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CubeSmart (NYSE:CUBE)
Q3 2021 Earnings Call
Nov 5, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the CubeSmart Third Quarter of 2021 Earnings Call. My name is Elliott and I will be coordinating your call today. [Operator Instructions]

I'll now hand over to our host Josh Schutzer. Josh, please go ahead, when you're ready.

Joshua Schutzer -- Vice President of Finance

Thank you, Elliot. Good morning, everyone. Welcome to CubeSmart's third quarter 2021 earnings call. Participants on today's call include Chris Marr, President and Chief Executive Officer; and Tim Martin, Chief Financial Officer. Our prepared remarks will be followed by a Q&A session. In addition to our earnings release, which was issued yesterday evening, supplemental operating and financial data is available under the Investor Relations section of the company's website at www.cubesmart.com.

The company's remarks will include certain forward-looking statements regarding earnings and strategy that involve risks, uncertainties and other factors that may cause the actual results to differ materially from these forward-looking statements. The risks and factors that could cause our actual results to differ materially from forward-looking statements are provided in documents the company furnishes to or filed with the Securities and Exchange Commission, specifically the Form 8-K we filed this morning together with our earnings release filed with the Form 8-K and the Risk Factors section of the company's annual report on Form 10-K.

In addition, the company's remarks include reference to non-GAAP measures. A reconciliation between GAAP and non-GAAP measures can be found in the third quarter financial supplement posted on the company's website at www.cubesmart.com.

I will now turn the call over to Chris.

Christopher P. Marr -- President and Chief Executive Officer

Thank you, Josh, and good morning. We are pleased to wrap up a very successful quarter for the self-storage industry. Operating fundamentals continue to maintain their positive trajectory supported by our sophisticated systems and solid consumer demand. We have been able to leverage that demand by growing occupancy and maximizing rate for both new and existing customers. The benefit of the positive consumer demand backdrop is evident in our same-store metrics. The impact of the solid operating environment is also being experienced in our non-same-store and recently developed properties. Physical occupancy, realized rent, revenue and net operating income and our non-same stores and development properties well exceeded our expectations during the quarter.

We are particularly pleased with the accelerating same-store revenue performance we have experienced, when considering the positive same-store revenue growth we had produced in the back half of 2020 in the teeth of the challenges created by the pandemic. Our same-store revenue growth during the quarter and our outlook for the full year reflect our strategy of balancing marketing, occupancy, rental rate and discounting to produce the maximum sustainable revenue growth over the long term. Looking forward, we remain bullish on fundamentals as evidenced by our increased guidance, which Tim will get into with more detail in his commentary.

Our thesis on supply for the balance of '21 and '22 remains intact. Our current data supports our expectation that supply in our top 12 markets peaked in 2019. We continue to expect new supply in those markets will decline in 2022 compared to the 2021 expected deliveries. Specific to the outer boroughs of New York, we expect new deliveries to contract significantly from what we have experienced over the past three years. Currently, our data suggests three openings across Brooklyn, the Bronx and Queens in each of the first and second quarter of next year dwindling to one in the third quarter of next year and no further openings after Q3 of 2022 currently on our radar.

I want to take this opportunity to thank our store teammates for their dedication to customer service and tremendous resiliency in the face of what seems to be multiple once-in-a-lifetime events. Our team continues to navigate through the pandemic with grace, flexibility and genuine care for our customers. I want to especially thank our team in the New York MSA for their customer service during and after tropical storm Ida. We experienced significant water intrusion at several of our stores in Queens, the Bronx, North Jersey in Westchester County. Our teams did an outstanding job assisting our customers and navigating the operational challenges created by the flooding.

I also want to recognize the collaborative efforts of our third-party management and information technology teams who introduced SmartView during the quarter. SmartView is our first of its kind, proprietary mobile app, designed to connect our third party customers seamlessly the key performance metrics for their stores. Yet another example of how we are serving our third-party management clients in innovative ways, so that we may continue to keep ahead of the fast pace of change.

