Self-Storage Valuation • Section 10 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 Ext. = Exterior 41,250 SF Source: © 2015 Colliers International
percent to 6 percent per year. Therefore, appraisers always take into consideration historical increases.
What Is True Economic Occupancy? Many storage facilities have no problem capturing and retaining tenants. When their occupancy statistics reports (rent rolls) are reviewed, they appear to be 85 percent to 90 percent occupied. Are these properties prime acquisition targets? They won’t have any problems achieving maximum leverage from a refinance, right? The level of occupancy of self-storage facilities can be measured in different ways.
While some owners measure occupancy in terms of square
footage, the most common measurement of physical occupan- cy is the number of storage units rented. Another key measure- ment metric is economic occupancy, which factors in discounts and concessions as well as credit loss. Essentially, physical unit occupancy is a “top line” concept, while economic occupancy is a “bottom line” concept.
It is common for economic occupancy to be 2 percent to 5
percent lower than physical occupancy due to discounts and concessions. The gap between economic and physical unit oc- cupancy widened in 2009 and 2010 as the economy struggled and more concessions were offered to maintain physical occu- pancy, but has decreased since that time in most markets.
Many operators and managers focus heavily on maintain-
ing physical occupancy, which is vital. However, spending time and energy on improving economic occupancy “bottom line” is what is most important. According to Carol Krendl, an experi- enced storage auditor and consultant based in central California with over 25 years of storage expertise, if your facility’s physical unit occupancy exceeds your dollars deposited (economic oc- cupancy) by more than 10 percent, you have at least one of the following problems:
• Too many concessions/discounts from market rent • Excess delinquency • High amount of prepaid rent • Issues with employee embezzlement/pilferage • Uncollected rents/fees
Let’s quickly focus on concessions or discounts. Doesn’t ev-
ery facility have to offer concessions or discounts and/or move- in specials? Our appraisal practice group surveys thousands of facilities each year and there is a significant 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 de- termine what concessions to offer (if any)? We can’t help you implement all the proper controls and collections processes, but here are three suggestions to maximize economic occupancy:
• Track occupancy and rates of turnover for all your unit types/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 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’s management software has any add-ons such as fraud alerts. Take advantage of the training and support offered by your software provider.
Table 10.3 – 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)
2016 Self-Storage Almanac 113
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 National 90%
Table 10.2 – 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
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