The self-storage industry continues to be a consistent, sound investment. At two years post-pandemic, recent market data reflects that self-storage is worth consideration to expand current investments for entrepreneurs. According to the December 2022 Storage Café report, investors can continue to feel confident in self-storage.
Extensive figures can be found at https://www.storagecafe.com/self-storage-industry-statistics/
Across the United States, self-storage boasts 2 billion square feet of available self-storage space according to the Self-Storage Almanac via Sparefoot. Investors continue to build new facilities to meet demand in areas across the country.
Prices for rentals remained steady in the few years leading up to the pandemic. The average price per 10×10 unit for 2022 hovered around $110-120 with the most significant jump in price from 2020-2021 where average prices for the same unit were around $90. (Sparefoot, 2023) With 2023 off to a slower start, prices for the same unit for a new rental may slightly come down. While consumers will enjoy the decrease, owners may feel a hint of concern.
5 steps to take when it’s time to increase rates
How do you handle the opposite when demand exceeds supply? Even if national averages have slightly decreased, it might be time to consider raising rates. If rates have been below average for a while, here are some steps to take today. Let’s look at 5 steps to take when it’s time to increase rates.
- Assess the current market with local competitors.
It’s important to know the current market with 5-10 of the closest competitors. A little research can go a long way to assess current pricing. Online pricing via websites, social media or even making phone calls to inquire takes only about 30 minutes of time.
- Assess current tenants and decide which rents to raise first.
Are all tenants currently renting at market value? Do all tenants currently pay on time without late fees? The first rents to increase should be the ones not currently at market value. If a handful of long-term tenants are below market value, consider what steps to take to get them to current market price. This may include a series of percentage increases over time.
The second group to consider for rent increases is tenants who are routinely late on rent. This group may be challenging because they are often behind; however, they continue to pay late fees and other assessments as a result of their tardy bill payment. They also remain a customer. Rate increases will either prompt them to move out or they will stay. Once all tenants who will receive increases is established, it’s time for the next step.
- List new pricing online: website and social media.
Don’t make the mistake of advertising lower prices on your website or social media than current tenants are paying. Current tenants seeing a lower price than what they’re paying will likely call for a rate decrease or at least to air their frustration. At the end of each month it is wise to consider assessing and updating current pricing to reflect the market and availability.
This is also a good time to refresh any social media marketing currently utilized in order to generate new traffic. Make sure to advertise pricing in a conspicuous way that also is attractive to potential customers.
- Draft rental increase notices.
A crisis management phrase popular among public relations professionals goes, “tell the truth, tell it all, tell it now.” Rental increases are not necessarily crises to be managed; however, the meaning behind it is helpful across industries.
Tell the truth of why rates are increasing. Tell when it will happen. Tell is now so there are few surprises for customers who have been loyal.
Explain why rates are increasing and what tenants can expect in return. If you’re investing in anything specific to your location that will enhance the customer experience, this is a good time to explain that. Give customers a 60-day window prior to the increase. This time frame allows them the opportunity to prepare for the financial change and to shop for a new self-storage if necessary. Answer any questions that might be anticipated in your communication, but keep it brief. Businesses incur costs and changes daily. The increase reflects that, and most customers know and expect this. Don’t belabor the point.
- Assess your rental increase process.
With any significant change to operations, assessing after the fact is essential to business growth. Make note of what worked well, what didn’t and what to change for next time. Rental increases may happen more than once per year depending on the market for your self-storage. Assessments and reflection make it easier for the future. Pay attention to things like increased revenue generated, retention rate and what concerns customers raised in the process.
As the Argus Self-Storage Network Broker Affiliate, Weaver Realty has been the trusted source for self-storage opportunities in the state of Florida (excluding the panhandle) since 1999. We work hard to encourage and educate our self-storage investors beyond the acquisition of their property. Call us today to find out how we can help you grow your portfolio at 904-733-0039.