Greetings, and welcome to Public Storage Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Ryan Burke. Thank you. You may begin.

Thank you, Rob. Hello, everyone. Thank you for joining us for our third quarter 2025 earnings call. I'm here with Joe Russell; and Tom Boyle. Before we begin, we want to remind you that certain matters discussed during this call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. All forward-looking statements speak only as of today, October 30, 2025, and we assume no obligation to update, revise or supplement statements that become untrue because of subsequent events. A reconciliation to GAAP of the non-GAAP financial measures we provide on this call is included in our earnings release. You can find our press release, supplement report, SEC reports and an audio replay of this conference call on our website, publicstorage.com. We do ask that you initially limit yourself to 2 questions. Of course, if you have more after that, please feel free to jump in queue. With that, I'll turn the call over to Joe.

Thank you, Ryan, and thank you all for joining us today. Public Storage's third quarter results reflect differentiated strategies that continue to drive our outperformance in addition to encouraging industry trends, including operational stabilization, lower competition from new supply and increasing acquisition activity. We are raising our 2025 outlook for the second consecutive quarter based on outperformance in same-store and nonsame-store NOI growth, acquisition volume and core FFO growth per share. Public Storage's industry leadership is proven by, among other things, the highest revenue generation per square foot with the most profitable operating platform, the strongest portfolio expansion through our best-in-class teams and backed by our growth-oriented balance sheet, the highest retained cash flow generation, which we utilized to invest back into our business to drive earnings, and FFO growth in excess of stabilized same-store growth driven by our compounding returns platform. We have been actively advancing the pillars of this platform, which include our leading operations, capital allocation and capital access. Just a few of many examples in terms of our operating innovation include: first, we have the industry's leading omnichannel customer experience through which we offer digital options across their entire journey. The success is evident with customers now choosing digital path and 85% of their interactions and transactions with us. Second, with the shift to digital, we are modernizing our field operations by utilizing AI to directly provide customer service and staff our properties more appropriately. The days of needing a property manager on site all day, every day are behind us. Instead, we now have people on site, when and where customers need help. To date, this has reduced labor hours by more than 30%, while also increasing employee engagement and lowering turnover. And third, we are deploying new technology-based strategies across the entire organization, including customer search and generative engine optimization, unit pricing and revenue management, asset management including security, vendors and maintenance, identifying and executing development opportunities and putting the right tools in our field and corporate teams hands to even more effectively drive revenues and control expenses. Collectively, these initiatives are driving higher revenues, margins and core FFO per share growth. Now I'll turn the call over to Tom.

Thanks, Joe. We are leaning into our platform strength. Joe spoke to our industry-leading operations and technology initiatives. I'll now touch on capital allocation, capital access and performance specifics. On capital allocation, we have accelerated portfolio growth with more than $1.3 billion in wholly owned acquisitions and developments already announced this year. The acquisition opportunities are relatively broad-based across size, geography as well as seller type. We will continue expanding the non-same-store pool through additional acquisitions and our $650 million development pipeline to be delivered over the next 2 years. We are built to execute on this activity based on our industry relationships, data-driven underwriting and strong capital position. With leverage at 4.2x net debt and preferred to EBITDA and retained cash flow reaching about $650 million this year, we will continue using our advantageous cost of capital to fund portfolio expansion and drive core FFO per share growth. Now shifting to financial performance for the quarter and our improved outlook. Revenue growth in the same-store pool came in ahead of our expectations, primarily due to strong in-place customer behavior. Overall, in-place rents were up 0.6%, offset by lower occupancy. From a market perspective, Chicago, Minneapolis, Tampa, Honolulu and the West Coast are standouts with revenue growth in the 2% to 4% same-store revenue range. Speaking specifically to the West Coast, our strong presence top to bottom from Seattle down to San Diego, representing 1/3 of our NOI, serves us well with good demand trends and more limited new supply. Los Angeles will return to strong growth when the state of emergency price restrictions expire. Our expense control across the same-store pool continues to be strong as well, held flat for the quarter and driven by reductions across most line items. Continuing declines in property payroll and utilities are direct results of the differentiated initiatives that Joe spoke to. Accordingly, same-store NOI growth came in better than we anticipated. Outside of the same-store pool, outperformance in our high-growth non-same-store pool helped drive core FFO per share higher by 2.6%. This is a 560 basis point acceleration from the growth level achieved in the third quarter of last year. As Joe mentioned, our strategic focus continues to drive core FFO per share growth well in excess of our stabilized same-store growth. We adjusted our full year guidance to reflect the positive trends I just spoke to with increased outlooks for same-store revenue, same-store NOI and nonsame-store NOI. All in, we increased core FFO per share growth by nearly 1% with 1 quarter left in the year. Looking forward, we are very well positioned to continue driving performance with differentiated strategies that will further enhance our compounding returns platform. With that, Rob, let's open it up for questions.

