Institutional self-storage operators have rapidly consolidated the market, now accounting for 80% of the industry. 

This consolidation has driven record growth, with spending surpassing $7 billion annually. 

Janus International (JBI), the leading supplier of storage-unit doors in North America, dominates the institutional self-storage market with an 80% share. 

Janus is also expanding its presence through Noke, a smart lock and SaaS business, which is expected to drive significant growth. 

With a near-monopoly in the industry and a low valuation, Janus is well-positioned for continued success.

Investor Essentials Daily:
Tuesday News-based update
Powered by Valens Research

Institutional self-storage operators like Public Storage (PSA), ExtraSpace (EXR), and CubeSmart (CUBE) have been buying up small, individual storage facilities at a rapid pace since 2017.

Once a fragmented market, institutions now account for 80% of self-storage, with the top five owning more than 37% on their own. 

As self-storage consolidates, it’s also leading to record growth. Growth had been in the mid-single digits for years, but since 2015, monthly spending on construction has been accelerating. 

This year, self-storage hit an annual spending record, topping $7 billion, and this trend looks primed to continue. 

On top of normal growth, the industry is approaching its next big replacement cycle. Storage facilities have a useful life of around 39 years and more than 42% of units are 30+ years old. 

It won’t be long before these units need replacing and renovating. This provides a massive opportunity for suppliers to the space. 

Janus International (JBI) is the leading maker of storage-unit doors in North America. 

The company has an 80% market share in institutional self-storage facilities, a fast-consolidating market.  It’s also the leader in noninstitutional mom-and-pop self-storage businesses, with a 55% share. 

Janus is a one-stop shop for storage facility improvements. It touches all parts of a facility’s life cycle, from initial construction to end-of-life replacement. 

About 37% of the company’s sales come from new construction. Another 31% is derived from restore, rebuild, and replace (“R3”).

R3 involves renovating both storage-unit doors and the hallways, offices, and security systems within a storage facility. 

The remaining 32% of revenue comes from its commercial segment which makes commercial sheet doors and heavy-duty rolling steel doors for warehouses and distribution centers.

Compared with self-storage, Janus is a much smaller player in commercial infrastructure, with just an 8% share of this $3 billion industry. While Janus has more room to gain a share in the larger commercial door market, it’s not taking its eye off the crown jewel.

In 2018, Janus acquired Noke, which specializes in smart locks and systems that provide remote access to storage units. Renters appreciate smart locks because they’re more secure and allow for retrieving items without physical keys.

Self-storage operators like them as well since they make it easier to repossess a unit when unpaid. Noke is starting to take off. 

The business grew 66% in 2023, and its products are now installed in 300,000 units in the US, which is just 1% of the total market, a potential $5.5 billion opportunity. 

Janus expects Noke to grow 50% per year through 2028, which would entail only 10% market penetration. That could add $550 million to a business that generated $1 billion in sales last year. 

Noke isn’t just a new business for Janus, either. It’s a better business. Storage doors generate revenue when they’re installed and then sit around for decades until they need to be replaced. 

Meanwhile, Noke doesn’t just sell hardware. Its main offering is the software associated with smart locks. By offering subscriptions, it operates like a SaaS company. 

This new business unit offers recurring revenue, and its customer churn rate is below 1%. As this becomes a larger share of Janus’ business, it should become more stable, too. And Noke can drive above-market growth for Janus. A large part of Janus’ growth strategy involves extracting as much as it can from existing facilities.

The company generated just $2.50 per square foot in 2002. Its new products and services more than tripled this figure to $7.85 per square foot in 2020. 

Noke can drive that even higher. Janus should not have trouble squeezing more profits from customers as its services only account for 5% to 10% of the total cost of building a self-storage facility. 

All in all, Janus has carved out a great opportunity to leverage its already dominant position in self-storage. It has a near-monopoly on a critical niche industry, meaning competitors have little interest in disrupting the space. Moreover, Noke’s SaaS model can make it even more profitable.

The firm is a high-quality performer, with a low valuation of 11x Uniform P/E, and strong growth, satisfying all pillars of a good investment.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research