Operating performance results released this month by the industry’s large real estate investment trusts (REIT) from the first quarter demonstrated that self-storage is very much in demand in most regions. The big five revealed gains in net operating income and occupancy. In a statement about the results, Andrew Gregorie, chief financial officer for Life Storage Inc., also noted rental rates for new customers increased in the quarter, and they expect this trend to continue as the busy season begins.
The REITs aren’t the only ones enjoying consumer demand. Many storage facilities in big cities and small towns are full and have waiting lists. There are a number of reasons for this.
The pandemic, of course, slowed down self-storage development. At the same time, the need for self-storage increased as people downsized, moved or became remote workers. The high energy at the ISS World Expo last month proved there’s never been a better time to be in self-storage.
Like the REITs, independent and regional operators are also successfully raising rental rates for new and existing customers. In a poll on Self-Storage Talk, members shared what they’re doing this spring regarding rental rates. About 84% report they’re boosting rates for all tenants. That’s amazing, especially considering just a year ago, operators struggled to bump up their pricing.
If you’re hesitant about raising rates at your self-storage facility, don’t be. There are so many options! Many management software programs can do it for you. Artificial intelligence is also playing a bigger role in managing rental rates for many operators.
If you’d like to take control, there are also many schools of thought. In the article “Rip Off That Rental-Rate Band-Aid!” self-storage owner Charlie Kao discusses his strategy. He factors in current occupancy, competition, facility size and other notables to create a system that has proven successful for his sites. Your software reports can also lend a hand. Examining what units are always rented and at what price tells you a lot. Look for those that have a 90% occupancy or higher. These are your targets.
Another great approach is to price units according to the perceived value from the customer’s point of view. Think valet parking, designer clothes or an airplane seat in first class. In storage, it might be a unit near an elevator or on the first floor of a three-story building, close to the front gate, or across from a security camera. There are many renters who’ll pay more for these perks.
While you should definitely evaluate your rental rates regularly, you must also be mindful of your market. Your method shouldn’t be “how high can I go.” Taking a careful, calculated approach is the better choice. Consider what your competition is doing, and what demand shows for your market and facility, and then build your pricing plan.
If you own, manage or invest in self-storage, you need to capitalize on this moment in time. People are becoming accustomed to paying more for products and services. The cost to operate a self-storage business is rising, too. Raising rates isn’t a “money grab,” but an opportunity to create a more successful business. Before you pull the lever, peruse the many resources on revenue management on the ISS website. In addition to articles, videos and blogs on rental rates, you’ll also find content on how to trim operation costs, budgeting and collection strategies. Or head over the to the ISS Store and learn more about this topic from our industry experts!