Occupancy • Section 7
dustry operators aim to keep occupancy levels between 90 percent and 95 percent. Some, however, seek to maintain 100 percent occupancy.
T Counterintuitive as it may seem, you are losing money if
you keep your facility completely full. This leaves you with two options: add new units or raise rental rates.
Equally important to the ideal occupancy rate is how you
measure occupancy. The two primary ways to measure it are physical and economic. We report data in the Self-Storage Almanac based on physical occupancy. This measures the number of units rented. For example, if you have 100 units and 90 are occupied, then your facility’s physical occupancy is 90 percent.
By contrast, economic occupancy is based on the gross
potential income you are collecting. Gross potential income includes consideration of any concessions or discounts you give your customers. For example, if you have a 100-unit facility with 90 units rented and you give customers a one- month free concession on the remaining 10 units, then your facility’s economic occupancy is 80 percent. This is because you collected no rent for one month on those 10 units, which lowered your income accordingly.
The Impact Of New Facilities New facilities coming on line the past two to three years have lowered lease-up and rental rates and the ability to increase rental rates in certain markets, but those effects vary dramati- cally according to individual markets, says Kenneth Nitzberg, chairman and CEO of Devon Self Storage in Emeryville, Ca- lif. Some markets have not been affected at all, “depending on how difficult or easy it is to build.” Self-storage is “very geographic-specific” and can also vary widely between in- dividual localities within a given market’s geographic area.
Of course, the
COVID-19 pandemic dis- rupted everything in 2020, in self-storage and most other industries. Wide- spread shelter-in-place rules across the country starting
in mid-March
slowed down or stopped a lot of new self-storage projects, but “given a little bit of time that’ll probably be pretty positive for the overall industry,” because it will slow down some of
2021 Self-Storage Almanac 59 “Municipalities don’t
like self-storage, period,” Nitzberg says, because (with few exceptions) self- storage doesn’t pay much sales tax or create many jobs. The markets where municipalities aren’t put- ting up those roadblocks are getting short-term overbuilt and need time to absorb what has been built, “so I’m pretty positive about the marketplace.
I
think we’re going to see a couple of good years com- ing ahead of us.” But the “giant wild card” for him is the unemployment rate, which could hurt the in- dustry if it surges.
Development of new
product has stayed “very strong,” says AJ Ross, CEO of Atlanta-based Univer- sal Storage Group. David
he self-storage industry is rife with misconceptions about how operators should best evaluate occupancy as a factor in the revenue and profit equation. Most in-
the industry’s unnecessary overbuilding, Nitzberg says. He expects to see the development slowdown continue since lenders are getting more cautions and municipalities in some areas are getting stingier about granting zoning changes and building permits.
1987
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
78.4%
80.4% 85.9% 81.5% 86.4% 85.0% 88.3% 89.9% 88.5% 88.3% 85.1% 82.9% 86.9% 83.7% 86.1% 85.4% 84.6% 84.2% 83.0% 83.0% 81.4% 80.3% 76.7% 75.7% 79.7% 85.0% 87.8% 89.1% 90.2% 91.2% 92.8% 91.7% 91.0% 92.2%
*Based on 2nd Quarter Numbers Sources: 2019 Almanac and Radius+
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 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152
