Section 4 • Occupancy
Indianapolis, Indiana, which enjoyed a 3.8 percent quarterly gain in its average occupancy rate. Orange County, Calif.; Sacra- mento, Calif.; and Nashville, Tenn., round out the list of the top five occupancy growth leaders in the nation for 2014. When examining occupancy gains over a longer one-year
term, Orange County, Calif., climbs to the top of the occupancy rate growth chart. Over the past 12 months, occupancy levels grew 2.8 percent in this metropolitan area. Two Southern cit- ies—Charlotte, N.C., and Nashville, Tenn.—followed with each metro area reporting occupancy rate increases of 2.6 percent. In the number four slot, Sacramento also reported an average occupancy rate growth of 2.6 percent over the year while Kansas City, Mo., gained 2.5 percent in its occupancy rate over the past 12 months. Like size and location, the design of a self-storage facility can
significantly impact its occupancy rate. Some customers shy away from self-storage spaces located on a facility’s second or higher floors that require stair or elevator access. Instead, they prefer the ease and convenience of moving their belongings into a unit housed on the main level. However, multi-story prop- erties are frequently newer construction than are single-story facilities, a factor that makes them more desirable to another customer segment since recently built properties tend to offer the newest features and amenities that many customers want from their self-storage stores.
Single- Versus Multi-Story For the most recent quarter, multi-story storage businesses enjoyed a lead of 0.7 percentage points in average occupancy rates when compared to their single-story counterparts. Al- though multi-story properties enjoy a slight occupancy edge, it is important to note that occupancy level growth at single-story stores outpaced that of multi-story properties by a rate of 2.6 percent versus 2.5 percent. This occupancy rate jump follows several quarters of slight decline within the single-story facility category. Further refining the occupancy focus
and examining submarket categories can reveal some interesting insights. Looking at the submarket of Chicago illustrates some occupancy findings unique to the
Table 4.11 – National Occupancy by Facility Size Facility Size
Region National
National National National
(in Units) (1) 1 to 200
National (5) 801+ National Total
Based on Second Quarter Survey Results
89.1%
(2) 201 to 400 89.4% (3) 401 to 600 89.3% (4) 601 to 800 88.8% 89.1% 89.1%
Source: © 2014 REIS, INC. Source: © 2014 REIS, INC. 64 Self-Storage Almanac 2015
metro area. While the city center remains a very tightly occupied overall, it is notable that self-storage properties lying outside of the urban core, such as the suburban area of Aurora/Naperville/ Wheaton, actually led the category in occupancy levels with a rate of 93.9 percent. Lake County followed less than a percent- age point behind with a strong second quarter 2014 occupancy rate of 93.5 percent. The largest operators in the industry tend to be the sector’s
real estate investment trusts (REITs). REITs are investment ve- hicles that allow individual investors to pool funds in order to purchase shares of ownership in a real estate portfolio. Modeled after the mutual fund business model, REITs provide investors with the stability of an income stream along with the benefit of longer-term price appreciation. Self-storage stores owned or operated by REITs tend to run under some of the most sophisticated business plans in the industry. These stores also enjoy the many benefits that come with leveraging the economies of scale offered by their large corporate owners. One of the advantages REITs tend to leverage is the fact that they have the means and ability to produce and disseminate excellent marketing and advertising campaigns. They also profit from highly advanced, professional manage-
ment techniques and employee training programs. Many REITs devote a serious amount of time and money into determining the benefits and amenities their customers want and go to great lengths to create a polished, professional atmosphere—a fact that makes large, corporate-owned self-storage stores a popular option for self-storage consumers.
REIT Occupancy Levels Over the past six quarters, REITs and large operators have boasted higher occupancy rates in comparison to smaller op- erators within the self-storage sector. While both types of facili- ties showed strong gains between the first and second quarters of 2014, the REIT-owned and larger owner properties remain
Table 4.12 –
Top 10 Metro Areas by Increase in Quarterly Occupancy (2014 Q1 - Q2)
Metro
Rank Area 1 Baltimore
Occupancy Rate
2 Indianapolis 3 Orange County 4 Sacramento 5 Nashville 6 Cincinnati 7 Kansas City 8 Philadelphia 9 Los Angeles 10 New York
Increase in Occupancy
4.2% 3.8% 3.5% 3.5% 3.3% 3.1% 3.1% 3.1% 3.0% 3.0%
Table 4.13 –
Top 10 Metro Areas by 1-Year Increase in Occupancy (2014 Q1 - Q2)
Metro Rank Area
1 Orange County 2 Charlotte 3 Nashville 4 Sacramento 5 Kansas City 6 Cleveland 7 Orlando 8 Atlanta 9
1-Year Increase in Occupancy
2.8% 2.6% 2.6% 2.6% 2.5% 2.4% 2.4% 2.1%
Northern New Jersey 2.0%
10 San Bernardino/Riverside 2.0% Source: © 2014 REIS, INC.
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