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Understanding Occupancy and Management Data to Improve Your Self-Storage Operation

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By Magen Smith

When most self-storage operators think of occupancy rates, they immediately focus on unit occupancy. To truly run a storage business well, however, you also need to understand economic occupancy. Using these metrics to drive your rental-rate pricing—as well as key data derived from your management-software reports—is a great way to make more money.

Unit Occupancy

To clearly understand unit occupancy, let’s use some very easy numbers. Imagine you only have 10 storage units. If you rent three units, your unit occupancy is 30 percent. If you rent eight units, your unit occupancy is 80 percent. This is true no matter how much you charge for those units.

Some operators work hard to get their unit occupancy to a “brag-worthy” level. They’ll offer the first month free or use other discounts or incentives just to get people in the door. They think if they can convince prospects to move in, unit occupancy will increase and tenants will stay for years. Sometimes this is true, but not always. Giving discounts to acquire a move-in can often lead to increased collections and auctions. While that $1 move-in special will increase your unit occupancy, it does nothing for your economic occupancy.

Economic Occupancy

Economic occupancy offers major insight to your facility’s health. While you can improve your unit-occupancy rate with specials and discounts, your economic occupancy always shows the truth. Let’s see how it works.

Every self-storage facility has a gross potential rate. If you have 10 units that rent for $100 each per month, your gross potential rate is $1,000 a month (10 units multiplied by $100). Now let’s assume you rented your 10 units the following way:

  • Five units @ $100 = $500 per month
  • Two units @ $50 = $100 per month

So, you have seven of your 10 units rented, making your unit occupancy 70 percent. If you only ever looked at unit occupancy, you’d think the business was doing well. However, I guarantee your next thought would be, “Where’s all the money?” Unit occupancy is a vanity number. The only thing it tells you is how many leases are signed. It doesn’t tell you how much money to expect each month.

Economic occupancy is the actual occupied divided by gross potential. In the above example, you’re collecting $600 per month instead of the $1,000 you’d be collecting if every unit was rented at the full $100 rate. Six hundred divided by 1,000 is .60. Your economic occupancy is 60 percent.

Here’s a real-life scenario: A facility had a physical unit occupancy of more than 90 percent, but its economic occupancy hovered around 50 percent. When the owner looked at the reports, she thought everything was fine; but she was looking at the wrong number (unit occupancy). After a while, she realized her manager was stealing by giving free storage in exchange for personal benefits.

Following a few years of really hard work, the owner’s unit and economic occupancy are at 75 percent. Her unit occupancy is down from when the manager was in charge, but her economic occupancy is up. She’s making more money with fewer tenants and headaches. The moral of the story is: When reviewing your occupancy rates, look at both unit occupancy and economic occupancy.

Management Data

So where do you find all this data? Your management software offers several reports to help you crunch numbers and look for trends. One cautionary note: Make sure your program is reflecting the correct information. Occupancy rates are based on total units in the system. This number shouldn’t change unless you literally add or remove a unit to or from your building. When you sit down to review your reports, make sure your total unit number stays the same each month.

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