The spotlight shining on our industry has increased investors' interest in owning self-storage. This has had a positive impact on our third-party management business as our pipeline of future opportunities remains solid. This wonderful operating environment has also had a positive impact on the acquisition environment and our deal flow is quite robust. We continue to evaluate our external growth opportunities with a focus on achieving attractive risk-adjusted returns and maintaining our position as the highest quality portfolio in our business. Our balance sheet is well positioned to capitalize on opportunities.

Finally, I wish to point out that we published our Inaugural Sustainability Report this morning. We are proud of our work to date and are committed to continuous improvement as sustainability efforts play a key role in our long-term value creation.

Thank you. And I will now ask Tim to share his comments on our quarterly results and outlook. Tim?

Timothy M. Martin -- Chief Financial Officer

Thanks, Chris and thank you to everyone on the call for your continued interest and support. As Chris touched on, results in the third quarter continue to reflect incredibly strong operating fundamentals across our portfolio, leading to another quarter of results that were better than expectations and again led to a meaningful raise in our earnings guidance going forward.

Same-store performance included headline results of 15.6% revenue growth and 3.9% expense growth, yielding NOI growth of 21.1% for the quarter. Same-store occupancy levels remained unseasonably strong, averaging 95.6% in the third quarter, which is up 150 basis points year-over-year and we ended the quarter with physical occupancy at 94.8%. Strong demand continued to be evidenced not only a high level of physical occupancy, but also in strong pricing power. Higher net effective rates to new customers, existing customer rent increases and elongating lengths of stay, all contributed to the 15.6% growth in same-store revenue. Same-store expense growth of 3.9% for the quarter was in line with our expectations, driven by continued pressure on real estate taxes, property insurance, and an opportunistic marketing spend, offset by efficiencies and personnel and lower utility costs. Similar performance drivers drove results across our non-same-store portfolio and our third-party management business. And combining all of that internal growth, we reported FFO per share, as adjusted, of $0.56 for the quarter, representing 27% growth over the last year.

Our continued meaningful growth and cash flows led to our announcement earlier this week of a 26.5% increase in our quarterly dividend, resulting in an annualized $1.72 per share and that's up from the previous rate of $1.36 per share. We remain active in our pursuit of external growth opportunities and continue to be busy underwriting a lot of potential deals. We continue to find select transactions that we find attractive that fit our disciplined investment strategy.

During the quarter, we acquired two stores on balance sheet for $33 million and another three stores in JVs for just under $90 million. We have $85.8 million of on-balance sheet stores under contract and $66.3 million of stores under contract through joint venture investments. During the quarter, we were active on selective dispositions. We sold 4 stores for $38.6 million and have another store in the contract itself for just over $5 million. Additionally, subsequent to quarter end, we sold 7 stores from a joint venture for $85 million. On the third-party management front, we added 33 stores in the quarter and ended the quarter with 706 third-party stores under management.

Our balance sheet position remains strong, as we continue to focus on funding our growth in a conservative manner that's consistent with our BBB/Baa2 credit rating. We continue to raise equity capital through our at-the-market equity program during the quarter, raising net proceeds of $57.9 million. Our conservative leverage levels and revolver capacity have us well positioned to pursue external growth opportunities.

Details of our 2021 revised earnings guidance and related assumptions were included in our release last night. Based on the strong operating fundamentals we've discussed, we've increased our guidance range for full-year FFO per share by 4.2% at the midpoint. Much of that guidance increase is based on an improved outlook for our same-store revenue growth for the year, which expanded to a revised range of 12.5% to 13.5% growth over 2020 levels.

As Chris mentioned, again I'd like to also thank our teams across all functions of the company as they continue to work hard and ensure that we're maximizing all of the opportunities that the current environment is presenting and our results continue to validate the strength of the CubeSmart brand and the CubeSmart platform. So thanks again for joining us on the call this morning.

