Self-storage has been the best performing real estate subsector in 2021, so it's not that big of a surprise that M&A activity is heating up. In this Fool Live video clip, recorded on Nov. 16, contributors Matt Frankel and Matt DiLallo, along with editors Kayla Schorr and Deidre Woollard, discuss CubeSmart's (CUBE 2.64%) recently announced deal to acquire Storage West for $1.7 billion. 

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Deidre Woollard: So, this is CubeSmart. CubeSmart is buying a partnership of LAACO which owns Storage West for $1.7 billion. You've probably seen their self-storage facilities around the country. Storage West, like the name sounds, Southern California, Phoenix, Vegas, Houston. The thing I thought was interesting about this one is this deal got announced and then immediately, CubeSmart announced a sale of 13 million shares. It seems they're already planning on how they're going to finance this by selling more shares.

Matt Frankel: Remember that no real estate sector has done better this year than self-storage.

Woollard: True.

Frankel: It's really smart that they are funding it that way while their share price is so high. It's really a much lower cost of capital to make such an acquisition than they would have had a few months ago. I like this deal. I'm actually surprised we haven't seen as much consolidation in the self-storage space as we have in the data center space. I think CubeSmart is doing a really good job. They're repurposing grocery stores in my area that have been vacant for 10 years and turning them into storage facilities that I'm sure they paid pennies on the dollar for. Not just in my area, they're doing that all over the country. Just because there's so much demand, maybe Americans just bought a whole lot of stuff during the pandemic and need a place to put it.

Kayla Schorr: I was going to say to that point, I was worried about self storage during the pandemic. Obviously, it's not office, it's not retail, it's not going to clearly collapse. But in my experience in the pandemic, people were cleaning up their houses. You couldn't get a dumpster outside of your house because people were motivated to do something, like there was absolutely nothing to do so people were cleaning up their houses, getting rid of things. I was worried that people would get rid of storage units because of this, but that clearly wasn't what happened.

Frankel: Self-storage is a much stickier business than a lot of people think it is. Sure it's on a month-to-month lease, but most people who have storage units have them out of necessity. I know I wouldn't want to put all the stuff that I have in a storage unit back in my house right now. That would be terrible, I wouldn't know where to put it. It would fill up my whole garage and my wife would probably leave. It's so much clutter. A lot of people have those because they need them, and that's what people were missing at the beginning of the pandemic, I feel like. People hear month-to-month lease and say, "Oh, it's really easy for people to take their stuff and leave." Not so much. Have you seen some of these self-storage units? They're packed to the gills.

Matt DiLallo: One thing I thought was interesting is the cluttering trend that Kayla has mentioned, that's actually a new thing that's really driving a lot of the extra demand for self storage. The public storage, the CEO had been talking for a while about the four Ds which is divorce, death, dislocation and disaster as being the main drivers of self storage. But now there's a fifth D of decluttering and what people are doing, as Matt said, they're decluttering their house and they are getting these self-storage units and they're just leaving it there, because it's nice to have a clean house and have a clutter house. We think of it as being like we'll eventually just get rid of the stuff and that is not the case. People keep their stuff in these places for years, and that's just what the economics are so good for this business and it's really driving these REITs to just go buy more of it, because economically they're just fantastic.

Schorr: Yeah. I also saw a ton of need for self storage. Oh, I thought I dropped out of the Zoom (ZM 1.12%), because you weren't sharing your screen anymore, but here I am. I saw a huge need for self storage during the pandemic also, because people were relocating back to the suburbs. A lot of people my age were moving back in with their parents, they had all of this furniture that they needed to find a place for. There was a lot of people just relocating and they needed a place to put all their stuff, and I'd imagine it's still there.