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Occupancy Declining at Self-Storage Properties

Marcus & Millichap forecast says it will take two more quarters to determine long-term trend. Newer assets in former high-growth areas experience the greatest loss in value.

By John McCloud | Updated on December 30, 2009

SEATTLE-Occupancy levels at self-storage properties are declining, according to the 2010 Self Storage Outlook from the National Self Storage Group at Marcus & Millichap. The report says it may take two or more quarters to determine whether aggressive leasing incentives and rent reductions currently being offered will be sufficient to jump-start tenant demand.

The report attributes the decline in occupancy to efforts by the usual customer base to avoid unnecessary expenditures in the face of job losses and falling home values. Counter efforts by self-storage property owners to mitigate occupancy decreases by cutting rents have resulted in revenue decreases.

According to the report, newer assets built during the market peak in once high-growth areas are suffering the most from weak demand, with some markets operating at occupancy levels in the low-70% range, 100 basis points below the national average. On the other hand, Marcus & Millichap says properties in close-in commercial and residential areas are expected to perform better in the short term, benefiting from more stable housing conditions and small businesses seeking additional space for expansion when the recovery gets under way.

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