Juan Sanabria: And then I was just hoping you could spend a couple minutes on Los Angeles. I know you had some benefit starting last year as the rental restrictions rolled off. Where are we in that? Is that done? And any benefit that is going to wear off as we kind of roll the calendar forward a year?
Joe Russell: Yes. Sure, Juan. Yes, just to step back, as you know, Los Angeles is our largest market. We’ve got 229 properties here in the L.A. Basin, another 26 properties in San Diego, but as a full Southern California portfolio, L.A., in particular, we’re beyond the correction or the opportunity that was at hand based on the price constraints that we had for that 3-year period. So the level of performance you’re seeing now is truly indicative quality of the market and the strength of that size portfolio, the location and the overall dynamics that we see here in Southern California continue to provide, which is, again, very, very healthy levels of new customer activity, very healthy levels of existing customer behavior in a market that, again, we have a very outsized level of not only presence but a very strong portfolio.
We’ve talked about this to some degree, recently, but it’s also a portfolio that we’ve touched holistically from our Property of Tomorrow program. We’ve invested $80 million plus in the assets to pull them into a very ideal position relative to curb appeal, other attributes that we’ve added through Property of Tomorrow enhancements, etcetera. So all things considered the market is humming along quite well. And we think we will continue to see good activity and good performance going forward.
Juan Sanabria: Just one last quick follow-up, if you don’t mind. You mentioned occupancy was down 60 basis points year-over-year at the end of October. What’s the absolute occupancy percentage, if you don’t mind sharing that.
Tom Boyle: The occupancy percentage as we sit here today, I’m not sure, is directly relevant to what the period-end occupancies are going to be. Obviously, we’re getting towards the end of the month. Today, we will be a move out day at many of our facilities. So I guess, I suggest that not too dissimilar to where we were in September. The occupancies are north of 93% today, but expect them to be in the 92s as we finish the business day up here.
Juan Sanabria: Thank you.
Joe Russell: Thank you, Juan.
Operator: Our next question is from Jeff Spector with Bank of America. Please proceed with your question.
Jeff Spector: Great. Thank you. I just – I guess I wanted to ask about the market in general, just listening to your comments and thinking about is there an equilibrium like some point where, I don’t know if it’s national occupancy, something to alleviate the pressure on new rates? Or do you not really care because your volumes are so strong? Like how are you thinking about that as we’re trying to forecast and think about the coming months into ‘24.
Tom Boyle: Jeff, there is a lot there. I guess what I’d suggest is – if you think about this year, right, we came into this year expecting that the move-in environment would be more competitive. And that was based on our outlook and what we were seeing, no question housing having a component of that with record last 20-year record high, mortgage rates, as Joe mentioned, that’s led to a slowdown in demand. The flip side is we’ve seen good activity from renters as we’ve highlighted, but the move-in environment has gotten more competitive, right? Our facilities, in particular, if you rewind a couple of years, we’re full. And frankly, we were turning customers away in 2021. Because we were so full and we were pushing rate.
And so the combination of that dynamic and where we are now, has led to a correction. And I think in terms of moving rents, maybe an overcorrection in certain markets where the industry as a whole is reacting to an environment where the larger operators are taking their typical move-in volumes and the overall demand environment is a little softer than where it was maybe 2 years ago. But demand continues to be relatively healthy if you go back in time for self-storage, it’s just nowhere near what it was in 2021. And no question that’s led to declining move-in rents. And as we look at how our business has performed through this year, that has been the one notable component of the revenue algorithm that has underpunched expectations, i.e., moving rents have been lower than what we anticipated.
The good thing is on the flip side, moving volumes, to your point, have been strong. The existing tenant behavior has been good, move-outs have moderated. So obviously, leading to us increasing our outlook as we move through the year. But I don’t want to shy away from the fact that move-in rents have been a particular soft spot as we move through the year.
Joe Russell: And yes, on top of that, Jeff, you again, need to be reflective of the three tools that we continue to speak to marketing, promotions and rental rates. Those are tools that are highly interrelated right down to a per property and per customer basis relative to the way that we can optimize the utility of each of those with the data that we have, the amount of demand, volume and knowledge that we have relative to any particular trade area. More often than not, we’re typically competing with owners that have far few tools of any depth and/or ability to judge and react to any of the dynamics that Tom just spoke to. These, frankly, are tools that are deep seated. We’ve used them in a whole variety of different economic arenas.
Clearly, the last 3 years or so, most operators have had to rely on those tools very frequently. We’re very good at using those tools. And frankly, we’ve become better even over the near-term relative to our own utility of data, the knowledge that we have and we will continue to unlock relative to all the operational efficiencies as well. So we feel very encouraged that we’re using those tools to not only drive top-of-funnel demand, but conversion to the move-in activity that we’re reporting, and we’re going to continue to keep them very sharp and active.
Jeff Spector: Great. Thank you. Very helpful. And just one question, a clarification, please. On the 60 basis points year-over-year for occupancy, was that the end of period or the average, if it was end of period – can you state the average?
Tom Boyle: For the month of October. Well, we started the month at down 120 basis points. We’re finishing up down 60 basis points. So the average is right about in the midpoint there.
Jeff Spector: Okay, thank you.
Operator: Our next question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.
Todd Thomas: Hi, thanks. First question, I just wanted to follow-up on the last question about move-in rents. Tom, you talked about moving volumes being stronger than expected. And it sounds like you’ve taken share from other operators. Joe, you mentioned in your prepared remarks that customers are choosing public storage more and more. In this environment, a more competitive environment, I guess really without sort of an increase in overall demand, even if occupancy stabilizes in Public Storage’s portfolio, which I think the high end of your guidance now assumes at year-end, do you foresee the ability for move-in rents to stabilize or begin to stabilize or will they continue to drift lower until overall industry occupancy really stabilizes and maybe find a bottom?
