SELF STORAGE INDUSTRY GROUP FOR OUR CLIENTS WE DELIVER EXCEPTIONAL RESULTS CREATED THROUGH INSIGHT Cushman & Wakefield s Self Storage practice group combines local experience with international resources. Our clients benefit from our market research database, geographic coverage, and single point of accountability. With more than 20 practice group members serving 100 major markets, we leverage our expertise to quantify the current value and projected performance of your real estate. What can our team do for you? cushwakeselfstorage.com Appraisal Brokerage Due Diligence for Acquisition Litigation Support Market & Feasibility Studies Portfolio Valuation Self Storage Data Services (SSDS) Property Tax Services KATE SPENCER, MAI, Managing Director +1 214 558 9953 kate.spencer@cushwake.com IDEAS INTO ACTION
Publisher s Note Welcome to the 2017 Self-Storage Expense GuideBook. First published in 2004, the Expense GuideBook was the result of many requests for additional expense information above and beyond what was traditionally presented in the Self-Storage Almanac. Over the past 12 years, it has become one of the most sought after products produced by MiniCo Publishing. Just as we continue to refine the scope of the Self-Storage Almanac, so do we strive to continually improve the scope of the data in the Expense GuideBook. As such, we would like to offer a very special thank you to Aaron Swerdlin, Executive Managing Director of Poppy Behrens Publisher NGKF Capital Markets Self Storage Group, and Kate Spencer, Managing Director of Self Storage at Cushman & Wakefield, for their partnership and invaluable contribution to this project. Their insight into industry trends and data helped to make this edition possible. Once again in this year s edition you will find the overall expense to income ratio on a national basis, as well as overall facility income and rental revenue growth and the traditional expense data broken down into more precise categories. PUBLISHER Poppy Behrens PRODUCTION MANAGER Jeffry Pettingill EDITOR Erica Shatzer ADVERTSING SALES EXECUTIVE James Appleton (800) 824-6864 PUBLISHING COORDINATOR Samantha Traina (602) 308-6340 CIRCULATION & ONLINE SALES COORDINATOR Ginger Coates (800) 352-4636 SUBSCRIPTION SALES & CUSTOMER SERVICE (800) 352-4636 WEBSITES www.ministoragemessenger.com www.minico.com www.aranins.com EMAIL messenger@minico.com It is important to note that the data in this edition is not collected on a same store basis; therefore, the numbers represent an average based on the facilities that responded to the 2017 Expense GuideBook Survey and partner data. For additional self-storage data and statistics, we suggest that you look to the 2017 Self-Storage Almanac and the many other educational products offered by MiniCo Publishing. Above all, we hope you find this edition of the Expense GuideBook to be a valuable tool with which to pursue your selfstorage endeavors. Unsolicited manuscripts, artwork and photograph must be accompanied by an addressed return envelope and the necessary postage. Publisher assumes no responsibility for the return of materials. 2017 MiniCo Insurance Agency, LLC. All rights reserved. Reproduction in whole or in part without written permission is prohibited. Printed in the United States. 4 THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK
The 2017 Expense GuideBook For more than 38 years, real estate professionals, investors, brokers, owners, managers, researchers, appraisers, governmental agencies, and market observers across the country have turned to MiniCo s publications to answer questions about self-storage data, statistics, and information. First published in 2004, the Self-Storage Expense GuideBook was the result of numerous requests from readers of the annual Self-Storage Almanac who were looking for additional information regarding operating expense data for self-storage properties. Since its inception, the Expense GuideBook has become the industry s leading source of self-storage operating expense information, offering ranges and averages by region in the major facility expense categories. Once again partnering with the self-storage team at Newmark Grubb Knight Frank, we are proud to present the 2017 Expense GuideBook, offering valuable industry expense information in a new format, which includes newly defined categories as designated in the map below: WASHINGTON OREGON NEVADA CALIFORNIA IDAHO UTAH ARIZONA MONTANA WYOMING COLORADO