If you operate self storage properties you need to read the next two sentences. You can increase the rental rate on existing customers 7% and it will have no impact on the number of move outs. You can raise rents as often as every 9 months (rather than every 12) and it will have no impact on the number of people who move out.
I learned this from Kent Christensen, CFO of Extra Space. They run statistical experiments on their customer base. For example, 25,000 customers get no rent increase and 25,000 in the same markets get a 5% rent increase, another 25,0000 get 6% etc. and then the statisticians compare the move out data among the control and experimental groups. It would be fun to have such a capability. Its also an interesting advantage to having a lot of scale. In the end, I'm thankful for him for sharing. It will have a huge impact on how we run our stores moving forward.
Evidently, he already disclosed all of this info in a public call with analysts. Makes me think dialing into future quarterly calls with the public REITS might not be a bad idea.
According to Kent, the softest markets from Extra Space's perspective are Atlanta, Florida, Philidelphia, and Southern New Jersey. The strongest markets are Boston, Chicago, Dallas, Houston, and Northern California.
All of the panelists commented on how development has slowed. Extra Space polls all of its stores monthly about new construction activity in its trade areas. In 2007 they were impacted by 48 new competitors. In 2008 they have only seen 36.
