What Should I Track?
Understanding the Metrics that Impact Facility Success
You’re running a storage business and want to track the success of your facility or portfolio, or you are an investor and want to determine if the value of your asset is growing. You need to know “What should I track?” or more importantly, what are the most important metrics needed to gauge if your facility is performing? Below we have identified what a self-storage owner should track to understand how their facility is performing.
Occupancy
Topping the list is occupancy. Every owner, investor, operator, and manager should be tracking occupancy at every location they operate. Physical occupancy is the percentage of units that are currently occupied by tenants. Although, if you have delinquent tenants, the units may be occupied but not generating income. Understanding the difference between Physical vs. Economic Occupancy is essential. Assuming your tenants are paying rent, the higher your occupancy—the more profitable your business, but occupancy can tell you more than vacant units and NOT. It can reveal opportunities to increase rental rates, highlight the needs for discounts, and expose factors related to demand in your market. If you want to track success, start with your occupancy report.
Occupancy and Rental Rates
You notice that your 10X20 units are all always rented, and you have a waiting list. This is a great time to capitalize on increasing rates for this unit size. Of course, the opposite is also true. You have fifty 5X10’s and 32 are currently vacant—it is time to consider concessions.
Occupancy and Discounts
Many owners think, “I can’t offer lower rates to new tenants because it will upset my current tenants”. This mindset will keep your units vacant longer and your NOI lower than it could be. Multiple vacant units of the same size is an opportunity to test discounts or even consider repurposing units to meet the demand of your market.
Occupancy and Your Market
This one is often the hardest to overcome. Assuming you adjust rates, offer discounts, and utilize marketing efforts, but still have multiple vacant units, you could be in an oversaturated market. What is considered “oversaturated”? Normally markets that are over 10 NRSF per capita are considered oversaturated. This is not a standard that can be applied in isolation, but low occupancy, lack of growth (people, housing, etc.), and a high number of competitors can be a sign of oversaturation.
Rent Per Square Foot
Rent per square foot is pretty straightforward, this metric represents the average rental rate per square foot of storage space. For existing facilities, this number is a direct result of the rates you are charging both in store and online. For developments and lease-ups this is an analysis of your market and an indicator of future potential income for your site. Often the more urban your site is the higher the rate, but rural sites can generate substantial operating income when there is demand in the market. Tracking rent per square foot month over month and year over year will allow you to see trends and plan for rate changes to maximize your rental income.
Revenue Management Index
This metric looks at the average rental rate of your facility and compares that amount to the market average. It is a good way to identify if you are charging too little or too much for your units, and it reveals the need to adjust rates to be more competitive in your marketplace. Often, this can be a struggle for smaller operators because they may not have access to data on their competitors. One way to work around this is to check the rates online for facilities in your market and calling competitors to see what they are offering to prospective tenants.
Monthly Rent Roll
Monthly rent roll is the total revenue generated by your facility monthly including rental income, fees, insurance, merchandise, and miscellaneous income. Rent roll can help analyze if your rates are effective, areas for improvement, and opportunities growth. Often there are opportunities to increase your revenue with additional forms of revenue. Do you currently charge tenants administrative and late fees? Are your tenants required to purchase insurance with their rental? What merchandise do you have available for purchase in your office? Additionally, there are now many options for owners to work with vendors who can generate miscellaneous types of income. From PO boxes to Amazon pick up locations to solar panels, the self-storage industry is booming with opportunity.
The Benefits of Metrics
Metrics represent an unbiased assessment of what is happening at your facility. They allow you to make better decisions, gain a competitive advantage, and improve performance and success. If you want to increase profitability analyzing the numbers is a great place to start. Metrics uncover the answer to “why is my facility not performing well?”. When you can compare data over a period of time, you are able to identify what is working and what needs improvement.
Get a Proforma from our Team
We offer storage owners the ability to see how their numbers stack up against competitors in their market and review with them opportunities for growth. If you would like to see how your facility or portfolio is performing reach out to our team, and we can get a proforma started for you today!