At this time, Elliot, let's open up the call for some questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Smedes Rose from Citi. Smedes, your line is now open.

Smedes Rose -- Citi -- Analyst

All right, thank you. But I wanted to ask just a little bit I guess about how you're thinking about occupancy at this point, kind of peak to trough and kind of what's in your revised guidance?

Christopher P. Marr -- President and Chief Executive Officer

Yes, Smedes, this is Chris. Welcome of the call. I'll take a dive at that and Tim can pile on. So what we're seeing is that the demand is there, vacates from student certainly were there in August and September as school returned to its more normal schedule. So we saw that in some of our student markets such as Boston. And what we're seeing now, as we get into the post-Labor Day time frame, is as a bit in certain markets of the return to work, return to home type thesis. So we would see the gap to last year. And again, we don't guide specific to the occupancy relative to rate or other levers. But broadly, we would envision that occupancies continue to move back toward last year's level that the gap to last year will continue to shrink. And I think by the time we get to the end of December here, our expectation is that we will be plus or minus a few basis points to where we ended 2020 in physical occupancy. And then as we move into next year, again, we would consider that gradual return to a more typical pattern to continue up until the beginning of the busy season. And then given where we are in the housing market, in particular, we would envision quite a robust busy season for the industry starting in the typical March-April time frame of next year.

Smedes Rose -- Citi -- Analyst

Okay. Can you share what October, end of October occupancy was?

Christopher P. Marr -- President and Chief Executive Officer

I can share what the end of October occupancy was. The end of October occupancy, I have here.

Timothy M. Martin -- Chief Financial Officer

Chris, 94.4%.

Christopher P. Marr -- President and Chief Executive Officer

94.4, thank you.

Smedes Rose -- Citi -- Analyst

That's great. Okay. Okay, thanks. And I just wanted to ask one sort of bigger picture question. I mean, all of the other public storage REIT significantly ups their overall acquisitions outlook for the year. You guys maintained yours. And I was just wondering is it just a function of pricing or kind of what -- maybe why are you may be a little more hesitant to up your overall external growth expectations?

Timothy M. Martin -- Chief Financial Officer

Hey, Smedes. Good morning. Can't speak to what others are doing. What I can tell you is that you have likely grown to expect and should continue to expect that we will remain incredibly consistent in our external growth strategy, focus on opportunities that complement or enhance our high quality portfolio book and asset quality and market quality. And we do continue to find stores and transactions that fit strategically at risk-adjusted returns that create long-term shareholder value in our view. If you think about our growth over the past four, rolling four quarters, we've with acquired about $1 billion of real estate. So, we've been pretty busy and have transacted on things that fit our strategy. As we mentioned in the opening remarks, our balance sheet is well positioned. We continue to underwrite a lot of opportunity. At this point, what we've provided in our guidance is what we found that makes sense for us.

Smedes Rose -- Citi -- Analyst

Okay, thank you.

Christopher P. Marr -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Elvis Rodriguez from Bank of America. Elvis, your line is now open.

Elvis Rodriguez -- Bank of America -- Analyst

Good morning. And thank you for taking the question. Tim, you mentioned opportunistic marketing spend. And if you look at the year-over-year same-store marketing spend for CUBE versus peers, it increased while others decreased. Can you just talk a little bit about what you're doing on the marketing side and where the benefits are coming from?

Timothy M. Martin -- Chief Financial Officer

I would love to try to answer your question, but Chris really wants to do it, so I'm going to let him do it.

Christopher P. Marr -- President and Chief Executive Officer

I did really want to take it, so Elvis, I'll take that question. Yeah, I mean, obviously there is some differences in how folks are thinking about balancing the levers of marketing investment relative to price, relative to discounting. And when we look at our incremental spend, which is almost entirely in the paid search channels, we look at our incremental spend and the rates then that we are able to get. And so we're looking at it to say, we're getting somewhere between 8% and 10% higher rates based on the incremental spend. And if you look at, in our view, what that will generate over a projected length of stay for those customers who came in from that incremental spend -- we look at it over the long term to say that return, it is 450% to 500% of the investment and we'll produce low -- high -- low double-digit revenue over that time frame.

