Section 14 • Valuation


shown. Market rental rates, occupancy rates, and the current income collected by each line item are shown. From this, we can analyze the figures to determine the answers to various questions.


• Is there a unit type that is better occupied? • Are larger units better occupied than smaller units? • Is the facility obtaining rents that are above or below market rents?


If the income for a particular unit type and size is well


above the overall physical occupancy, then it is likely that an increase in the market rent is warranted. This analysis is key in determining where rents can be increased, and which unit types may need additional marketing or concessions to increase the occupancy. The analysis of the actual income collected is an important step in determining the forecast of the property’s income and the assumptions in the discount- ed cash flow, which will be discussed in further detail.


The next step is to gather rental rates in the market. This will not only allow for an analysis of the asking rents but will also allow for the comparison of the collected market rents. The best market comparables are not necessarily the ones that are closest to the facility, rather the selection should be dependent upon facilities that offer the same type and size of units with similar amenities. The forecast of the market rental rates should be based on the subject’s position in the


market as well as the subject’s occupancy rate for that spe- cific unit and type. The next step is to sum the total of all the vacant units at the forecasted market rental rates.


The best market comparables are not necessarily the ones that are closest to the facility, rather the selection should be dependent upon


facilities that offer the same type and size of units with similar amenities.


While the main source of income will be from the storage


units, did you know that there are a variety of other income sources at a self-storage facility? Most common sources in- clude parking, truck rental, tenant insurance, cell towers, on-site offices, pack and ship operations, retail sales, and fees, such as administrative and late fees. Generally, other in- come ranges from one to 10 percent of the self-storage unit rental income.


Now that the gross income has been estimated, the va-


cancy and collection loss must be deducted to determine the effective gross income. There are two main components


Expense Item Typical Ranges Real Estate Taxes


Property Insurance Repairs


& Maintenance General


& Administrative On-Site


Management Off-Site


Management Utilities


Advertising Varies by Location


$0.08 - $0.20 / SF $0.15 - $.40 / SF


$0.25 - $0.75 / SF


$0.60 - $1.25 / SF 5% - 6 % of EGI


$0.20 - $0.50 / SF $0.15 - $0.30 / SF


150 Self-Storage Almanac 2018


Source: Cushman & Wakefield Description & Analysis


This expense includes all taxes related to the real estate. Each state has its own process of determining the assessed values. In some states, the assessment is to be based on 100 percent of market value, whereas another state may only be able to increase an assessment a certain percentage per year. It is important to not only understand the possible changes on a year-to-year basis, but also the impact of a sale on an assessment.


This expense includes costs associated with building insurance. Location factors into the cost of insurance. Areas that are more prone to flooding, hurricanes, or other natural disasters will experience higher premiums.


This expense category includes elements typical to self-storage maintenance, such as all maintenance contracts, sweeping and landscaping, pest control, gate repairs, and other general maintenance of the building.


Administration expenses related to office functions, such as telephone, postage, bank charges, credit reports, pro- fessional fees (including legal services), data processing, and other expenses incurred in the operation of a self-storage property.


On-site management expenses account for full-time management, including relief managers and payroll-related costs.


Prudent ownership will incur fees for outside management and overhead expenses, calculated as three to six percent of the effective gross income for self-storage properties.


Utility expenses include electricity, trash, water, and sewer. The climate of the facility, as well as the percentage of climate-controlled units, will impact the utility expense.


This expense element is crucial for the successful operation of a self-storage property. Expenses include SEO place- ment, maintaining a website, promotions, and other marketing expenses.


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