Valuation • Section 9 Typically, economic occupancy is 2 percent to 5 percent
lower due to discounts and concessions. The gap between eco- nomic and physical unit occupancy widened in 2009 and 2010 as the economy struggled and more concessions were offered to maintain physical occupancy, but it decreased from 2010 to 2011 before widening again slightly in 2012.
Accurate valuation is enhanced by solid operating history. It is common to also rely upon expense comparable data when valuing properties through direct capitalization.
Table 9.3 indicates the regional and national average occu-
pancy rates between 2008 and 2012. Many operators and man- agers focus heavily on maintaining physical occupancy, which is vital. However, spending time and energy on improving eco- nomic occupancy “bottom line” is what is most important. According to Carol Krendl, an experienced storage auditor
and consultant based in central California with over 25 years of storage expertise, if your facility’s physical unit occupancy ex- ceeds your dollars deposited (economic occupancy) by more than 10 percent, you have at least one of the following problems:
Self-Storage Units Occ. %
Unit Type Desc. Unit SF Units Total (SF) (Units) 5 x 5
Ext. 25 SF 50 1,250 SF 92%
5 x 10 Ext. 50 SF 100 5,000 SF 95% 10 x 10 Ext. 100 SF 100 10,000 SF 90% 10 x 15 Ext. 150 SF 100 15,000 SF 85% 10 x 20 Ext. 200 SF 50 10,000 SF 84% Totals/Averages
400 Source: © 2014 Colliers International
• Too many concessions/discounts from market rent • Excess delinquency • High amount of prepaid rent •
Issues with employee embezzlement/pilferage
• Uncollected rents/fees Let’s focus on concessions and discounts. Doesn’t every facil-
ity have to offer these and/or move-in specials? Our appraisal practice group surveys thousands of facilities each year and there is a large variance in the concessions/discount programs employed in the marketplace. How do you determine whether to offer concessions, and
what process does your facility manager or leasing staff follow to determine what concessions to offer (if any)? We can’t help you implement all the proper controls and collections processes, but below are three suggestions to maximize economic occupancy:
Table 9.3 – Regional Average Occupancy Rates West
Pacific 2012
Economic 77.4% Physical 19.9% 2011
Economic 75.2% Physical 77.9% 2010
Economic 69.0% Physical 75.7% 2009
Economic 74.7% Physical 80.3% 2008
Economic 83.1% Physical 85.4%
70.3% 77.0%
79.6% 80.7%
69.9% 75.5%
76.2% 81.2%
84.0% 86.4%
Source: Self Storage Almanacs 2008-2013 (Only 2010-2011 Figures Include Facilities In Lease-up)
2015 Self-Storage Almanac 95
74.7% 75.9%
71.8% 75.8%
68.1% 75.7%
72.8% 79.2%
79.9% 82.9%
74.3% 79.7%
75.7% 79.7%
68.3% 75.7%
73.7% 79.5%
77.7% 80.3%
Mountain 41,250 SF 90%
• Track occupancy and rates of turnover for all your unit types and sizes. Limit or eliminate concessions/discounts given on unit sizes with high rates of turnover.
• Implement an online payment system to make it easy and safe for your customers to pay using a debit card or with a one-time or recurring electronic funds transfers (these reduce charges paid to credit card companies).
• Learn, review and read your monthly reports, and see if your facility management software has any add-ons such as fraud alerts! Take advantage of the training/support offered by your software provider.
Ultimately, economic occupancy/collections is the only thing
that matters to a potential buyer, a lending institution for financ- ing, or to your investors.
Understanding Operating Expenses Accurate valuation is enhanced by solid operating history. It is common to also rely upon expense comparable data when valu- ing properties through direct
capitalization. Understanding
how operating expenses vary from region to region is key, par- ticularly for specialized lenders and investors looking to expand into other national markets. Chart 9.1 is a sampling of over 200
Table 9.2 – Concluding Market Rent Asking Rent
Actual Rent
/Unit /SF /Month /Unit /SF /Month $40 $1.60 $1,840 $60 $1.20 $5,700 $90 $0.90 $8,100
$36 $1.44 $1,656 $55 $1.10 $5,225 $82 $0.82 $7,380
$110 $0.73 $9,350 $100 $0.67 $8,500 $130 $0.65 $5,460 $120 $0.60 $5,040 --
-- -- --
Rent Comparable Range
$30 to $50 $52 to $70 $75 to $95 $92 to $110 $105 to $130
Concluded Rent
/Unit /SF /Month $40 $1.60 $2,000 $60 $1.20 $6,000 $85 $0.85 $8,500 $100 $0.67 $10,000 $120 $0.60 $6,000 $76
$0.74 $30,500
National
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132