[Operator Instructions] Our first question comes from Eric Wolfe with Citi.

As we get closer to year-end, could you maybe just talk about the process you go through in setting your budgets for 2026? And sort of how you go about determining things like where move-in rents to go, occupancy and sort of all the main variables that are going to make up growth for next year?

Yes, sure. We can talk about that. I mean, we're continuously forecasting and updating our forecast for the business as we move through any given year, obviously, starting with 2026 process, something we started several months ago, and people are forecasting their businesses. In terms of some of the line items you spoke to we're using data-driven processes and historical trends as well as predictive analytics to drive those forecasts. We certainly challenge our teams to come up with new initiatives to drive the business going forward into the new year, and that process is well underway.

And Eric, I'd add that it's a robust process across literally every function within the company. It's fluid. It doesn't end and begin even as we speak, it builds, and we have a lot of analytics relative to the things that we're doing from a deployment standpoint as we've spoken to, we have a whole host of efficiency efforts that are tied to investments in digital and otherwise, it continues to drive our margins to the level that we attain. And then to Tom's point, the whole host of things that we do tied to revenue optimization across the entire portfolio with not only our same-store but our non-same-store portfolio.

Got it. That's helpful. And I think in the press release, you characterized things as sort of stabilizing. I don't know if you feel like maybe there's a path of things getting back to more sort of a normal run rate growth or what it would take to get there. But just sort of curious how you're thinking about sort of the trends that you've seen recently in October, over the last couple of months. If you're starting to get a little bit closer back to normal, if it's more of a just kind of like a stabilization and sort of a little bit more of a muted rebound?

Yes, a good question. I think as we look ahead, we do see steady stabilization. And as we've moved through 2025, we've seen demand bouncing off the bottoms of '24. We see new supply continuing to be coming down just given the challenges associated with new development in many of the markets we operate. But I'd probably point you most notably to the fact that what I commented on earlier around some of our stronger markets where we're stable, but we're growing at a healthy clip as well. And just highlighting the West Coast again, with growth in the 2% to 4% same-store revenue growth range and good fundamentals. So some of the markets aren't quite there yet, but we're seeing a good and healthy customer and overall operational performance in many of the markets we operate today.

Our next question comes from Michael Griffin with Evercore.

I'm curious if you can give us any insight into whether new customer behavior has changed at all. It seems like the revenue this quarter was mainly driven by that existing customer, which seems to remain sticky. But as these move-in rents decline on a year-over-year basis, do you feel like we're starting to hit a trough there? Or do you think there's potentially further to go in terms of new move-in rents?

Yes. I'd say taking a step back, I think there's too much focus related to move-in rents is one particular element of revenue, right? Overall, across the organization, we are focused on revenue as the most important metric. And that is a combination of what you're highlighting, yes move-in rents but also move-in volumes, move-out activity existing customer behavior and rent increases. And it continues to be a competitive operating environment for new customer move-ins and you could see that through the quarter. But the focus here is certainly around revenue is the most important metric and that goes throughout the organization from the property managers and property staff, all the way through the home office organization. So we continue to make investments through our platform to drive revenue in a competitive environment. And I would point you not to one particular metric.

Tom, I appreciate the context there. And then maybe just on the revised guidance, it seems like you're trending in the more favorable range, both on expenses being towards the low end and NOI being toward the high end, at least on a year-to-date basis. So maybe are there any puts and takes we should think about when looking at the fourth quarter sort of implied guidance? Maybe tougher comps in certain line items? Or any clarification there would be helpful.

