What is “normalised” growth?

The term “normalised growth” is often used when discussing revenue performance and forecasts in valuations and financial projections. Specifically for self storage, normalised growth refers to average fee rate growth and/or and storage revenue growth. In Australasia, revenue growth is often measured by RevPAM (Revenue Per Available Metre) which seeks to combine fee rate growth with occupancy performance.

In this article we are referring to normalised growth as the level of revenue growth a self storage facility can reasonably sustain over the long term, once the asset is trading at ‘maturity’ and the market is generally stable.

Normal [adjective] is defined as – typical, usual, or ordinary; what you would expect

However, when does a trend become typical, usual or expected?

Based upon our analysis, using the East Coast cities as the test markets, revenue growth (measured by RevPAM) averaged 4.98% over the 10 years between 2015 and 2025.

Significant growth was recorded across 2021, 2022 and 2023 – the period we describe as the “Covid Boom Period” which sustained heightened self storage demand. Between 2021 and 2023, RevPAM growth averaged 13.3% per annum.

Pre-pandemic, between 2011 and 2019, revenue growth averaged 2.38%, with a low of -2.76% and a high of 5.64%. The negative years (yes, we have had negative trading years in the past) are attributed to increased self storage supply and a delicate economy with stagnant demand for self storage. Further, the early 2020 period was affected by the shock of the pandemic outbreak.

Post the shock of the pandemic (2021-2025) fee rate growth averaged 9.15% per annum. Yet over the past two years (2024 and 2025), RevPAM growth in the East Coast cities has averaged 2.92% per annum, which is below the long-term average of 4.53%, influenced once again, by an increase in new self storage supply. Pleasingly, the most recent results available suggest that revenue growth is once again increasing as major markets stabilise.

So, what should we adopt as being “normal” in today’s market?

Double-digit growth was achieved over the peak demand (“Covid Boom”) years of 2021 to 2023. Increased demand for self storage occurred with the change in working and living preferences, decluttering and renovation trends, all-round disruption, a stronger housing market, and increased discretionary spend levels. Further, limited new self storage supply was added to the market over these years.

While these outcomes were real and value-creating, they are not generally considered as being normal or sustainable. As demand moderates and the new supply pipeline increases once again, growth expectations should be reset to reflect the current state of play.

What drives actual self storage revenue growth?

Self storage revenue growth is driven by three core metrics.

• Increases in area occupied
• Increases in rental rates
• Reductions in concessions and incentives.

During lease-up or periods of market disruption, all three can contribute meaningfully. Under normalised conditions, however, their role changes.

Occupancy: stability over revenue growth

Once a facility reaches the “mature” operating level, which typically falls between 85% and 90% (by area), occupancy becomes a stabilising factor rather than a tool for driving revenue growth.

Normalised assumptions typically do not rely on ongoing occupancy gains. Instead, they allow for modest fluctuations around the long-term sustainable average occupancy level, considering seasonality and competition without assuming continuous gains.

Rental growth: the key long-term driver

Rental growth is the primary contributor to normalised revenue growth.

Sustainable rental growth in our region is influenced by:

• Increased demand for self storage due to micro and macro-economic factors and lifestyle changes
• Wage growth and an increase in discretionary spend levels
• The strength of the local housing market
• Supply additions within the catchment
• An increase in awareness of self storage amongst the general population

Well-located, professionally managed facilities have historically demonstrated the ability to grow rents well ahead of CPI over the long term. Normalised growth should exclude sharp rent spikes and drops in growth rates with a change in management or asset enhancement, or indeed, due to above-average rates of new supply coming to the market. Instead, normalised growth should reflect steady, continual increases that customers can absorb without materially increasing churn (move out rates) or impacting stabilised occupancy levels.

Removing abnormal trading periods

Normalising growth rates requires identifying and adjusting for periods of abnormal performance, such as:

• Double-digit growth during boom demand periods
• Lease-up performance following development or expansion
• Revenue uplift from operational upgrades
• Temporary impacts (positive or negative) from either delayed or additional new supply.

By way of example, a facility achieving 10-12% annual revenue growth during peak demand periods may normalise to say 3-5% once conditions stabilise. The reduction, however, may not occur immediately. For example, the change in actual growth may look something like this:

Year 1: annual growth of 12%,
Year 2: annual growth of 9%,
Year 3: annual growth of 7%,
Year 4: annual growth of 5%.

These types of changes often represent the trend in slowing (or when presented in the inverse trend; increasing) demand periods and they can be indicative of a shifting market.

What does normalised growth look like?

There is no single figure that applies to every asset or market. Normalised growth varies by location, the level of competition in the catchment, asset quality/position, catchment barriers to entry, and the style of management.

The most important consideration when calculating normalised growth is to be truthful with assumptions by having regard to underlying fundamentals rather than recent peak performance periods.

Put simply, normalised growth reflects the asset’s long term performance under normal trading conditions in a stable market, having regard to recent trends.