Why does everyone say the housing market is the problem for storage? I thought demand was life events

Moving is the life event. People rent a unit when their stuff has nowhere to be, and the most common version of that is between houses. Divorce and death generate move-ins too, but a housing transaction is the volume driver.

To put a number on parcel's point, the surveys operators quote generally put moving or relocation somewhere near half of move-in reasons, with the rest spread across renovation, business storage, downsizing, and life disruption. So a big drop in home sales takes a bite out of roughly half your demand pipeline, and it hits new move-ins rather than existing tenants. Occupancy holds up better than you'd expect because nobody moves out either. What suffers is street rate, since you're competing for a smaller pool of new customers and you discount to win them.

That's the part that surprised me when I started underwriting these. Occupancy can look fine at 90 percent while effective rent per square foot is down 8 percent, because the whole fight is happening in the new-move-in rate. If you only look at the occupancy line you'll think the market is healthy.

So the defensive part is that people don't leave, and the weak part is that not enough new people arrive? I think I've been reading defensive as meaning revenue is stable, when it means something narrower than that.

vellum, the lease structure is why. Storage rentals are typically month to month, which cuts both ways. The owner can raise an existing tenant's rate on notice, and the tenant can leave any time with no penalty. So there's no contractual revenue floor at all, just behavioral stickiness because moving your stuff again is a hassle. Notice requirements for rate increases vary by state, and a few places have had rent-regulation conversations touching storage, so the ability to raise rates isn't uniform.

The underwriting consequence is that trailing NOI on a storage facility bought during a strong housing cycle can be flattering. I'd want move-in counts by month for three years alongside the rate, because a facility that filled at high rates in a hot market and is now holding occupancy through rate increases on legacy tenants has a churn problem coming that the trailing numbers don't show.

There's a footnote I've seen in offering documents that matters here: whether the occupancy figure quoted is square-foot occupancy or unit occupancy. They diverge, sometimes by four or five points, because small units rent differently than large ones. A deck quoting whichever number is higher without saying which one it is happens more than it should.

quarry, the thing I hadn't understood until this thread is that relocation demand and life-event demand aren't separate buckets. Relocation is the biggest life event.

Renovation demand is the one I'd watch as a partial offset. When people can't move they remodel instead, and remodels put furniture in storage for four to six months. Shorter stays than a relocation tenant, but it's real move-in volume.

thatch, does a four-month tenant even pay back the move-in discount though? If the first month is a dollar and the acquisition cost through paid search is meaningful, a short-stay tenant looks like thin business to me.

Now I'm less sure than when I started reading. If occupancy stays high while rate falls, and the defensive story is really about tenants being reluctant to move rather than any contract holding them, then the whole sector's stability rests on inertia. That's a strange thing to underwrite around and I don't know yet how I'd price it.