Yes, sure. Every quarter has got its own set of comps. I do think the fourth quarter specifically Property tax is a tough comp. We had a number of healthy refunds last year. We'll see whether the team can execute on similar amounts this year, but that's a pretty tough comp. And then as we think about same-store revenue, we've been consistent highlighting that the impact on Los Angeles will grow as the year progresses. And so we do anticipate that to occur in the fourth quarter. Otherwise, those would be the 2 items I'd highlight for you.

Our next question comes from Samir Khanal with Bank of America.

I guess just sticking to that topic about L.A. and the impact. I mean, kind of what are you hearing on the ground given the pricing restrictions and the burn-off in Jan? I mean, what are your channel checks kind of telling you at this point?

Yes, Samir, not probably anything deterently than you're hearing, which it's completely in the hands of the Governor. And the decision time frame, he's looking to come back to announce whatever next set of decisions would be very early January. So no additional color or context beyond it could result in a whole range of outcomes, but nothing specific at this point.

Got it. And then I guess, Tom, on the expense side, when you look at expense growth, kind of that 3% range, you guys have done a great job in terms of controlling expenses. I mean how much room do you have there to kind of still kind of grow at that sort of 2% into next year, at least the next 12 to 24 months?

Yes, sure. And I appreciate the comments. The team is focused around a number of different initiatives to drive operating expense performance while also driving revenue in the overall business. And the couple that we continuously highlight and we're seeing bear fruit again this year, continue to be the digital investments that we've been making. One of the side effects of those digital investments is the ability to think holistically differently about our property staffing and customer interaction, so we saw some fruit borne from that this year, more to come there as the team continues to drive evolution in our operating model. And then I think the other one clearly to highlight is our solar power initiatives, which we'll have solar on over 1,100 -- or we have solar on over 1,100 of our properties today and continue to drive forward with that initiative. And we'll continue to see the benefits from that. But in this environment, we're looking for all those ways to invest in the platform and drive better OpEx performance.

Our next question comes from Caitlin Burrows with Goldman Sachs.

I was wondering if you could talk through your current expectations for supply and maybe how you expect the next 12 months will compare to the last 12 months and what's driving that?

Yes. Sure, Caitlin. The trajectory continues to be the same, meaning on a year-by-year basis, we see the pressure creating fewer and fewer developments as a whole industry-wide. There are here and there are certain markets that have a number of additional assets coming to market. But clearly and nationally in a very positive context that supply delivery momentum continues to go down. And we've seen it throughout 2025, we're going to see it into '26. And I would even say we're continuing to '27. The basis for that outlook continues to be first and foremost, we're in that business nationally. We see the complexity and the friction that comes from any kind of a development. It's tied to the things that you have to do from an entitlement standpoint, becoming more and more complicated, the cost structure of assets themselves and then, again, formulating and understanding the risk that would be tied to going into the development process that in and of itself could take anywhere from 2 to 3 years if not longer. And then going to a stabilized asset that could take another 2, 3 or 4 years. So the risk factors for any kind of developer out there are much higher today and they continue to go a direction that's actually very good for the industry as a whole. Meaning there are going to be fewer and fewer deliveries even going in the next couple of years.

Got it. And then so I guess then leading into PSA's on development activity. It does sound though like you guys want to kind of maintain or backfill your pipeline of activity. So other than, I guess, size, what do you think differentiates your strategy and ability to kind of get past all of those issues? And how is your kind of stabilization over the past few years been going versus underwriting?

Sure. I'll take the first part and I'll have Tom talk to the stabilization, which is quite good as well. So no question, we have very different capabilities. It starts with inherent and deep-seated knowledge, market-to-market, with the amount of inherent operational data that we get, we have an ability to underwrite assets from a development and risk standpoint far differently than others do. We have the data set that guides us to optimize not only property size but also configuration within properties, unit, size, mix, et cetera. We can find pockets of assets quite effectively or pockets of asset development very differently than most developers. We've got a good national team working aggressively out finding in developing assets in a window that I just spoke to, that is far more difficult. So in a reverse way for us uniquely, it's providing the opportunity to go in and find very powerful development opportunities in a whole host of markets nationally. So our confidence and our commitment to the business has never been higher, but at the same time, it's never been a more difficult business. So it is a very good and unique window for us to continue to deploy capital, and it continues to lead to substantial and the highest returns that we see from any capital allocation effort. Tom, you can go ahead and talk about some of the metrics cited out, which continue to be quite good.

