uploads///Factors that make Extra Space Special

Extra Space’s Occupancy Rate and Other Growth Factors

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Jan. 26 2018, Updated 9:05 a.m. ET

Occupancy rate

The occupancy rate of Extra Space’s (EXR) same-store pool was higher in 2017 than in 2016. EXR’s occupancy rate in 2Q17 was 94.5% compared to 94.1% in 2Q16. EXR has maintained its position in 3Q17 at 94.4%.

Strong occupancy rates led to greater pricing power, as Extra Space (EXR) was able to grow its street rates along with strong occupancy. These factors helped it achieve 5.2% growth in its same-store revenues.

A similar trend was observed in EXR’s occupancy rates for the core pool. This rate was similar in 2Q16 and 2Q17 at 94.6%. In 3Q17, this rate was 93.2% in comparison to 92.9% in 2Q17.

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Third-party managed stores

A key aspect of EXR’s business model is the third-party managed segment, which means that the company runs these stores without owning them.

EXR is the largest operator in the US in this segment, capturing 6% of the market share. As a result, it can reduce its expenses and increase its margins.

47 quarters of same-store outperformance

A fast-growing business, strong acquisition pipeline, joint ventures, and reduced capital expenditures helped EXR create a strong brand. Other key factors include increasing economies of scale, aggressive advertising, and reinvesting in its properties.

These factors allow EXR to obtain strong pricing power to increase its annual rental fees and still maintain strong occupancy rates.

EXR’s net operating income rose 5.5% for EXR. Among its peers, CubeSmart (CUBE), Life Storage (LSI), and Public Storage (PSA) saw their net operating income figures move 4.1%, -0.5%, and 2.6%, respectively. EXR forms ~2.0% of the Real Estate Select Sector SPDR ETF (XLRE).

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