Question-and-Answer Session
Operator
(Operator Instructions) The first question comes from the line of Joseph Greff – JP Morgan.
Joseph Greff – JP Morgan
I have three questions; two are related to occupancy volume and one on CapEx. You mentioned in your earlier comments that occupancy would need to meaningfully improve to get pricing, I presume that is same store pricing, up and it is market by market, geography by geography. Can you maybe talk about are we 200-300 basis points away from getting pricing or 500-600 basis points and particularly with respect to New York we seem to look at New York as a leading indicator market. Another comment on occupancy you also mentioned was the first half of next year you expect demand to be weak. Do we interpret that comment on the first half of 2010 as occupancy down or occupancy up but still well below normalized thresholds or still kind of below on a 2-year basis?
My final question is how are you thinking about 2010 CapEx? What is the minimum level of maintenance CapEx you can get away with do you think?
W. Edward Walter
Let me start with speaking a little bit about occupancy. The question you raised about how much of an occupancy increase do we need to see is an interesting one. As carefully as we have tried to look at it, it really does come down to a market-by-market issue. Markets like New York and probably L.A. and D.C. where in New York we are running 90% right now and in L.A. and D.C. we are running close to 80%, I think there is an opportunity in a market like that as we start to see a little bit of improvement in demand it could fairly quickly translate into some pricing strength. We are not at that point quite yet but we are certainly approaching that. On the other hand if you have a market like Atlanta and Denver where we are running in the 60% range right now you are going to need occupancy to rebuild a lot more before you are going to really see any pricing power.
As you know, it really does happen day by day because where we get pricing power ultimately comes about on the days when we have more demand than we have room. So when you get to that scenario that creates the opportunity to really drive pricing by trying to [raise] it. To talk about my comment relative to 2010 I think the way we were thinking about that on the demand side is we would probably start off, I think we expect a little bit lower occupancies in the beginning of the year in 2010 but I think the bigger issue for 2010 is really rate and rate is really the bigger challenge as we transition from where we are finishing this year and into next year we are concerned that rates are just lower than where they have been.
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