Proceed With Care: How to Raise Your Self-Storage Rates and Collect Past-Due Rent in a Time of Inflation

When COVID invaded our lives in 2020, it wasn’t clear how the self-storage industry would be impacted. There were some temporary drops in business at first as lockdowns went into place and consumers sheltered at home, but that passed fairly quickly. Within a year, rates went back on the climb as demand increased. The leniency many owners and managers had shown their tenants became less necessary, and late fees and auctions resumed.

Fast forward to today, and we’ve got an entirely new self-storage dynamic. Not only are operators executing healthy price increases for existing tenants and new renters, these adjustments are often substantial despite a troubled economy plagued by inflation and a looming recession. But it isn’t all rainbows and unicorns. While many customers are taking these surges in stride, some may be getting a little testy as they feel the financial pinch.

Are you seeing customer pushback on higher rates and incremental increases? What about delinquencies, are you experiencing more of those? Maybe you’ve heard grumbling over late fees or administrative costs? It would be no surprise if you were. Though these challenges may rear their ugly heads—and facility managers may be reluctant to battle them—your self-storage operation can be assertive about income, even in this environment. Here are some strategies to help ease the way.

Help Them Understand

It’s natural for some self-storage renters to be surprised or even upset when their rate jumps. We’re all spending more to fill up our gas tanks and put food in the fridge these days. Nearly everything we buy costs more, and yet customers generally expect their storage bill to stay the same. They simply don’t understand the need for rate increases. Without the proper information to help them see your side of the story, rent bumps read as greed.

“The average consumer sees some metal buildings and thinks this has to be a cheap business. In reality, we have employees to pay who answer the phone, and we have a physical office we house our operations in,” says Adam Armstrong, president of A&G Storage Solutions in Blue Ridge, Georgia. “With the handful of complaints that we receive about the rate increases, we use that moment as an opportunity to educate the customer that there's a lot that goes into this business.”

Charles Nieman purchased Browns Storage in Grandy, North Carolina, in December. When he adjusted rates this year, he got fierce resistance from a couple of tenants but managed to smooth things over with a phone call. “To be honest, neither conversation was pleasant. I typically do not get angry and project that to a customer; however, their tone in their email was accusatory, angry, and [they] all but called me a crook,” he says.

After implementing a 10% increase for 350 tenants, a South Carolina manager who asked to remain anonymous also received a few complaints. One was an irate email from a tenant whose rate hadn’t changed in five years.

“They seemed to think they were entitled to that rate for life because they were a ‘loyal customer’ who had never paid late,” says the manager. “We simply replied to them to emphasize how rare it is in self-storage—at least in our area—to go five years without a single rent increase and showed them the pricing of equivalent units at the only two nearby facilities that even had that size/type of unit available. We also emphasized the level of service we provide. They never replied back, but they didn’t vacate either.”

Social media has also become a frequent avenue for tenants wishing to express anger over a bigger storage bill. “We had a few people leave us one-star reviews on Google. This was an opportunity to educate the general public on why we raised rates,” Armstrong says.

Salve the Pain With Good Service

While it can be tempting to fight fire with fire, it’s never wise to get upset with a self-storage tenant, take their anger personally or participate in a screaming match. When faced with customers who are distressed about a rate change, late fee or lien sale, instead draw on your well-honed customer-service skills.

“We train our team to lead with empathy and explain our policies to customers. We allow the store teams to negotiate on fees or rates and submit adjustments for approval if they feel it’s a good business decision. We work to empower our team to be able to respond to customers with options,” says Mitch Pope, vice president of operations support for Extra Space Storage Inc., a self-storage real estate investment trust and management company.

To pacify current tenants, let them know they’re still getting a better rate than those new to the business. “We never raise [existing tenant] rates to or beyond current [street] rates. This always gives our staff the ability to let tenants know that even with the increase, they’re still getting a discounted rate,” says Monty Rainey, owner of RPM Storage Management LLC, a Texas-based third-party management company.

“Leave your store staff some wiggle room,” he suggests. “Once they explain that the tenant is still receiving a discount, however slight it may be, most customers will reluctantly accept the increase and understand our costs have gone up like everyone else’s.”

Educating every customer who walks through your door, visits your website or calls your self-storage facility is imperative. You should explain the “why” behind a price increase, but you don’t need to justify it. “The entire world is having to deal with increased rates. The cost of business is going up, and the average consumer just sees metal buildings and a fence,” Armstrong says. “They don't understand what else goes into running these businesses. A light bulb typically goes off once we explain our costs to them.”

Whatever a tenant’s feelings about a financial issue, you as the facility operator should never tolerate aggressive behavior. Any threats or intimidation should be cause for non-renewal of the self-storage rental. “There's a paragraph in our lease agreement about it. If they cuss, mistreat or threaten us, they’re gone,” Armstrong says.

Offer Consistency and Compassion

Today’s economic woes have led to another problem for many self-storage operators: More tenants are falling behind on rent. You may be spending additional hours chasing past-due payments or facing the need for more lien sales.

“Self-storage does better than most industries during inflationary periods, but we are not immune to it,” Rainey says. “We have seen a definite uptick in delinquency and are putting more focus on collections calls. We have also seen about a 20% rise in auction units over last year.”

One way to mitigate this challenge is to take an active approach with your tenants, particularly those who are habitually late. “We have always been very active in collections, and I think we do more contact than the average facility,” Armstrong says. “As soon as the first of the month hits, we start calling people. This sets the tone for the customer. We call daily until it's taken care of.”

In addition to contacting renters through email, text and phone, you’ll have more favorable results if you approach this process with compassion. “Empathy goes a long way with customers,” Pope says. “If the customer feels like they need a resolution beyond an explanation, we empower our call center and store employees to resolve the customer’s complaint and have given them new tools to streamline that process.”

Once you’ve opened the lines of communication, you can determine how to best help your self-storage tenant. This could be by moving them to a smaller unit with a lower price, offering a payment plan to help them catch up or waiving a late fee to lessen the total bill. You might also accept a percentage of what’s owed or ask them to forfeit their unit through a signed abandonment form with a promise that you won’t turn the account over to collections. The goal should always be to bring the unit current or vacate it so you can rent it to a paying tenant.

Whether your customer is upset about a rental increase, collection call or lien sale, you need to be prepared for whatever comes your way. “The key to addressing customers is clear, honest, empathetic communication. Allowing the customer to be heard is imperative,” says Vanessa Rovekamp, director of marketing for Andover. “Still, it is important that our customers understand that we are impacted just as they are by the economy; and just as they need to sustain their business, we need to sustain ours as well so that we can continue to offer them the quality storage they have entrusted us to provide.”