So from our perspective and the data that we compiled, it's giving us that rate that we're getting. The issue really, and we appreciate this, is that, that's hard to look at quarter-to-quarter. But if you look at it over a longer time frame, we believe that the return that we're getting on that marketing spend over the longer term is creating those higher rental rates, which, again assuming the customers like to say is what we believe it will be, will continue to produce very attractive returns and higher revenue over the next couple of quarters.

Elvis Rodriguez -- Bank of America -- Analyst

Thanks, Chris. And then you touched a little bit on supply in your expectations here, specifically in the boroughs, can you speak more specifically to -- you mentioned only one store in 3Q of '21, I believe, you mentioned and then none after. Can you speak to what's going to happen over the next six months?

Christopher P. Marr -- President and Chief Executive Officer

Yeah. So again to clarify, my commentary was that we only see one store in Q3 of 2022 and then no stores thereafter. So if you look at expectations that we would have, and again these are our based on openings projected as of now, they may happen sooner, they may happen later, but the reality is that we are looking at we're looking at supply where there are, let's say, two to three stores I think it is in Brooklyn, two or three in Queens coming in first and second quarter of next year, one store in Brooklyn in the third quarter of next year and then right now zero thereafter.

Elvis Rodriguez -- Bank of America -- Analyst

Great. Thank you very much.

Operator

Our next question comes from Todd Thomas from KeyBanc Capital Markets. Todd, your line is now open.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Hi. Thanks. Good morning. First question, I wanted to just, I guess, sticking with New York City, it performed well in the quarter, but it was one of the few markets that saw growth decelerate about 100 -- about 430 basis points in the quarter on a revenue basis. Chris, you mentioned the supply in some of the boroughs, and in New York, you mentioned the rains and the floods that occurred during the quarter. Can you just speak to what you're seeing in the New York City MSA within your portfolio?

Christopher P. Marr -- President and Chief Executive Officer

Sure. Thanks for the question. So let's -- yeah, let's do take a look under the hood at the New York MSA performance during the quarter. So in the back half of last year, New York MSA performed exceptionally well, which made it more difficult to generate outsized growth this year. And then as you touched on, there are a few other factors to evaluate. We've got the impact of Ida and new supply. The performance of our non-same-store pool and the consumer demand picture. You start with the rain. The heavy rain from Ida, we had water damage at nine of our stores in the MSA, two in Queens, three in the Bronx, two in Westchester County and one each in Brooklyn and North Jersey. Unfortunately, the nature of that storm led to isolated pockets of water intrusion, and it was largely as a result of the of the sewer systems' incapability of absorbing that much rain that quickly. So those nine stores, we really experienced no new demand during about a month or so as we cleaned up, but we did experience the resulting vacates, because sadly many of the customers' possessions were at a total loss. So we had a bit of an occupancy decline at those impacted stores. And so that was one factor for the quarter.

On the supply side, we've been consistent in our messaging regarding the impact, especially in Brooklyn and Queens, which was as expected and factored in our expectations. So while our same-store results in Brooklyn and Queens are outperforming our expectations on occupancy rate revenue, much like Washington DC and Nashville MSAs, they're dealing with the headwinds that we're not experiencing, market is not seeing new supply. I think the upshot to this is that the new development stores then continue to lease up in those markets, particularly in Brooklyn and Queens well ahead of our expectations. So the customers that we can't accommodate at our highly occupied same stores, we're getting them at the lease-up stores in the boroughs. And those stores are experiencing physical occupancy revenue higher than planned. Our acquisition last year in the fourth quarter of the Storage Deluxe Assets are well-outpacing our underwriting. Those aren't in the same-store pool. So I think you got to look at this holistically.

