The big REITs just released their Q3 earnings.

Occupancy is stabilizing. Some are even back above 90%.

Sounds great, right?

Except their net operating income is falling.

Read that again: Occupancy is up, but they’re making LESS money than last quarter.

How is that possible?

Because they’re buying occupancy with discounts.

Remember those 35-40% rate cuts the REITs admitted to in Q1? They’re still doing it.

They’re filling units at below-market rates just to keep occupancy numbers looking good for investors.

And it’s working – for now.

But here’s the problem:

Occupancy is a vanity metric if revenue is declining.

A 95% occupied facility losing money is worse than an 85% occupied facility that’s profitable.

The REITs can afford to play this game for a while. They have billion-dollar balance sheets and access to cheap capital.

You don’t.

If you’re chasing occupancy at the expense of revenue, you’re playing a game you can’t win.

Because the moment you cut rates to match the REIT down the street, you’ve locked in below-market pricing for months or years.

And when those discounted tenants finally move out, you’re competing with the same REITs who are STILL offering 35-40% discounts to the next tenant.

It’s a death spiral disguised as healthy occupancy.

Here’s what some of the smartest operators in the game are doing instead:

They’re focusing on revenue per square foot, not occupancy percentage.

They’re letting occupancy dip to 82-85% if it means maintaining rate integrity.

They’re targeting a different customer than the price-shoppers the REITs are attracting.

And they’re stress-testing their facilities assuming this pricing environment persists for another 12-18 months.

The operators who survive this aren’t the ones with the highest occupancy.

They’re the ones who understood that revenue stability beats vanity metrics every single time.

What are you optimizing for?

Here’s to your success,

Cody

P.S. The financing strategies that banks approve are changing based on how you present your revenue model. Occupancy alone doesn’t impress lenders anymore – they want to see revenue stability and rate discipline. Learn how to position your deals for approval here →