Income vs. Occupancy

By Travis Morrow, National Self Storage Management Inc.
AZSA President

Reading Marmor’s Rules and Anne’s Additions inspired me to share the biggest rule I preach to my stores every month:

Rule #1: Occupancy is good, but income is better

When you talk to storage operators, many are quick to tell you their occupancy is 98 or 100%.  It’s a great stat to brag about and an accomplishment to be sure, but does it tell the truth about how your store is actually performing?

If you are 100% occupied, but only charging your tenants 75% of the standard rate, are you really 100% full?  The truth is, you are only 75% full.  Would you be better off sticking closer to your standard rates and only 90% physically occupied?  The short answer is YES.  Here’s an example for a facility with 100 units @ 10x10 each, with a standard rate of $100/unit:

Scenario AScenario B 

Physical Occupancy100%90% 

Discounts25%5% 

Economic Occupancy75%86% 

Units Rented10090 

Monthly Revenue$7,500$8,550

Which scenario would you rather be in?  By sticking to the “standard” or “street rate” and monitoring discounts, the operator in Scenario B generates more dollars per month than Scenario A while having a fewer units rented.   Is Scenario A giving away too much just to be able to say they are 100% occupied?  It looks like the answer is yes.  What good does that do?  

Trying buying lunch and paying with 100% occupancy.

Travis Morrow in Vice President of National Self Storage Management, Inc. and its Designated Arizona Real Estate Broker.  He is also President of AZSA and a Director of the SSA.

Source: Behind Closed Doors, AZSA Newsletter Archives