And then looking at the consumer demand picture, demand remains very solid. We obviously have all-time high physical occupancy. I think it's basically 95.5% in the outer boroughs. We do see the returning population to New York City impact on the vacates side in our Manhattan store and then some of the immediately adjacent stores. We view that actually has a long-term positive. Near term, we're seeing some vacates from people who would have stored at the beginning of the pandemic. Long term, that returning population what we're seeing on the multifamily side, particularly in rates on the multifamily side, we view as a long-term positive as people return to the city.

So I think when you factor in the exogenous factors that I described, and then the endogenous factors, we're encouraged by the overall results for the quarter and year-to-date. So hopefully, Todd, that gives you some helpful context.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Yeah. That's helpful. Are you seeing occupancy rebound in New York, in New York City a bit in October and early November? And has there been any change to your ECRI program or has there been any resistance to rent increases to in-place customers in that region? And then, Tim, within the revised guidance, do you anticipate growth to continue to moderate in New York City in the near term?

Christopher P. Marr -- President and Chief Executive Officer

So I'll take the first part of that. So when you think about trends, again occupancy at 95.5% in the boroughs as a whole, we're full. So that's not the issue. Again, as I said, the occupancy and the water damaged stores, I think, fell about 170 basis points as a result of those -- of Ida. And we are recovering from that and the stores have been cleaned and the damage has been repaired and they're wide open for business again. And we're seeing demand return there. On the -- as I mentioned, on the Manhattan store and then the couple in Long Island City and in Park Slope, most of which are not in the same-store pool, you are seeing lower physical occupancies at those stores as the return to New York and the population returning, I think, has clearly increased vacates at those stores. The outer borough stores unaffected by that and continue to perform continue to perform well, again balancing Brooklyn with the supply that is real and certainly a factor there.

So from that perspective, we are also not experiencing any issues as it relates to existing customer rate increases at any of our stores. And specifically, we are not experiencing any pushback of anything outside of the normal pushback in the New York City stores specifically. And then I'll speak for Tim, I know the answer has got to be we don't get into the market-specific, but we are expecting continued solid growth on a relative basis as we move through the year.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay, all right. And then just one question, just back to on the acquisitions. I hear your comments on investments and remaining disciplined. It sounds like there has been less of an emphasis on sort of going in yields, just because of expectations around upside and outsized growth potential in the near term or in the years ahead, either stabilization in occupancy, rates, both, I suppose. Are you not seeing that same opportunity? Do you think when you're running up against folks on investments, do you -- are you not seeing that same sort of upside or outsized growth opportunity over the next couple of years, relative to what you think others might be factoring in, when underwriting potential acquisitions?

Timothy M. Martin -- Chief Financial Officer

Yeah, that's a tough question to answer, given that, I mean, we certainly know what we see. I can't speak for what others see and what other speak into their underwriting. We're focused in, as we always are, on all-in returns on a risk-adjusted basis. So, unfortunately, your question is multi-multi-layered and many of those layers have to do with what others are doing and what others are thinking, and I can't really speak to that. You'd have to ask them. What we have done and what we have under contract are the result of all of our efforts in where we've landed on things that hit our strategy and makes sense to us on a risk-adjusted basis.

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Okay. All right, thank you.

Timothy M. Martin -- Chief Financial Officer

Thanks.

Operator

Our next question comes from Juan Sanabria from BMO Capital Markets. Juan, your line is now open.

Juan Sanabria -- BMO Capital Markets -- Analyst

Hi, good morning. Just wanted to follow up on the New York City stuff you guys were talking about. Do you have a sense of what the impact to same-store revenues was from Ida? And the second part of the question. Should we expect any incremental benefit from the eventual inclusion of Storage Deluxe, I think that would happen in the first quarter '22 once that enters the same-store pool?

