Occupancy • Section 4
the wider world of self-storage and attest to the strength or weakness of the industry. The metric is often considered the barometer of the industry, allowing owners and operators to assess current market conditions and make predictions about the future of the sector. In times of economic distress, occupancy rates often
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stagnate and stumble. Many factors can put downward pressure on occupancy rates, such as recession and periods of sustained high unemployment levels. However, based on historical patterns, occupancy numbers tend to recuperate and rise in lockstep with overall economic recovery.
Supply And Demand Shifts in both supply and demand also have a substantial impact on occupancy levels at self-storage properties na- tionwide. Factors such as overbuilding and oversaturation can increase the competitive landscape at local self-storage stores and drag down occupancy rates at individual busi- nesses. Properties with operations or management chal- lenges may also experience a downturn in occupancy rates on a store-by-store basis.
Sophisticated algorithms and business
practices can help self-storage properties leverage these constant occupancy changes while maximizing both occupancy rates and revenue.
On the other hand, self-storage facilities tend to ben-
efit from rising occupancy rates during times of economic growth. An influx of new move-ins within a particular area can increase demand for self-storage space. Cities and towns experiencing new home construction booms and areas bolstered by major corporation or employers hiring large numbers of new employees may also see a positive shift in demand for self-storage units. On a more micro level, periods of change often drive
individuals to seek out a self-storage solution. Transitions in family situations—such as combining households after a marriage or dissolution of a household following a di- vorce—can also bring new customers to self-storage stores. In addition, events such as deaths, births, and job transitions frequently lead new customers to lease a unit from self- storage facilities.
Continual Occupancy Changes Since the self-storage business model most often operates on a month-to-month basis, occupancy rates are constant- ly in a state of flux. It can be difficult to anticipate when a
ccupancy rates provide more than basic information about the number of rented units at a self-storage fa- cility. In aggregate, these figures can be a window into
customer will move out of a unit or when a new tenant will sign a lease agreement and move into storage. Sophisticated algorithms and business practices can help self-
storage properties leverage these constant occupancy changes while maximizing both occupancy rates and revenue. Using a combination of current and historical occupancy data along with other factors impacting an individual market area, these types of programs can help self-storage owners and operators optimize in- come by re-pricing rental rates on a near constant basis. Often referred to as self-storage revenue management, the pro-
cess analyzes the number of occupied units at a self-storage store as well as the occupancy rates within the general market area and sets prices according to availability and anticipated customer demand. For example, if all but one of a facility’s 10-by-10 square foot units is currently rented, the self-storage store would put a premium on the last unit. Based on calls and inquiries about storage space, the price of the remaining 10-by-10 square foot unit could potentially fluctuate throughout the day until the unit is eventually leased and occupied by a new customer. These kinds of revenue man-
agement strategies focus on another side of the occupancy equation—economic occupancy. Economic occupancy is the total possible revenue a self-storage property can realize at a given time. It is determined by a facil- ity’s street rates for the total num- ber of units at the storage store minus any vacancies and conces- sions. For example, a self-storage facility may have 90 of 100 units currently occupied by customers, giving the site a physical occu- pancy rate of 90 percent. Howev- er, if 10 of the units were offered to customers as part of a first- month-free new customer pro- motion, the economic occupancy number would have to factor that discount into the occupancy equation. Since 10 of the 90 occu- pied units brought in no income for the month, the storage facility would be given an economic oc- cupancy rate of 80 percent.
Optimal Occupancy Rates Although every self-storage busi- ness has its own unique goals and benchmarks, many self-storage operators strive for a physical oc- cupancy rate somewhere within the low 90 percent-range. When occupancy rates are too high,
Table 4.1 –
Historical Physical Occupancy
Year Occupancy
1987 78.4% 1988 80.4% 1989 85.9% 1990 81.5% 1991 86.4% 1992 85.0% 1993 88.3% 1994 89.9% 1995 88.5% 1996 88.3% 1997 85.1% 1998 82.9% 1999 86.9% 2000 83.7% 2001 86.1% 2002 85.4% 2003 84.6% 2004 84.2% 2005 83.0% 2006 83.0% 2007 81.4% 2008 80.3% 2009 76.7% 2010 75.7% 2011 79.7% 2012 85.0% 2013 87.8% 2014 89.1%
*Based on Second Quarter Survey Results
Source: Self-Storage Almanac (1987 - 2014) © 2014 REIS, INC.
2015 Self-Storage Almanac 59
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