Managers too often make occupancy rates their first priority since they tends to be the benchmark by which most successful facilities are judged. But just because a facility is 100 percent full doesn’t mean it’s as profitable as it should be. While measuring occupancy is a good formula, there are other ways to determine long-term success.
Consider Smaller Sizes
If prospective tenants for small units are being turned away in favor of those requesting larger ones, the manager not only loses rent, he loses the higher price per square foot the renter of the smaller unit would have paid.
If the manager has done his homework, understands the unit mix needed in his market (demand) and has those units available (supply), the formula is working. But by decreasing unit sizes, the manager or owner can increase rental income per square foot and, as a result, net operating income (NOI).
Here’s another advantage of having smaller units: Let’s say a customer requests a 10-by-20 but there are none available. If the manager has smaller units in the inventory, he can offer the customer two 10-by-10s for the same price.
It’s true some markets may not need the smaller units right away, but the difference in the rent per square foot may make up for the temporary lower occupancy rate in the short term. Including smaller units in the mix isn’t intended to negate conventional unit-mix planning; it should be viewed as another method of increasing NOI in the long term.
In the final anaysis, a good unit mix should take into consideration the needs of the market, but also maximize facility revenue. In looking at the bigger picture, there are several factors that impact success in the self-storage business. Unit mix is just one consideration.
After all, the ability of any self-storage facility to experience sustained growth and profitability should be the goal of every manager, owner and investor. Doesn’t it make sense to use every tool at your disposal?
Mike Gillikin is a sales consultant for BETCO Inc., a single-source manufacturer of metal self-storage buildings and all-steel components. For more information, call 800.654.7813; e-mail firstname.lastname@example.org; visit www.betcoinc.com.