Utilizing Technology: Analytics • Section 7
qualify for a discount reduction. Store owners using first of the month billing should review their discounted tenants at least once monthly for discount reductions. For owners on anniver- sary billing, these tenants should be reviewed at least twice per month, since new tenants will join this list daily based upon how long it has been since their last rent increase. Some of the more savvy buyers are now using these software
techniques to analyze their prospective acquisitions by looking for this upside potential.
What Are Your Effective Rates? The standard rate or “street rate” less the discount or a percent- age of income lost due to a concession plan give you the “effec- tive” amount of rent you are actually collecting for a particular unit. When you think about it, unless you are the price leader in your market, we are actually competing against our competitors’ “effective” rates. To calculate the income loss due to a particular concession plan, we analyzed over 494,000 concession plans from more than 500 storage facilities. Table 7.3 is a brief summary indicating a concession plan, the
percent income lost, and the average length of stay of the tenant using that particular plan. By using this type of analysis, you can calculate what you can truly expect to receive and monitor how much money you are giving away. Some plans are much more cost efficient than others, and
they can save hundreds of dollars on each lease. You can also monitor exactly how long each tenant stays when using a partic- ular concession plan. The particular month you offer a particular plan, even though it is the same dollar amount, can make a sig- nificant difference on the percentage of income loss. Having your managers simply ask the prospect how long they are planning to stay can give them a clue to offering the right concession that will significantly improve your income. Generally, the longer you can defer the concession, the longer the tenant stays, and thus the percentage of income that is sacrificed will be much smaller. Over the years, the industry has been in general agreement
that you never want to be 100 percent occupied. This was partly due to the Yellow Pages cost per phone call at approximately $12. Who would want to turn down that customer and waste that marketing dollar? So, the theory was to try to have at least one
Concession Plan
Free Moving Supplies or Lock $10 Off One Time
Pay 3 mths get 5% off $50 Off One Time 10% Off 6 Mos
One Half Month Free 2nd Month Free One Month Free 50% of 4 Months 1.5 Mo. Free 3 Months Free
* Not Applicable
of every unit size available at all times. Also, you were told that “if you are 100 percent occupied, then your rates are too low.” Some, however, would rather have $100 rent in hand and lose that in- cremental marketing dollar instead of trying to keep a vacancy available. Why step over a guaranteed $100 rent for a month or more to save $12? Thirty years ago, facilities were hitting over 100 percent economic occupancy due to late fees and other income. Upon a recent survey of 1,000 storage facilities, a software
company found that 14 storage facilities hit 100 percent occu- pancy (1.4 percent) at the end of August 2014. We have finally got- ten back to where we were in the early 1990s. To maximize your income, one would ideally want to fluctuate between 98 percent and 105 percent economic occupancy for every unit type and size. That means continuously adjusting all of your rates both up and down to meet the demand at the time. The industry typically sees that demand and activity drop as
soon as the elementary school in your locale starts its fall semes- ter. If one were to be 100 percent occupied the day before school started, within a few days, due to normal attrition or move-outs, you would no longer be 100 percent occupied. Most facilities in the U.S. drop between 3 percent and 8 percent in occupancy and income between the start of fall and through the winter. Know- ing this in advance, one can adjust accordingly by proper market- ing and discount/concession adjustments and avoid this typical drop in occupancy. Wouldn’t it be great to start the leasing season without having to make up a previous 8 percent drop in income?
Table 7.2 – Concession Plan Analysis
Concession Plan 1st Month Free
2nd Month Free 4th Month Free
2 Months Free or 50% of 4 Months 3 Months Free 5% Discount
Pay 3 mths get 5% off 10% Off 3 Mos 10% Off 6 Mos
Source: © 2014 District Manager
Table 7.3 - Analysis of Suggested Concession Plans % Lost Revenue Average Cost *
$6.00
0.9% 1.2% 2.2% 3.3% 4.6%
10.8% 12.3% 14.0% 17.5% 27.6%
$10.00 $24.79 $50.00 $77.35 $79.99 $94.51
$105.80 $107.78 $160.22 $341.10
Average Stay (Months) *
14.3 22.7 23.1 10.2 13.9 9.0 7.2 7.9 7.7 8.9
% Income Loss Av. Month Stay 12.3%
10.8% 4.7%
14.0% 27.6% 5.7% 1.2% 2.8% 3.3%
7.2 9.0
19.8 7.9 8.9
19.7 22.7 18.3 10.2
Occupancy 98%+
95%+ 95%+ 95%+ 90%+ 90%+ 85%+ 80%+ 75%
<75% <65%
Units Vacant 2
2 2
3+ 4+ 4+ 5+ 5+
10+ 10+ 10+
Source: © 2014 District Manager 2015 Self-Storage Almanac 83
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