How fast are self storage rent increases happening?
Well it depends.
It depends on your market, what size and so on. But the truth is, it has been hard for us to really tell accurately.
Much of our competition uses the demand marketing model (where prices vary daily or weekly like hotel or airline pricing – see my blog post HERE where we discussed this in more detail). As we survey the competition it’s hard to get an exact handle on what prices really are.
What we don’t want (and have unfortunately done before) is to get so far behind the market that we’re raising rents in big jumps at a time.
We used to have a yearly price increase and were proud of it. Today, if you just have one price increase per year you are either (1) having big jumps in rental prices, or (2) you’re behind the market.
It seems odd. More facilities are going up now than ever before (no stats, just what it looks like). Occupancies are higher than ever before. And I can’t keep the rents rising fast enough to keep up with the market.
In the world of problems, I guess this is a good one.
Here are some of the adjustments we are doing that I thought you may be interested in:
- We have two price increases per year now that average between 2.5% and 3.5% per increase.
- We use 88% stabilized occupancy in our Proforma (sometimes I slip back to 85% just to feel safe).(Okay, the reality is if I see one at 85%, I wonder what’s wrong.)
- In most cases, I am moving net absorption of square feet per month to 1,500 square feet in our Proformas of new construction or expansion square footage.
This is all good, but you also have to keep in mind is that not only has the industry matured, the customer has as well.
If you’re asking $135 or $150 a month for non-climate controlled 10 x 10’s:
- They better be in excellent condition.
- The customer service better be awesome, and the customer better know much you appreciate their business.
- If they have a problem, it had better be addressed quickly and with a smile on the manager’s face.
Nothing will stop the acceptability of two price increases per year faster than bad reviews from bad customer service.
This is a fast maturing industry, and even though we are the “smaller investors” in the game we do have a real advantage. We can pivot faster than the big guys, and we can out customer service the customer.
I’ve seen it over and over, if you have happy customers who like their facility, like their unit, and like their manager, they can handle the price increases. Just make sure you’re not putting them through large jumps in price all at once.