Yes. Our lease-up of our developments that have been recently delivered continues to do well, actually pacing a little bit ahead of expectations year-to-date. And you can see in the sub the yields produced by those vintages to Joe's point earlier, it does take 2 to 4 years for those vintages to stabilize, but we're seeing good trajectory across those vintages today and achieving those strong risk-adjusted returns that Joe spoke to.

Next question comes from Ron Kamdem with Morgan Stanley.

Just 2 quick ones. The guide -- I think this came up earlier, but the guidance sort of assumes a little bit of decel as you get into sort of 4Q. And I guess the obvious question is just as you're thinking about top of the funnel demand, whether it's some of the web search data or anything like that, are you seeing anything from that standpoint that's showing that demand may be slowing? Or how do you sort of think about that?

Yes. Thanks, Ron. Nothing implied there as it relates to demand overall. We continue to see a healthy customer activity to date. I think the item that I would highlight as it relates to same-store revenue, if that's where your focus is what I highlighted to Michael Griffin earlier around, the cumulative impact of the rental rate restrictions on Los Angeles, which will be holding us back a little bit more in the fourth quarter compared to the third quarter. And then that property tax, tough comps as well. But otherwise, the non-same-store pool is set to continue to accelerate given the activities to date and the capital allocation that we've been putting for forth.

Great. And then, yes, my second question was just on the acquisition pace picking up. Just maybe talk about the product that you're seeing stabilized, nonstabilized and sort of cap rates and returns expectations.

Sure, Ron. It's a combination of all of those things. So we had an active quarter, obviously, and pleased to see the range of different types of sellers that have come to us either through off-market transactions and/or assets that we've been [trolling] or in dialogue for some period of time. So it's a combination of some larger portfolios that we've curated to match some of our own investment requirements, market to market. It's also been a combination of some smaller portfolios that have resulted from some of our off-market and/or private conversations with them, always a healthy way to do some additional business. And then as we typically do with our national focus and the team that's out working nationally, relationships and otherwise, we're doing a whole host of one-off or a much smaller transaction. So it's a whole combination. It's, again, a market focus that we have to stay very close to and we're well suited to do so. We have unique capabilities to underwrite these assets with, again, going back to our development processes, knowing and understanding markets very deeply and been very pleased with a whole host of different types of assets that are either on one end of the spectrum stabilized or others that we're very comfortable bringing in the portfolio that are not stabilized, but once we put them on our platform, very comfortable and confident we're going to get the kinds of returns and meet expectations from, again, the invested capital going into those assets as well. So we're seeing a fair amount of good activity based on a lot of hard work that continues to go in that process, but it's bearing some good fruit.

Our next question is from Eric Luebchow with Wells Fargo.

Great. Appreciate the question. So maybe could you update us a little bit on operating trends through October in terms of occupancy moving rates? Anything you're seeing as we kind of move into the fourth quarter here?

Yes, sure. Happy to do that. I'll provide a couple of elements. And as I spoke earlier, focus continues to be on revenue overall. But specifically, talking about new customer activity. I'd maybe frame it as if you look at the third quarter and the rate and volume associated with new customer activity is down about 9% year-over-year. And each of the months throughout the quarter a little bit different in terms of volume versus rate, et cetera. October is doing a touch better than that, down 9%. So some improving from that standpoint. Really driven in this particular month, driven by stronger move-in activity, and we're achieving that with less discounts but also lower rates. So better net outcome there. I'd point you to move-in rates that again are driving that volume being in the down 10%, 11% ZIP code, but driving good volume up 3%, 4%. In terms of occupancy, because of that move-in volume, occupancy closed, Eric, is sitting today down about 40 basis points year-over-year. But again, I reiterate the revenue focus versus occupancy or rental rate. And we feel like we're in a very good place from an occupancy standpoint to drive revenue in a steady stabilizing and hopefully improving operating fundamental picture.

Great. And maybe just a follow-up. I know you touched on this a little bit, but the LA rent restriction headwinds, you had guided to about 100 basis point headwind. So maybe you could just update us on what you're expecting kind of as we look into Q4 and what you see underlying demand looking like on the West Coast? And I guess a related question. I mean, there has been some recent news about rent restrictions related to immigration activity in LA County with ICE. And so just wondering if you expect that to have any impact in the region.

