Following a dramatic swing in occupancy rates last year, self-storage REIT Life Storage expects a return to normal in 2021.
At the beginning of 2020, the same-store occupancy rate for Williamsville, NY-based Life Storage lagged 30 basis points behind the same period a year earlier. By the end of 2020, however, the occupancy moved dramatically in the other direction. On Dec. 31, same-store occupancy sat at 92.9%, compared with 89.6% at the same point in 2019. That’s a difference of 330 basis points.
CEO Joe Saffire said three market territories — New York City, Boston and New England — notched year-over-year occupancy gains of more than 500 basis points in 2020.
Move-outs are coming
As we move further into 2021, Saffire anticipates a rise in move-outs, meaning occupancy rates generally should come back down to earth.
“We do expect some return to normalcy in the second half of the year; maybe we’ll be wrong. It’s not that easy to ascertain how long some of these new customers will stick around,” Saffire said during the REIT’s Feb. 23 earnings call.
Saffire said home renovation projects, business shutdowns and other factors contributed to a lift in move-ins last year and consistently robust occupancy rates after the onset of the coronavirus pandemic. This year, though, Life Storage should see a drop in the occupancy rate of about 200 basis points from July to December, he said.
“There’s not a whole lot more occupancy we have to gain,” Saffire said.
Positioned for 2021
Nonetheless, Life Storage forecasts a 3.75% to 4.75% jump in same-store revenue and same-store NOI this year, and a 4% to 5% spike in same-store operating expenses. That compares with a 1.6% increase in same-store revenue, 2.3% increase in same-store NOI and 0.3% jump in same-store operating expenses last year versus 2019.
“As I think back to where we were in late March and early April last year, I cannot be more pleased with how our business has performed and how we are positioned as we begin 2021,” Saffire said.