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The Effect of Self-Storage Concessions

Amy Campbell

November 6, 2009

2 Min Read
The Effect of Self-Storage Concessions

This week the self-storage REITs released their financial results for the third quarter ending Sept. 30, 2009. Not surprisingly, they've reported some losses on the revenue side over the same quarter in 2008. But decreased volume is not necessarily to blame. The primary culprit may be what the operators have had to do to attract and keep business.

Sovran Self Storage continues to make extensive use of move-in incentives, according to the company's report. During the quarter, the company granted more than $4.5 million in "first month free" and other promotions. As a result, revenue at the company's 356 stores decreased 3.6 percent over the same quarter in 2008. And it expects more of the same moving forward:

Sovran is experiencing soft consumer demand in many of its markets and expects conditions to remain competitive. It anticipates the continuation of leasing incentives as well as increased advertising and aggressive marketing to improve occupancy and, accordingly, estimates a decline in same store revenue of 2 percent to 4 percent from that of 2008.

From U-Store-It: Total revenue decreased 3.5 percent to $54.9 million from $57.3 million, primarily due to lower occupancy levels and lower average scheduled rent per square foot.

How are store promotions and discounts affecting your business? What is your business philosophy on concessions? Some self-storage operators feel these things are a necessary evil, a way to get bodies in the door until the economy improves and they can raise rates. Others feel this is a Pandora's Box, dangerous for the overall market. What's your take?

Folks on the Self-Storage Talk forum are expressing mixed opinions on the topic but also offering some smart alternatives to reducing revenue. For example, one member suggests giving away free locks or credits for moving and storage supplies rather than free or discount rent. Read about the challenges facility managers and owners are facing and get ideas for tactics to apply in your market in these threads:

Feel free to jump on the blog and share your comments about self-storage discounting. Is it salvation or peril?

About the Author(s)

Amy Campbell

Editor, Inside Self Storage

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