Christopher P. Marr -- President and Chief Executive Officer

I'll take the first part of that one. In terms of just broadly, the impact was negative. It's hard to put basis points on what could or could not have happened at those stores, not had to close down and not have to deal with the cleanup. Certainly, again we lost occupancy. We were unable to accept new customers and and it was difficult to accept new customers for a short period of time. So I don't know how to quantify the basis point impact to it. They certainly were among the poor performing stores for the quarter.

Timothy M. Martin -- Chief Financial Officer

And on the impact of stuff coming in or out of the same-store pool next year, I mean we're not going to get into stuff related to 2022 guidance. Things that come into our same-store pool are stable when they come in. So I'm happy to try to provide some color on that next quarter when we get into '22 guidance.

Juan Sanabria -- BMO Capital Markets -- Analyst

Okay. And then just one follow-up question for the third-party management business. Do you expect as you look forward to and kind of have a sense of what's either on market today for sale or what could be coming based on your discussions that we'll see continued churn in '22 or do you expect that to level out and to have more net growth going forward?

Timothy M. Martin -- Chief Financial Officer

Yeah, great question. We certainly expect, I think -- and I mean, 2021 as others have said on calls earlier than ours, 2021 obviously, as you know, has been an incredibly active and robust transaction environment. And we've seen a lot of stores come onto our platform and we've seen a lot of stores come off, as many of our owners have monetized a lot of the value that we have helped create for them on our platform. We'd expect that trend. I think it's not a one-year trend. Many of the stores that are on our platform are stores that were newly developed two, three, four years ago. Many of the owners that we manage for are not forever holders. So when the right time comes for them to monetize, then sell to us or take it to market and potentially sell to somebody else.

I think that is continued trend, that is just the reality of the landscape for the third-party management business for us and others who are in it. So difficult to predict whether there would be net growth or net contraction. We work hard on continuing, from a new business development standpoint, to attract new customers to the platform. We're still seeing great inbound activity on folks who are interested in our platform. And so, that part we can control. The other part candidly is, is that we're doing a really good job capitalizing on the opportunities that are in the markets and we're getting the stores leased up for our owners, and again helping them create value and monetize, which is what they hired us to do. So hard to predict at this point.

Juan Sanabria -- BMO Capital Markets -- Analyst

Thank you.

Operator

Our next question comes from Joab Dempsey from Truist. Joab, your line is now open.

Joab Dempsey -- Truist Securities -- Analyst

Hi. Good morning, everyone and thanks for taking the question. Chris, in your prepared remarks, you spoke about supply being manageable going into next year. Clearly, with fundamentals being so strong, you think you'll start to see some supply coming online. But is there anything in terms of whether it's the entitlement process or the supply chain disruption, making a harder to source construction materials that are keeping a lid on new supply?

Christopher P. Marr -- President and Chief Executive Officer

Yeah, thanks for the question. So I think you have a nice balance at the moment where operating fundamentals are spectacular to say the least. And that will inevitably attract folks to our industry, and folks, who wish to think about participating in this via development. You're offsetting that with some continued trends, which is in several western markets, particularly in California, it is incredibly challenging for a whole host of reasons to develop new product. And, therefore, you've seen it'd be fairly muted and we would expect it will continue to be fairly muted. You have the issues, obviously, we've talked at length in New York City with the changes in tax law that makes it much difficult to develop there.

And again, I've outlined our expectations that, that dries up over time there. I think you have the new issues, as you've described, of cost of raw material, cost of labor, inability to source raw material, and inability to get labor, and a very I think continued constructive, meaning, rational lending environment. I think those factors then make a decision around new development more difficult and certainly trying to take today's environment and how do you try and forecast what, three, four or five years from now is going to look like from an occupancy and a rate perspective, given the fabulous run we're on, I think, is another challenge.