NEW MEXICO NORTH DAKOTA SOUTH DAKOTA NEBRASKA KANSAS OKLAHOMA MINNESOTA IOWA WISCONSIN MISSOURI ARKANSAS ILLINOIS MISS MICHIGAN INDIANA TENNESSEE OHIO KENTUCKY GEORGIA NEW HAMPSHIRE VERMONT NEW YORK PENNSYLVANIA WEST VA VIRGINIA NORTH CAROLINA SOUTH CAROLINA MAINE RHODE ISLAND CONNECTICUT NEW JERSEY DELAWARE MARYLAND MASSACHUSETTS WASHINGTON D.C. ALABAMA TEXAS LOUISIANA FLORIDA WEST / SOUTHWEST SOUTH MIDWEST SOUTHEAST EAST The 2017 edition of the GuideBook is based upon responses from owners and operators of self-storage properties, nationwide. Important to note is that the statistical base does not include data from any large operators including any of the publically traded companies. Therefore, it is important to note that the context of this data is more consistent with owners and operators of small portfolios of properties, or even just one property, and does not reflect significant economies of scale. We believe that this dynamic makes the data extremely relevant on an individual basis. Moreover, it also provides a dataset against which the publically reported operating data can be compared; and from that the economies of portfolios may be gleaned. THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK 5
Occupancy Data Both economic and physical occupancy data were collected as seen in Table 1. Based upon the consolidated responses, when measured against the published data from large operators, significant upside exists in the operating performance of privately operated facilities. Although discounts and rent concession data was not collected, based upon the variance between physical and economic occupancy, it is likely that the variance is an indication of where the respective region operates with discounts and concessions. And although this is one way to interpret the data, other factors influence the variance, such as average length of stay, aggressiveness of rate increases on existing tenants, frequency of street rate increases, and delinquent rent recovery. Make-Up Of Income Facility income is reflected in Tables 2 and 3. As seen in Table 2, income generated at a facility, excluding rent revenue, is a major contributor to profit. Managing the other income sources, and recognizing the impact on NOI, is critical to maximizing the profitability of the facility. Again, keeping in mind that a majority of respondents operate as small or one-off operators, contrasting these categories (especially the tenant insurance income) to the large operators, the potential for revenue growth in non-rent categories exceed incremental amounts. Rental Rate Growth Survey respondents were asked to provide rental revenue for the first and last month of a 12-month period. Based upon the representative growth, the regions all performed at above-gdp growth with rental income as seen in Table 4. The highest rental rate growth was reported for the Southeast and West/Southwest regions, with the Midwest and South seeing the lowest growth rate. 6 THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK
Expenses Tables 5 through 8 reflect self-storage facility expense information in two categories. The following are represented as administrative expenses: On-site Management Property, Liability, and Casualty Insurance Real Estate Taxes Administrative Expenses Management Fees The second category includes the following other expenses: Advertising / Technology Phone Costs Utilities Postage & Handling / Office Other Miscellaneous Expenses Maintenance & Repairs Credit Card / Bank Charges In general, as seen in this year s tables, property operating expenses were observed to be relatively consistent across regions, fluctuating most in payroll and real estate taxes for the East, and administrative expenses in the Southeast. Insurance costs also saw a wide spread between the West/Southwest and the Midwest. Definitions Of Expenses The purpose of the 2017 Expense GuideBook is to provide a foundation or benchmark for analyzing operating expenses. Therefore, it is important to note that expenses can vary widely, particularly when analyzed solely on a single unit of analysis such as per square foot of rentable building area. Therefore, we offer the following clarification on some of the expenses listed above: On-Site Management On-site management expenses account for full-time management including assistant managers, relief managers, and payroll-related costs. In today s self-storage industry, hiring quality managers is essential, especially given their direct impact on rental rates, occupancy, and ancillary income such as merchandise sales. Administrative Expenses In this category, expenses relate to office functions such as dues, subscriptions, copy machine, office supplies, printing, professional fees including legal services (eviction costs), data processing, travel expenses, partnership professional fees (legal and accounting), local licensing and permit fees, computer hardware and software, and other expenses incurred in the operation of a self-storage property. THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK 7