Yes, sure. So 2 components there. One, related to LA performance for the year, it is trending a little better than what we had expected at the start of the year. And I think last quarter, I provided some perspective around revenue growth expectations for Los Angeles for the year being down close to down 3% for the year. We think based on where we are right now, it's probably going to be down in the 1s, meaning negative 1% and negative 2% for the year. So some better improvements there. In terms of -- and I would point to the drivers there really being what we spoke to earlier around really top to bottom, the West Coast, good customer activity, less new supply in those marketplaces and good trends. So good customer activity there. And then the second part of your question, the more recent state of emergency is going to have a negligible impact on our operating performance in the fourth quarter just as you think about a state of emergency already being in place through the start of January. So no change there, but we're certainly still in an environment with pricing restrictions associated with those state of emergencies.

Our next question comes from Spenser Allaway with Green Street Advisors.

Just one for me. Can you talk about the amount of NOI upside you guys are currently underwriting when you're acquiring from mom-and-pop operators today? Maybe just broadly, I know that it varies asset to asset. And then with the increasing prevalence and uses for AI, do you think that, that upside is going to increase meaningfully in the years coming, just particularly as we think about the amount of data PSA has to work with and enter into like algorithms?

Yes. Sure, Spenser. So in terms of cash flow that we can earn from assets that we fold into the portfolio. That's an important component to our capital allocation strategy as we continue to make investments in our operating platform and drive performance there. We can utilize that advantage as we deploy capital. And the most visible thing that I would point to is the margin advantage that we have in and out of the marketplaces that we operate in and that gives you a sense. Generally speaking, that margin advantage for new assets is both the revenue side and the OpEx side driving that margin performance. And so consistently getting towards 10% sort of margin enhancement for lots of the assets that we acquire. In terms of going forward, I noted earlier, we continue to make investments in the platform, both from a revenue and OpEx side. And so we do anticipate that we'll continue to drive performance within our operating platform and that will then immediately have the same impact on the assets that we're putting into the pool, both for our wholly-owned assets as well as for the benefit of our third-party management customers, we drive our operating platform.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

First, 2 quick follow-ups on acquisitions. Your volume is approaching $1 billion for the year, so a fairly active year. First, what's the outlook for that pace to continue into 2026? And then second, you've had very active years in the past, you did more than $5 billion in '21 and nearly $3 billion in '23. Is now a good time to lean in ahead of a recovery? I'm just curious what the appetite is like today to do something more sizable or strategic?

Yes. So a number of components to that question. So Joe and I will probably tag team this one. But I think we have seen an improving transaction market this year, Joe, spoke to that a little earlier. I do think the improving debt market trends set up for more active transaction volumes going forward. And so I think that's an opportunity set. In terms of our appetite continues to be very strong. We look back at 2021 and the $5 billion of acquisitions that we acquired there and would love to do that again. So it's a question of what the opportunity set is ahead of us, but we're built to be able to integrate that level of activity and fold those assets into the operating platform that we're speaking to. So we're excited about the potential for increased activity. We'll have to see what 2026 brings.

Yes. And Todd, I'd just add, the balance sheet is well positioned to service as we, again, unlock those range of opportunities. To Tom's point, we've proven over the last 5 years in particular, that whether we're in a process where we're taking down one individual very large portfolio or a whole collection of smaller assets. All of our systems and digital investments, et cetera, allow us to integrate these assets incredibly smoothly in many cases, within a 24-hour time frame from one platform to another. So we've got the technique, the scale and now time and again the experience to continue to aggregate these assets, and we are going to continue to look for any and all ways to do just that.

Okay. That's helpful. And then Joe, just sticking -- your comments around technology. So you mentioned a number of things, employee efficiencies, the rental process, Generative AI search. Clearly, expenses are an area where you've seen technology have a big impact. Is there a lot more room there? Or do you feel you sort of rung out a lot of the efficiencies at this point with maybe more benefits accruing toward acquisitions, mainly going forward? And what do you think might have the biggest impact in the next 3 to 5 years as you look out?