So I think all of that, all of those things tend to balance out. That being said, you can still generate attractive returns in many markets if you find the right piece of land or if you've owned that land for quite a while and have a reasonable basis. And I think if you're patient and delay your start potentially until mid to end of next year and see if some of these supply chain issues work themselves out, then I think that will lead to supply in '23 or '24. Again, I think it's manageable. I think that tells you the industry is performing quite well. And I think we've demonstrated as a fact there that we can absorb it. And it's not a doomsday scenario and we'll be just fine. So I think there will be supply, all things being equal, and supply will continue, but it will be manageable.

Joab Dempsey -- Truist Securities -- Analyst

Okay, great. And then it looks like you sold four properties this quarter. With cap rate compression across the industry, how do you think about further recycling of assets and possibly putting that capital to work in other areas, particularly joint venture structure is what you're focused on lease-up opportunities?

Timothy M. Martin -- Chief Financial Officer

I mean, maximizing -- maximize our return on capital and recycling when appropriate has always been part of the playbook. And what we did here recently was to do just that. We had some assets that on a longer term, you think about the next five or 10 years, we thought that we could redeploy that capital into other opportunities, and get a better risk-adjusted return over time. We don't have a lot of those opportunities, because we've worked hard to assemble a portfolio of really high quality assets. And they're not easy to find. So we're not looking to sell tens of properties, but when we find particular situations where we think we can recycle that capital, we're anxious to do so. And we did that, as I mentioned, on a handful of opportunities on balance sheet, and then in the co-investment structure, had a similar approach where we're under contract -- well, actually, we -- subsequent to quarter end, we closed on the disposition of seven stores out of one of our joint ventures.

Joab Dempsey -- Truist Securities -- Analyst

Okay. Maybe I could sneak one small one, final quick one in. How did rate growth trend throughout the quarter and in October?

Christopher P. Marr -- President and Chief Executive Officer

Yeah, rates continued to be very solid over last year and over 2019. And I think in October, we were asking that effect is up right about 29% or so over 2020 and 55% over 2019.

Joab Dempsey -- Truist Securities -- Analyst

All right, great. Thank you, guys.

Operator

Our next question comes from Hong Zhang from JP Morgan. Hong, your line is now open.

Hongliang Zhang -- JP Morgan -- Analyst

Yeah. Hey, guys. So you've kept a pretty tight lid on personnel expense so far this year. I guess, just looking toward the fourth quarter next year, do you expect that to kind of reverse and trend up just given where wage pressures are?

Christopher P. Marr -- President and Chief Executive Officer

Hey, thanks for the question. Yeah, personnel has been a challenge in terms of certainly on the hiring side, as [Indecipherable] everybody has talked about that in not only our industry but across other service industries. We have always been a little bit more focused on the total reward package for our store teammates and, therefore, have traditionally paid and offered benefits that are at the higher end of what we see across the rest of the industry. So we haven't yet had to make any radical adjustments to our overall compensation. But we're certainly looking at trends and difficulty in hiring and adjusting accordingly. I think as we get into next year, it will be a balance of how inflation continues to progress, is it transitory or is it here to stay for a while, again, those challenges in certain specific markets. But then overall on hiring, making sure we're retaining our good teammates and offering them a total rewards package that meets the market and allows us to continue to retain high quality people that we have.

And then offsetting that, with continued efficiencies, pushing folks to SmartRental and self-service thinking about how we staff and the staffing levels that we have. So my sense to -- the short answer is that, inevitably, personnel expense has to be growing as we move into 2022. And then we're just focused on within what parameters can we maintain or constrain that. I think it's inevitable that it will grow as we move through '22.

Hongliang Zhang -- JP Morgan -- Analyst

Got it. And I'm not looking for guidance per se, but just even if you end the year at a flat year-over-year occupancy compared to 2020, you'd still be, call it, 200 basis points higher than what you were going into COVID. Just given where kind of move-in, move-out trends are, do you expect to retain a portion of that through 2022 or do you expect to kind of give it all back?

Timothy M. Martin -- Chief Financial Officer

From a physical occupancy standpoint?