Definitions Of Expenses (continued) Insurance Insurance includes property, liability, and casualty insurance expenses. Due to the significant variables involved when underwriting insurance, lower rates may in some cases be achieved by blanket policies with significant rate reductions. Therefore, unless there are special circumstances such as portfolio analysis, insurance rates are typically forecast for a single property. Other items that must be considered when seeking insurance are property specific technology in fire, life, and safety construction and design. Management Fee This category includes either: 1. Any costs associated with a third-party management service, or 2. All general and administrative costs associated with expenses at the corporate office for a facility operated by vertically integrated ownership. The cost allocation to this expense generally covers salaries, accounting staff, corporate systems, and all of other corporate office expense. Generally, it is charged to the property as a percentage of collected gross revenue. Real Estate Taxes Taxes account for real property taxes only. In most forecasts of income and expenses, real estate taxes are adjusted to market value according to an iterative process that multiplies market value against the tax rate. As a result, there tends to be a lag effect in the data which results in current taxes being somewhat higher than those indicated in the historical data. As such, it is imperative that local tax statutes are carefully analyzed and considered when estimating property taxes. Other expenses that may require clarification are: Utilities This expense category includes natural or propane gas, electricity, water, sewer service, and regular trash service. The age of the facility can have an impact on this category especially given that many newer sites utilize motion detectors to control lighting, thereby reducing utility costs. Moreover, single-level facilities with drive-up access only will have lower utility costs than multi-story facilities with indoor/elevator access. 8 THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK
Definitions Of Expenses (continued) Maintenance & Repairs This expense category will be influenced by the age of the facility, the quality of construction, and overall condition of the property. Actual expenses may include but are not limited to items such as: Electrical repairs Elevator maintenance and repairs Gate maintenance and repairs Landscaping Pest control Plumbing repairs Roll-up door maintenance and repairs Roof repairs and maintenance Security system, alarms, and monitor maintenance Site clean-up Trash removal Other This category of expenses primarily accounts for all other variables. It is used as a catch-all for miscellaneous expenses that vary between sites, are infrequently used, and do not match the other categories. Amounts in this category typically account for less than 10 percent of the total expenses at a given property. Data Methodology Notes All of the information, where appropriate, has been averaged using a weighted approach. Also included with each table is a breakdown of the data on a per-square-foot basis. Deviations of gross amounts begin to materially diverge when using rentable square feet multipliers that differ more than 9,000 square feet from the weighted average of the respective region, especially as it relates to non-controllable expenses. THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK 9
