Self Storage facilities are major capital investments. Unlike cash investments, returns to investors do not flow from day 1. The Let up time to break even for an average site can be from 24 to 48 months.
As the facility lets up from the first day, occupancy grows for the first 3 months rapidly. After 3 months, move out start to occur, slowing down growth.
Income maximisation should begin on the first day of opening. Often, vacancy is used as a barrier to make rate changes. In reality, revenue management must start from he first day.
Mistakes with concessions and discounts are evident with many new sites. ‘We need to get in the customers” is the argument used for heavy discounting.
One can assume that feasibility was completed for the new location. If the study showed the potential for good growth and a steady increase in occupancy, it’s fair to assume that a discounted rate was not used to present the argument to build.
Using District Manager® right from the start will ensure rate optimisation. Often overlooked, especially at low over occupancies is rate maximisation of unit types.
New Self Storage sites can miss out on much needed income by focusing on every new let, and as a particular size fills, its rate can be increased, even thought the facility is far from fully let.
Additional income driven by District Manager® can grow the “Economic Occupancy far higher than the physical occupancy, delivering higher income and achieving break even faster.
Importantly, much needed analytical data is gathered for future optimisation. District Manager® is constantly reviewing data in real time and concession and discount plan analysis is critical in the life of a new facility.
Decisions based on gut feeling, are often made to set rates. Inexperience replaces gut feeling at newer sites – and getting the rates wrong at the start of the occupancy ladder sets up a big job to maximise rates when occupancy stabilises.
‘Opening specials” are often used to entice new customers when a new facility opens. These need to be well thought out and monitored to ensure the new site is not filled with discount renters.
If you end up giving more than 15% of your revenue away to entice move ins, ensure you factor this into any feasibility.
District Manager® LITE and District Manager® PRO help profile renters, review concessions and make data based recommendations for rates.