It's top to bottom, Todd, and continues -- from an investment standpoint, we are making a whole host of priorities around impacts to the business that starts right at revenue, all the things that we can do through our technology and investments tied to revenue and then it's optimization. Clearly, you can see that with the efficiency and continued outperformance on margin achievement. But again, to give you color on where we are on this road map, we're very confident. We have only just begun. I mean there are very meaningful things that the team continues to invest in, literally every part of the company. It's very empowering. It's not easy, but we have the fortitude and we continue to display the ability to use these tools very effectively in many times, a much shorter time frame than we may have originally estimated, as we've spoken to now for some time. 85% of our customers now transact with us digitally, where 4, 5 years ago that number was basically 0. And with, again, the migration to more and more data-driven processes that creates iterative and in some cases, compounding opportunities to drive efficiency much sooner and more effectively than we may have even envisioned at the front end. And we are encouraged by the team-by-team effort that continues to play through. We are no question, a self-storage company, but we have a focus on data optimization that continues to serve us quite well, and we're very committed to that.

What kind of margin upside do you think is ultimately achievable?

Well, we'll see how that plays. But confident we're not done.

[Operator Instructions] Our next question comes from Juan Sanabria with BMO Capital Markets.

Just wanted to follow up on L.A. quickly. You talked about feeling a bit better about the drag that L.A. is going to see for the year. Just curious if you could translate that down 3% to now down 1% to 2% on the overall portfolio? And is there any offsets from the strength in L.A. on the West Coast, the same-store revenues?

Yes. No, and I think giving you the guidepost as it relates to the markets should be helpful. I think the fourth quarter, obviously implied number associated with that, as I've noted a couple of times, will be holding us back a little bit further as it relates to the impact to the overall same-store. The demand associated with new customer as well as one of the things we've seen in Los Angeles is less vacate activity, and we've seen that up and down many of our markets and nationally, less vacate activity also helpful. So occupancy is up a little bit in Los Angeles. And so a lot of the same trends that Joe and I have already spoken to on this call in terms of good customer activity, very challenging new development environment continue to support Los Angeles despite the fact that we can't charge the rents that we otherwise would charge in a competitive marketplace.

And then just cap rate wise, how should we think about going in yields and targeted stabilized yields on the investments you're making at around $1 billion year-to-date?

Yes. No, the yields that we've been targeting are pretty consistent with what we highlighted last quarter. So we're likely to achieve going in yields in the kind of 5.25% ZIP code on a mix of stabilized and unstabilized activities year-to-date. And so the points we've been making on this call, we have the opportunity to plug those assets into our operating platform. And as we do that, we'll achieve more cash flow from those assets. And so those will stabilize into the 6s.

Our next question comes from Michael Goldsmith with UBS.

Sticking with the transaction market, can you talk about the opportunity that you see with lease-up properties, you'll be able to operate them better, maybe there's the appetite to purchase that? And then also the increase in the non-same-store NOI guidance was higher by $10 million. Does that reflect improved performance of the previously owned properties? Or does that reflect the newly acquired ones?

Okay. I'll take the first part, and Tom can take the second, Michael. But no question we have continue to deploy capital into many assets that are far from stabilization from some that literally are vacant to 30%, 50%, 70% occupied and otherwise. And time and again, have proven the ability to lift the performance of those assets very confidently, just like I spoke about earlier, tied to the knowledge that we have from a market standpoint, all of the techniques that we're using from revenue management, operational efficiency, knowledge of customer dynamics, knowledge of the market itself. So no question, we have a high degree of confidence in any range of stabilization from an asset standpoint. So we will continue to entertain all different asset types based on that level of knowledge and skill and that is continuing to produce the kinds of returns that we're very confident will not only continue, but it will give us more running room as we grow the non-same-store portfolio just like we have in 2025. Tom, you can take the second part.

Yes, the second part of your question, just related to nonsame-store performance. Part of that is better performance and lease-up of some of the assets that you're speaking to. And then the other portion is obviously closing on some incremental assets than what we had closed under contracts. So that combination leads to better outlook for nonsame-store for this year. But you also know we included an update to the incremental NOI from after '25 to stabilization, which reflects the future engine of growth associated with this pool of assets as they stabilize and lease up. So that's increased to $130 million for '26 and beyond.

