Occupancy Doesn’t Matter? What Self Storage Investors Need to Know

Occupancy rates have long been the metric most investors fixate on, but what if that focus is entirely misplaced? In today’s shifting storage landscape, chasing high physical occupancy might not just be ineffective, it could actually be leaving significant revenue on the table.

That’s because not all occupancy is created equal. While it’s tempting to aim for a fully booked facility, the real question is: how much are those units actually earning? As we’ll explore, the more profitable strategy might involve fewer tenants, but stronger revenue per unit.

Let’s break it down using real market trends and a firsthand example with a single facility that flipped the script on conventional thinking.

The Market Now?

As self storage operators head into slower seasons, dips in occupancy are not only expected but almost routine. Across the industry, even the biggest players, public REITs, adjust by cutting street rates by as much as 50% in some cases. On the surface, that might look like a red flag. But here’s the surprising truth: many of these operators aren’t losing money. In fact, quite a few are actually increasing their revenue.

So, what gives?

The answer lies in understanding that success in storage isn’t just about how many units are full. It’s about what those units are earning. A facility that’s 80% full but charging strong rates and managing revenue effectively can outperform one that’s 100% full with deeply discounted rents and weak collections.

The market is shifting, and smart investors are shifting with it, focusing less on headline occupancy rates and more on the economics behind each rented unit.

This Is Not Normal

The past few years created an unusual environment for self storage. Occupancy levels soared to unprecedented highs, surpassing 92%, a figure the industry had never seen before. But that surge wasn’t sustainable. It was driven by a rare combination of elevated demand and tight supply, much of it occurring during the tail end of a development cycle.

What many investors experienced during that period was, in reality, an outlier. Before 2014, storage had never reached those kinds of occupancy levels. But the recent boom brought a wave of new buyers into the space, many of whom had never operated in a more traditional market.

Now, the industry is undergoing a healthy correction. Occupancy rates are trending back toward historic norms, around 90%. And while that may feel like a drop, especially to those who bought in at the peak, it’s actually a return to normal, not a decline in asset value.

This context is vital. You might see normal performance as underperformance if your expectations are based on an abnormal market cycle. But seasoned operators know this is simply the market finding its equilibrium.

Economic vs Physical Occupancy

Here’s where the real distinction lies in self storage performance:

• Physical occupancy tells you how many units are filled.
• Economic occupancy tells you how much income those units are actually producing.

At first glance, a facility with 90% physical occupancy might be doing well. But dig deeper, and the numbers can tell a different story. If many of those units were rented at discounted rates, inherited from outdated leases, or if some tenants are delinquent, the economic occupancy might be far lower, say, only 70% of the total rent potential.

That 20% gap isn't just a small inefficiency. It can represent tens of thousands in lost revenue every year. And it’s in that gap where the true opportunity lies.

High physical occupancy doesn’t mean much if the units aren’t generating real income. On the other hand, a facility with fewer occupied units, but at market-rate rents with clean collections, can be far more profitable. The most successful operators understand this and focus on improving economic performance, not just filling every unit.

What Happened to Our Occupancy

Take a facility we bought. It was 100% physically occupied at the time of purchase, a number that would excite most traditional investors. However, over just one year, that number dropped to approximately 85%.

From the outside looking in, this decline might appear alarming. A 15% drop in occupancy could suggest declining demand, operational issues, or poor management.

But here’s the reality: this drop was strategic.

Instead of clinging to high occupancy numbers, we focused on removing underperforming tenants who were behind on payments, on heavily discounted leases, or hadn’t had their rents raised in years. As these units turned over, they were gradually filled with higher-quality tenants paying closer to market rates.

In short, the facility became less full but more profitable. Lower physical occupancy doesn’t always equal weaker performance; it often reflects a shift toward stronger, more sustainable income.

What Happened to Our Revenue

Despite losing 15% of tenants, monthly revenue nearly doubled—from around $30,000 to $60,000.

How? Through smarter revenue management:

• Economic occupancy increased as rent collections improved.
  
• Delinquencies were tackled head-on.
  
• Discounts were reduced.
  
• Internal rent raises were implemented.
  

And while rent per square foot only increased 19%, gross revenue jumped by 63%. This wasn’t just about pricing but about running the asset like a business.

What It Means

This entire transformation was accomplished without adding a single new building or pouring a dollar into major construction, no expansions, no flashy upgrades—just smart, disciplined operational improvements.

What changed wasn’t the facility’s footprint but how it was managed.

We dramatically boosted revenue and net income by enforcing consistent rent increases, reducing delinquencies, phasing out discounts, and prioritizing economic occupancy over physical numbers.

The key takeaway? It’s not about how many units are filled, it’s about how much revenue each one generates.

In self storage, valuation is directly tied to net operating income. That means improving collections, tightening operations, and optimizing pricing can unlock millions in added value, without spending millions on new buildings.

For investors, this is a game-changing mindset shift: stop focusing on heads in units, and start focusing on dollars collected.

If you want a deeper breakdown of how these changes were implemented, be sure to watch the full video linked here. It’s one of the best real-world examples of why in self storage, revenue beats occupancy, every time.