Has stabilized occupancy risen higher than it was a couple of years ago? I think it has!
For several years, every feasibility report I have received has indicated stabilized occupancy for facilities over 50,000 square feet, was 85%. In other words, after a facility has gone through its lease up phase, and year after year, the occupancy remained about the same, it would be around 85%. Sure there would be seasonal differences, but for the year, 85% was the average. I think that value has risen, at least in the markets I am in.
But why? Why now? At first I thought it was because there was pent up demand from the recession. Very little new product came on line during the recession; and as people’s disposable income rose, they had more money to spend on luxuries such as self-storage. But the more I think about that logic, the more I see its flaws. Self-storage is “recession resistant” is it not? I saw firsthand that even though people complained about having to fund a self-storage unit when times were tough, they did it because it was a necessity. Storage is used by people in times of transition, and the recession caused lots of that. As times get better, is it causing more transition? Perhaps, but I think it is something more fundamental than that.
I think, although I have no data, just a hunch, that TV has familiarized the public with the product and it’s use, and that’s why a larger percentage of the population has started using it (I like it when I make bold statements). I think as owners we can thank (1) A & E for Storage Wars and (2) Public Storage for their television advertising (there may be more but that is all I have seen). Although self-storage is no longer in its infancy as an industry, we are just entering our teenage years at best. As a product, it just wasn’t easily accepted like other real estate ventures were (think timeshares). No one has ever said to me about shopping centers, “…yes, I went to one once when I needed something. Do a lot of people go to shopping centers?” (I have had many people ask me something similar to that about self-storage).
I think TV has made self storage a more accepted and mainstream part of our culture, thus a larger percentage of the population is going to be using it. Owners, imagine if 2% more of the population takes advantage of self-storage! If you are in a market with a million people, that’s 20,000 new customers. OK, I was getting excited, but no facility’s market is a million people, but let’s say there is a population of 30,000 in your three or five mile radius, that is 600 new potential customers. That would be enough to drive your occupancy up 6% to 8% higher, which is what we have seen in our facilities.
To the SSA (Self Storage Association), please come up with a way to measure this. I am not sure how, but with your resources and access to owners, the public, and people with PhD’s on staff or you can hire, figure out if I am correct please. I think owners will act differently if we knew it is as fundamental as I think it is. However, a note to my competition, I am going to assume it is and act accordingly. By the time it is figured out by others, our group will have more products (and earnings) under our belt.
Mark Helm
Q2 Self-Storage
Author of “Creating Wealth Through Self Storage”
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