Growth and real estate investment trusts (REITs) don't typically go together. In return for the privilege of not paying corporate income taxes, REITs are required to pay out at least 90% of net income to shareholders. That means REITs can't invest much money back into their business; they have to grow using debt or by selling more shares.

The two REITs that we're going to look at today, Public Storage (PSA 0.69%) and Extra Space Storage (EXR 1.49%), have kept the revenue growth flowing by rolling up the self-storage industry. The two companies are the big dogs in self-storage. Both have good revenue growth, global exposure, healthy dividend yields, and inflation protection. Is it time to add them to your portfolio?

Public Storage

While these self-storage REITs are the top two in the industry, Public Storage is indisputably, No. 1. The REIT owns 2,600 facilities in 39 states with a total of 182 million rentable square feet of space.

It's not a stodgy old stalwart that built its asset base over 100 years either. It's added 90 million square feet of space over the past 10 years and 20 million over the last two -- more than any other player in that time. That level of investment has led to revenue growth of 20% since 2019.

The REIT is also expanding internationally through affiliate Shurgard Self Storage, which owns 253 properties totaling 13.8 million SF across seven European countries.

Self-storage REITs should be able to withstand both rising inflation and a market downturn. As prices soar, self-storage companies can adapt more quickly than any other REIT type. Most storage leases are short-term, and many are month-to-month. If the inflation rate is running at 10% per year, Public Storage can raise its prices almost immediately, it doesn't have to wait for long-term leases to wind down.

Self-storage should also outperform in a recession. When businesses shut down locations or people lose jobs and are forced to downsize their household or even move in with a relative, they'll need somewhere to store their stuff until they get back on their feet.

Public Storage was founded in 1972 and has the expertise to operate through both inflationary periods and recessions. It's showing strong growth and has a dividend yield of 2.5%.

Extra Space

Though Public Storage had the revenue growth title for the last two and 10 years, Extra Space has been the most exciting for the last five. Before this year's stock market downturn, the shares were up 200% from August 2017 to January 2022. According to a recent management presentation, the REIT has the highest total return among all public REITs over the last 10 years.

Revenue grew from $1.11 billion in 2017 to $1.66 billion over the last 12 months. Operating income grew from $540 million to $890 million. And it still pays a hefty dividend, with a current yield of 3.5%.

Like Public Storage, Extra Space's strategy is to roll up the industry. Scour the country looking for mom-and-pop operators that can be bought cheap and made more efficient with Extra Space's management and administration capabilities.

So far, it's built up 2,130 total properties of which 995 are wholly owned, 288 are joint ventures, and 847 are owned by someone else and managed by Extra Space. When the REIT manages properties that it doesn't own, it's able to increase revenue without having to use its own capital. Over time, this will allow it to build a bigger asset base with a cleaner balance sheet.

With those properties, Extra Space has 1.5 million units in 41 states and over 4,000 employees. No property accounts for more than 1% of its portfolio, and no geographic market accounts for more than 12%. The next step for Extra Space is to expand internationally.