And my follow-up question, your marketing spend is down year-over-year. I believe your promotions given is also down. So can you just walk through kind of like the thought process around using these levers as top or as a top-of-funnel demand driver? And just is there a reason why pulling back on some of these factors, this is the right time to do that versus maybe leaning in at a time with demand being kind of uneven?

Yes. Thanks, Michael. I'd say we consistently use all the tools you highlighted in order to drive the right kind of customer volumes and behavior over time. So we're active in utilizing advertising as well as promotional activity, lowering our rental rates, increasing our rental rates. And as I noted earlier, it all goes into a focus on optimizing and maximizing revenue as the one metric that we're focused on versus individual line items. And that's the focus of the team, and we'll continue to use all those tools in order to focus on that revenue metric.

Our next question is from Mike Mueller with JPMorgan.

I guess for some of the stronger markets that you talked about in your initial comments, can you talk a little bit about how different were the, I guess, the move-in rent comparisons to the year-over-year comps in those markets compared to the roll-up number we see in the South?

Yes, Michael, I mean, I spoke earlier to the fact that many of those markets I highlighted are performing well, steady, strong growth from many of them. And associated with that, you have better move-in trends, but you also have better trends from existing customers and good behavior amongst the existing customer base. So it's a combination of things as always, but no question, seeing some good strength across many of our markets today.

Got it. Okay. And as a quick follow-up, and I apologize if I missed this one. The -- any changes in terms of the pushback from customers on ECRI or ECRI levels in general?

No. The existing customer continues to perform quite well. You can see vacates were down in the quarter. Price sensitivity remains consistent with our expectations and our modeling. So no shifts there, and we continue to be encouraged by the storage consumer as they rent with us.

Our next question comes from Brendan Lynch with Barclays Bank.

Clearly, you guys are making good progress on the efficiency initiatives, especially on labor. How do you evaluate though, if you cut too much? I'd imagine there's some sort of A/B testing. But any details on your approach to overage or underage of labor would be helpful.

Yes, Brendan, we're in a now multiyear integration, which has included, to your point, a whole host of testing relative to the efficacy of optimized labor. And we very conscientiously and first and foremost, used customer interaction and customer service as a guidepost to see and understand, to your point, how far to go. The components of that also, though, include on a per market basis, and even a submarket basis, the kind of scale that we have. And with that, the effectiveness of the digital ecosystem that guides us to the predictability factor of this. And the tools that we're using from a predictability standpoint continue to become more and more effective. So those kinds of tools are the tools that we invest in completely from a labor standpoint that does a multitude of things from an output standpoint. One, again, tied to customer service; number two, the effectiveness of the team member themselves, ironically, but intentionally, it's also led to a much higher level of employee satisfaction relative to the way that they're operating their day-in-day environment. It's also and very intentionally provided good expense optimization and we continue to see more and more tools, particularly with the amount of data that we're dealing with, where we're moving in, for instance, north of 100,000 customers a month to guide us to the effectiveness of this. I mentioned earlier that now 85% of our customers are transacting with us digitally, but there are many customers that want to do the opposite and we're servicing them quite well with, again, a whole host of even different tools that they had to conduct business with us 2, 3 or 4 years ago. So more evolution in this entire process, but very good traction, meaning that we've got more to do, and we're excited about it.

Great. That's helpful. I also wanted to ask on housing-related demand. Obviously, that's kind of been a missing element for a couple of years now. Are you seeing any signs of improvement yet or any reason to be more optimistic that 2026 would be better than 2025 or 2024?

Yes, sure. I mean I think housing is a component of our demand. It's been relatively stable over the last couple of years as housing transaction volumes have been relatively stable after the step lower several years ago. Clearly, interest rates are a touch lower, mortgage rates are a touch lower, that should be helpful as we think about activity going forward. We haven't seen anything on the ground yet that would dictate that there's any meaningful shifts currently. And our in-house perspective is that it's going to take some time for the housing market to continue to work through it's adjustment with a big shift in mortgage rates over the last couple of years. So I think it's probably a steady as she goes environment in housing, maybe a touch better than that.

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Ryan Burke for closing comments.

Thanks, Rob, and thanks to all of you for joining us today. Have a great day.

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.