By Drew Case
Storage Authority Franchise
In a time of concern that rates have dropped, rates can be increased at your self-storage. This may come as a surprise to some as we have become obsessed with competing by rate. A customer does not always choose a location solely by rate and we must not sell ourselves short as owners/managers. I you built a nice facility, then sell its features or upgrade and improve your facility to remain or be competitive. REITs have decided to go out on their own and create a new game. The jury is still out on their plan and the customer will determine the how the trust factor plays to their strategy. The customer always decides. As far as the rest of the self-storage world, we still need to make sense and be an advocate for the customer and still operate profitably.
When is a good time for a rate increase? When you are limited on a unit size or type is the perfect time. Pay attention to your own inventory as well as your surrounding competition. You should have a report in your management program that breaks down your occupancy by unit size and availability. You would see this on a rooms available report/list. A particular size may have plenty available, while you are significantly short on other sizes. For example, a 10 x10 CC unit with only one or two remaining would be a great candidate. Supply vs demand is the basic thought process.
How would you go about the rate increase? Provide at minimum 30 days notice to your tenants if you are raising their rent. It is best to include any improvements to your facility or reasoning that may help justify the increase in rent to your customer. It could be an upgrade in security, paving, building maintenance or even general operating expenses. The customer can better understand an increase with a justification. The standard increase would be $5 once or twice a year or up to $10 depending on market growth.
Who receives the increase? It could be only new customers that move into those sizes, but that is less rewarding and takes quite a long time to see the benefit as an owner. Normally, it will be all existing and new customers for the selected size. Some owners fear increasing rent on customers because they might move out. Managers also get concerned as they feel it is harder to rent units, however you should congratulate them on the occupancy that enabled you to increase the rate.
Let's do the math on this to consider the potential.
Let's consider a 600 unit facility that has 300 -10x10 units. If your 10x10 units are 90% full, then this would amount to 270 units. For this example, the new rate will be $110.
90% of 10x10 units is 270 units x $5 = $1350 per month ($16,200 annually).
Same increase at $10 per month = $2700 per month ($32,400 annually).
If your concern is that you will lose customers. Understand that this means a customer would have to be motivated to hire movers or rent a truck and move all their belongings elsewhere over $5-$10. This is highly unlikely. Lets say 5 people move out.
Five customers at $5 5 x $115 x 12 months = $6,900
Five customers at $10 5 x $120 x 12 months = $7200
Net Gain income annually at $5= $9300
Net Gain income annually at $10 = $25,200
In my 30 years experience in self-storage, I have never seen 5 people decide to out move over a minimal rate increase. I cannot recall even a couple move out of any specific facility for a minimal rate increase. If you have an occurrence with an upset customer, then work with them to retain them and keep them happy.
In the end, if five customers moved out, those are five units you can rent to the next customer at the higher rate. The vacant units provide the manager an opportunity to say YES to the next customer on a unit size that was usually highly occupied. Your units will be occupied regardless.
If you would like to learn more and start your journey to self-storage ownership click the link here: Storage Authority's guidance in self-storage development underscores the intricate balance between meeting storage demands and environmental sustainability. By aligning with Storage Authority's principles and leveraging our team's expertise, along with your engineer, architect, and general contractor we can navigate the complexities of impervious coverage with confidence, ensuring the creation of self-storage facilities that are both economically viable and environmentally responsible.
Storage Authority Franchising is all about owning your own local self-storage business, supported by professional systems and expertise. We like to say, "You're in business for yourself but not by yourself." If self-storage is on your mind, don't hesitate to reach out to Drew Case at Direct: 513-582-0125 or Drew@StorageAuthority.com to learn more about the Storage Authority Franchise opportunity. Your self-storage journey awaits!
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