The move-in offer is an acquisition cost, not an impairment of the rent roll, and the sector argues about the smaller half of it.
A half-price move-in offer on the average unit is worth £141 in present value. The customer it buys is worth £2,188, so the offer repays itself in 2.0 months, and value covers total acquisition cost — discount plus marketing, £267 — 8.19 times over. The discount is not a rent reduction but the price of an asset. At that price, the depth of the promotion has never been the expensive part of acquiring a storage customer.
Worked in full in Self-Storage Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
The store underwritten here is a mature building in Manchester: 590 units, 50,000 sq ft of gross internal area, 79.6 per cent occupied by unit count, offered at £8.4 million. The standard British offer is half price for 8 weeks. On the average unit, that offer and the customer it produces look like this.
| Per customer | Amount |
|---|---|
| Full monthly rent on the average unit | £160 |
| Months paid, on average | 13.8 months |
| Gross rent collected over the stay | £2,428 |
| Discounted at the required return | £2,192 |
| Margin on the marginal customer | 99.8 per cent |
| Value of one customer | £2,188 |
| Discount given at move-in, discounted | £141 |
| Marketing spent to find them | £126 |
| Total cost of acquisition | £267 |
| Value, over cost | 8.19x |
A rent reduction is a permanent impairment of an income stream. A move-in offer is a one-off payment made to secure a customer whose value depends on how long they stay. The two belong in different lines of a model and are routinely put in the same one. Placed in the right line, the offer repays itself in 2.0 months, and the value of one customer would finance 13.7 months of entirely free storage before that customer stopped being worth acquiring.
The marketing is the other half, and the two are rarely put together. This store spends £51,541 a year on marketing and customer acquisition to produce 408 move-ins — £126 each. Set beside the £141 of discount, the promotion is only 52.7 per cent of what it actually costs to bring a customer through the door. The argument the sector conducts in public is about the smaller half.
Between the discount and the marketing, the store spends £109,074 a year — 11.0 per cent of its rent roll — simply to replace the customers it loses. Not to grow. To stand still. That is the cost of having no leases, stated as a number. In an office building the equivalent line — letting agents, rent-free periods, void costs, fit-out contributions — is enormous when it falls but falls rarely. Here it falls every month, for ever, and it is booked as an operating expense rather than as the capital cost of maintaining a rent roll.
Because the offer is cheap relative to the customer, it is tempting to conclude that discounting is free and to go deeper. It is not free, for a reason the arithmetic does not show: a deeper promotion attracts a different customer, and the customer attracted by the deepest offer in the market is disproportionately the one who leaves soonest. If a deeper discount shortens the average stay by even a month, the store must find 2.7 more customers a month to hold its occupancy, and the gain disappears.
The value of a customer, the move-ins needed to stand still and the annual cost of standing still are all functions of one number — and it is the number operators report least often.
| Length of stay | Move-ins needed each month | Value of one customer | Cost of standing still, each year |
|---|---|---|---|
| 8.0 months | 58.7 | £1,268 | £188,193 |
| 10.0 months | 47.0 | £1,585 | £150,555 |
| 12.0 months | 39.1 | £1,902 | £125,462 |
| 13.8 months | 34.0 | £2,188 | £109,074 |
| 16.0 months | 29.4 | £2,536 | £94,097 |
| 20.0 months | 23.5 | £3,171 | £75,277 |
A store that keeps its customers 8.0 months instead of 13.8 must find 58.7 new customers every month rather than 34.0, for ever, to stand in the same place. That is not a marketing budget difference. It is a different business, run by more people, in a market that may not contain that many customers. It is also why the depth of the offer matters far less than what the offer does to the survival of the intake it buys.
Not on this arithmetic. The discount is worth £141 in present value against a customer worth £2,188, and 8.19x cover survives the £126 of marketing spent to find them. The risk is not depth but selection: a deeper offer that shortens average stay by one month obliges the store to find 2.7 more move-ins a month.
This store spends £109,074 a year — discount plus marketing, 11.0 per cent of its rent roll — simply to replace the customers it loses, before any growth at all. At 8.0 months of average stay rather than 13.8, the same line costs £188,193; at 20.0 months it costs £75,277.
It behaves as capital. £141 of discount and £126 of marketing buy an asset worth £2,188 that lasts 13.8 months on average, and a move-out destroys £1,094 of remaining value. Booking the whole £267 as an operating expense is defensible, but it makes comparison with a leased asset class misleading.
This article is one calculation from Self-Storage Real Estate. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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