Tables Overall Expense to Income Ratio* 41.01% * National Average Table 1 Facility Information Total Net Rentable Sq. Ft. Average / Economic Physical Avg. Units / Region Per Property Occupancy (1) Occupancy (1) Per Property West/Southwest 75,551 79.63% 85.83% 624 East 74,810 81.89% 89.01% 576 Midwest 70,716 79.10% 83.93% 552 South 70,005 78.69% 88.35% 497 Southeast 65,382 73.74% 88.92% 439 National 71,293 78.61% 87.21% 538 (1) Weighted Average Table 2 Average Facility Income Storage Rental Fee Net Goods Sold Miscellaneous Total Region Income Income and Insurance Income Revenue West/Southwest $877,963.25 $39,852.73 $6,845.04 $16,288.35 $940,949.36 East $1,216,966.04 $47,405.90 $13,749.15 $17,844.01 $1,295,965.10 Midwest $572,723.61 $38,702.76 $22,021.57 $4,671.79 $638,119.73 South $668,382.34 $32,868.32 $26,254.97 $16,203.75 $743,709.37 Southeast $591,176.34 $31,454.09 $25,424.03 $41,587.91 $689,642.37 National $785,442.32 $38,056.76 $18,858.95 $19,319.16 $861,677.19 10 THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK
Tables (continued) Table 3 Average Facility Income Per Square Foot Storage Rental Fee Net Goods Sold Miscellaneous Total Average Achieved Rent Region Income Income and Insurance Income Revenue Per Occupied Sq. Foot (2) West/Southwest $11.62 $0.53 $0.09 $0.22 $12.45 $13.54 East $16.27 $0.63 $0.18 $0.24 $17.32 $18.27 Midwest $8.10 $0.55 $0.31 $0.07 $9.02 $9.65 South $9.55 $0.47 $0.38 $0.23 $10.62 $10.81 Southeast $9.04 $0.48 $0.39 $0.64 $10.55 $10.17 National $11.02 $0.53 $0.26 $0.27 $12.09 $12.63 (2) Weighted average per rented square foot Table 4 Rental Income Growth Month 1 Rental Month 12 Rental Rental Revenue Region Revenue Revenue Growth West/Southwest $53,619.62 $59,108.12 10.24% East $53,322.91 $58,644.92 9.98% Midwest $42,809.66 $45,425.78 6.11% South $42,828.68 $46,098.37 7.63% Southeast $29,481.08 $33,344.61 13.11% National $44,412.39 $48,524.36 9.26% Table 5 Facility Administrative Expenses On-Site Management Administrative Property / Liability / Management Real Estate Region (All-in Costs) Expenses Casualty Insurance Fee Taxes West/Southwest $76,689.57 $30,126.10 $16,127.01 $56,348.84 $72,462.41 East $93,473.94 $29,122.01 $12,342.48 $79,860.40 $149,742.24 Midwest $59,427.26 $26,101.93 $6,214.86 $37,573.59 $65,605.39 South $64,150.24 $22,847.13 $11,742.12 $42,702.01 $75,906.93 Southeast $64,692.80 $19,950.05 $12,863.15 $39,381.64 $55,121.86 National $71,686.76 $25,629.44 $11,857.92 $51,173.29 $83,767.77 THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK 11
Tables (continued) Table 6 Facility Administrative Expenses Per Square Foot On-Site Management Administrative Property / Liability / Management Real Estate Region (All-in Costs) Expenses Casualty Insurance Fee Taxes West/Southwest $1.02 $0.40 $0.21 $0.75 $0.96 East $1.25 $0.39 $0.16 $1.07 $2.00 Midwest $0.84 $0.37 $0.09 $0.53 $0.93 South $0.92 $0.33 $0.17 $0.61 $1.08 Southeast $0.99 $0.31 $0.20 $0.60 $0.84 National $1.00 $0.36 $0.17 $0.71 $1.16 Table 7 Other Expenses Advertising / Postage & Credit Card / Phone Maintenance Region Technology Spend Handling / Office Bank Charges Costs Other Utilities & Repairs West/Southwest $16,809.04 $8,935.72 $11,149.11 $8,220.05 $96,625.92 $18,015.13 $22,741.91 East $22,634.44 $5,592.36 $10,679.07 $3,849.98 $17,327.50 $32,939.98 $42,617.74 Midwest $13,403.63 $3,926.32 $8,134.44 $7,494.55 $1,663.33 $12,913.13 $23,248.51 South $16,106.50 $3,711.16 $8,172.28 $4,168.02 $7,231.22 $23,564.12 $17,972.40 Southeast $16,352.96 $2,533.76 $5,409.00 $3,341.06 $6,174.89 $24,097.90 $18,323.32 National $17,061.31 $4,939.87 $8,708.78 $5,414.73 $25,804.57 $22,306.05 $24,980.78 Table 8 Other Expenses Per Square Foot Advertising / Postage & Credit Card / Phone Maintenance Region Technology Spend Handling / Office Bank Charges Costs Other Utilities & Repairs West/Southwest $0.22 $0.12 $0.15 $0.11 $1.28 $0.24 $0.30 East $0.30 $0.07 $0.14 $0.05 $0.23 $0.44 $0.57 Midwest $0.19 $0.06 $0.12 $0.11 $0.02 $0.18 $0.33 South $0.23 $0.05 $0.12 $0.06 $0.10 $0.34 $0.26 Southeast $0.25 $0.04 $0.08 $0.05 $0.09 $0.37 $0.28 National $0.24 $0.07 $0.12 $0.08 $0.35 $0.31 $0.35 12 THE 2017 SELF-STORAGE EXPENSE GUIDEBOOK
Looking for information? It shouldn t be this hard! We have what you need. Published since 1979, the Mini-Storage Messenger has become the most respected international trade magazine for self-storage operators, owners, developers and investors. Each monthly issue delivers a valuable mix of self-storage business news, research data and interviews, as well as reports on various aspects of the development, management and marketing of profitable self-storage facilities. Get the answers you need in the Mini-Storage Messenger, the Education Destination for Self-Storage Management Start your subscription today! www.ministoragemessenger.com 800.352.4636