Why is 90 percent occupancy not always the right assumption?

If every deal you see assumes 90 percent-plus occupancy, pause.

The state-level and non-REIT data tell a more nuanced story. Most states report occupancy between 80 percent and 90 percent, with a total weighted average of 88.3 percent. Storable’s 25,000-plus facility dataset averaged 81.8 percent over the last year. That does not mean a strong facility cannot run above 90 percent. It means buyers should not blindly assume 90 percent in every market. Stabilized occupancy depends on supply, population growth, competition, pricing discipline, management quality, and seasonality. When a facility is bought or sold, the occupancy usually takes a hit. Many of our underwrites don’t anticipate an increase in economic occupancy until after the first year because we acknowledge a stabilization phase. Some tenants will get annoyed by the transition to new management and new policies. Delinquent units may be auctioned off rather than provide phantom occupancy figures. In today’s environment, disciplined buyers underwrite a range of occupancy outcomes, not a single optimistic number.