There is an awful lot of discussion about occupancy rates in the self-storage industry. But it might be a bit confusing when it comes to which measurement someone is using, since there are three different measurements used to describe occupancy in self-storage. Those are unit occupancy, physical occupancy, and economic occupancy. Let’s have a look at what those mean and when they might be used.
The first, and most frequently used, is unit occupancy. This is simply a percentage of units occupied versus total units available. It is a very simple measurement to display how many units currently have tenants. It can also be broken down by size to give an operator a clearer view of which unit sizes are more popular than others. It’s a very simplistic approach to measuring occupancy, so it has certain limitations when assessing the financial success of a facility. But it is useful in determining size-related demands in your market.
The next occupancy measure is physical occupancy. Similar to unit occupancy, it is a further measure of tenant-related occupancy. In this case, it is a measure of how much square footage of your facility is occupied compared to how much footage you have available. While it also has its limitations, it can also offer some insight when compared to unit occupancy. Let’s say, for example, you have a physical occupancy of 98%. Sounds pretty good, doesn’t it? But let’s say your unit occupancy is only 90%. What you’ll probably find is that you have several smaller units that are available. These may be less popular in your market, which could highlight the need to offer a discount on those units to help move them.
Conversely, you might find yourself with a number of larger units available, which would lower physical occupancy rates when compared to unit occupancy.
One of the more powerful occupancy measures is that of economic occupancy. But what does that mean? Economic occupancy is a measure of your street rates versus actual rates under contract. Let’s say you have offered certain units to customers at $75 per month and you have 10 of them. If you rent all 10 at the full rate of $75, then your economic occupancy is 100%. But that is rarely the case. Offering discounts or even free units to charity will lower your economic occupancy, meaning the actual rents you collect are lower than the 100% in our example. This measure can tell you how you’re doing versus street rates and guide you in the direction of better management of discounts and rate increase timing.
What do all these measurement mean if you’re still experiencing low occupancy rates across the board? Well it could mean you need to utilize better marketing tools to drive up demand for your facility. Being a good operator is meaningless until you have a customer on your doorstep. Be sure to look for tools and tips that have an occupancy focus, like our Adverank tool. Driving occupancy should be your main focus, then you can worry about what these three measurements mean to your business.