought, and 2026 into 2027 may be the best window in years to fight them. In much of the Sunbelt, storage values and assessed values are moving in opposite directions. Houston same-store NOI fell 5.8 percent in the second quarter and Dallas-Fort Worth fell 4.9 percent, street rates remain below their 2022 peaks, and lease-up projections have stretched, yet many appraisal districts are still carrying values set off peak-era income assumptions. When your actual rent roll shows falling revenue and your assessment shows a rising value, you have the raw material for an appeal.

The valuation arguments are consistent everywhere. Storage assessments tend to overstate value in three ways: they apply stabilized occupancy and peak asking rates rather than actual collections, they understate the expense load (including the very tax and insurance growth described above), and they sweep the business value of the operation, the brand, the management platform, the tenant insurance income, into the real estate, when only the real estate is taxable. Actual income and expense statements, market vacancy data, competitive supply within your radius, and recent sales of comparable facilities are the evidence that wins. I have made a career-long habit of a simple test that applies on either side of the border: if someone wrote you a cheque for the assessed value of your property, would you happily take it? If yes, the assessment is probably too high and worth a fight. If your instinct is that the cheque is not nearly enough, an appeal is probably not in your best interest.

Texas property tax protests: the May 15 deadline, equal and uniform, and the circuit breaker

For owners in Texas, the largest storage state in the country, protesting is less a remedy than an annual discipline, and the sophisticated owners treat it that way. There is no state income tax, so the property tax carries the load, with combined rates in the major metros commonly north of 2 percent of assessed value. A few practical points matter most.

The deadline is May 15, or 30 days after the appraisal district mails your notice of appraised value, whichever is later. Miss it and your realistic options narrow to the late-correction provisions, which for commercial property generally require showing the appraisal exceeded the correct value by more than a third, with a penalty attached. Put the date on the calendar now for 2027, and file every year. Filing costs nothing, preserves your rights, and can be withdrawn.

Texas also gives commercial owners a second, often stronger argument: equal and uniform appraisal. Even if your value is defensible against market, you are entitled to a value in line with the median appraised value of comparable properties, adjusted appropriately. Storage owners in submarkets where a neighbouring facility protested successfully last year can often ride that comparable down. The process runs from an informal meeting with the district, to the appraisal review board, and beyond that to binding arbitration (available for properties at or under $5 million) or district court, where the equal-and-uniform argument does much of its work. Contingency-fee tax agents are a mature industry in Texas, and for most single-facility owners the economics of hiring one are straightforward.

One more Texas wrinkle worth knowing this year: the circuit breaker limitation. For the 2024 through 2026 tax years, non-homestead real property valued at or under roughly $5 million cannot have its taxable value increased more than 20 percent a year absent new improvements. It applies automatically, it resets when a property changes hands, and as of now it expires after the 2026 tax year unless the legislature extends it. Smaller owners should verify their district applied it; buyers should underwrite its disappearance.

Oklahoma property tax appeals: the 5 percent cap and the assessor meeting

Oklahoma runs a gentler system, and the constitutional cap does some of the work for you. Fair cash value on most commercial real property cannot rise more than 5 percent in a year, unless the property sells or is improved, at which point it resets to market. Assessment ratios sit near 11 percent of that value in the major counties, which keeps effective rates well below Texas levels. The cap is also the due-diligence trap: a facility that has sat under the same ownership for a decade may carry a taxable value far below market, and the buyer inherits the reset. Underwrite the post-sale tax bill, not the seller’s.

The appeal path starts informally with the county assessor, where a well-documented income approach conversation resolves many cases. Valuations are set as of January 1, and a written protest is due within 30 days of the increase notice; where no notice was issued, the filing window runs to the first Monday in April. From there the case goes to the County Board of Equalization, which hears appeals in the late spring with sworn testimony and structured evidence, and after that to district court. The counties reinspect on multi-year cycles, so an error that creeps in can compound for years if nobody challenges it. The meeting is cheap. Take it.

The takeaway for storage owners

The industry has spent three years waiting for the revenue line to turn, and it finally has. The expense line is the recovery’s unfinished business. Payroll, marketing, and maintenance are yielding to technology and discipline, as Extra Space just demonstrated, but property taxes, the largest single cost in the business, will not yield to an operating platform. They yield to evidence, deadlines, and the willingness to file. An owner who treats the assessment notice as an invoice will watch two fifths of their cost base compound at 5 percent a year. An owner who treats it as an opening offer has a lever the REITs’ platforms cannot replicate. In a recovery this gradual, that is where the margin gets kept.