Hongliang Zhang -- JP Morgan -- Analyst

Yeah, from a physical occupancy standpoint.

Timothy M. Martin -- Chief Financial Officer

Yeah, boy, it's hard to answer that question. Even with your preamble that you were trying not to get into '22 guidance, I'm not sure how to talk about that question. The reality is occupancies are -- occupancies continue to be unseasonably high. We have been I think as an industry, all of us on our side of the table, your side of the table have underestimated the strength and the quality of the demand of the customer that has come to us here since the beginning of the pandemic. So to date, we've all been too conservative in our expectation as to how sticky that customer is and how robust demand is. I think all of those are our considerations as to how we think about the sector, how we think about our projections for next year. And again, from a revenue standpoint, occupancy is only one part of the equation. And so, not sure that I have anything that's particularly helpful for you other than occupancies are higher than they ever have been. And I would think at some point in the future, I don't know if it's measured in the next couple of months, quarters or maybe years, there will be some expectation I think that occupancy would trend at least directionally back toward historical levels.

Hongliang Zhang -- JP Morgan -- Analyst

Got it. Thank you.

Timothy M. Martin -- Chief Financial Officer

Thanks.

Operator

Our final question comes from Spenser Allaway from Green Street. Spenser, your line is now open.

Spenser Allaway -- Green Street -- Analyst

Thank you. Amongst your peers, we've heard mixed reviews on existing rates compared to market rates today. I was wondering if you can provide some color on whether you've caught up with market rates across most of your portfolio or is there still some room to kind of catch-up here?

Christopher P. Marr -- President and Chief Executive Officer

Spenser, yeah. This is Chris. So specifically related to in-place customers versus where we are pricing for a new customer?

Spenser Allaway -- Green Street -- Analyst

Yeah.

Christopher P. Marr -- President and Chief Executive Officer

Yeah, so the move-in rate continues to be in that kind of 6% to 8% range higher than the in-place customers.

Spenser Allaway -- Green Street -- Analyst

Okay. And then can you give us an idea of how much of the revenue growth during the quarter was driven by the ECRIs versus those higher move-in rates that you were just speaking about?

Timothy M. Martin -- Chief Financial Officer

Yeah, Spenser, we don't typically get into, trying to get through that. But one thing that's fairly predictable, as you can see how much of the revenue growth comes from occupancy, everything else is in that mix of a combination of things that you're talking about. We don't -- we haven't historically broken it out. All right. Thank you.

Christopher P. Marr -- President and Chief Executive Officer

Thanks.

Operator

We have no further questions. I will now hand back to Christopher Marr for any closing remarks.

Christopher P. Marr -- President and Chief Executive Officer

All right. Thanks everybody for participating in our call, and wrapping up the self-storage earning season with us. It has been a spectacular earning season, to say the least. It's been a spectacular year for our industry. I was just reflecting that this call, the third quarter call, I was fortunate enough to participate in my first one, 27 years ago this month. And so as I look back over those 27 years, I think it's safe to say that this year has been the best that I've ever had the fortune to participate in from a self-storage perspective. And we're quite bullish on the industry as we move into next year. So thank you all for enjoying this with us and we look forward to talking with you at the end of the year. Be safe.

Operator

[Operator Closing Remarks]

Duration: 45 minutes

Call participants:

Joshua Schutzer -- Vice President of Finance

Christopher P. Marr -- President and Chief Executive Officer

Timothy M. Martin -- Chief Financial Officer

Smedes Rose -- Citi -- Analyst

Elvis Rodriguez -- Bank of America -- Analyst

Todd Thomas -- KeyBanc Capital Markets -- Analyst

Juan Sanabria -- BMO Capital Markets -- Analyst

Joab Dempsey -- Truist Securities -- Analyst

Hongliang Zhang -- JP Morgan -- Analyst

Spenser Allaway -- Green Street -- Analyst

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