Public Storage Inc., a self-storage real estate investment trust (REIT), will increase rental rates this year for existing tenants on average of 8.5 percent. John Reyes, the company’s chief financial officer, made the announcement this week during an investor presentation for REITWeek 2013, the investor forum for the National Association of Real Estate Investment Trusts (NAREIT). Executives from the other three publicly traded U.S. self-storage REITs—CubeSmart, Extra Space Storage Inc. and Sovran Self Storage Inc.—were also scheduled to speak.
Reyes acknowledged the rent hike is “very aggressive” but noted that Public Storage has seen little difference in attrition or the number of customer complaints whether it increases rent 3 percent or 8 percent for existing tenants. “That's pretty encouraging for us. So, naturally, we’ve migrated to the 8.5 percent,” he said.
The rent increase is in line with the company’s first-quarter performance. Public Storage showed a revenue increase of 5.4 percent year over year, while same-store net operating income grew by 9.5 percent. The company’s occupancy rate also increased from 90.8 percent to 92.4 percent.
Many self-storage operators increase rents sometime between February and August, applying percentage formulas based on testing and analysis in their markets, according to the source. While economic recovery played a role in Public Storage’s decision, Reyes said the rent increase was made primarily based on analyzing customer demographics and market data.
“The management for these facilities has gotten so much more sophisticated,” said Marc A. Boorstein, a principal with MJ Partners Real Estate Services, a full-service real estate brokerage and investment banking company specializing in commercial real estate, mortgage banking and consulting services, including self-storage.
Based in Glendale, Calif., Public Storage has interests in 2,080 self-storage facilities in 38 states with approximately 133 million net rentable square feet. Operating under the Shurgard brand name, the company also has 188 facilities in seven European countries, with approximately 10 million net rentable square feet.