Rental Rates • Section 3 M
any variables must be considered when it comes to establishing or adjusting rental rates at a self-storage facility. Some of those factors include the competition,
unit size, unit availability, demand, location, and the economics and demographics of the area. While it is essential to increase rental rates occasionally to keep up with inflation and optimize income, adjusting rental rates can be tricky business if demo- graphics and economics aren’t taken into consideration. Many larger self-storage companies and REITs spend a hefty amount of time and money making daily changes to rental rates based on occupancy rates and other data that they mon- itor. They constantly adjust rental rates at their facilities in order to maximize rental rates and re- duce incentives. However, not every self-storage facility can af-
ford to spend a million dollars on a rate manage- ment program or hire additional employees to serve as the business’s private revenue manage- ment team. Storage owners operating on a small- er budget simply need to take a close look at the local economics and demographics of the areas in which their facilities are located in order to de- termine the rental rates they should be charging. For example, if the population is growing but the household income has declined, it is probably un- wise to raise the rental rates. Knowing what is hap- pening in a facility’s market area can help owners and operators make more logical decisions.
Costs By Location As noted above, many components are taken into consideration when determining rental rates. One of the main factors is need. Rental rates are adjusted based on supply and demand. Another factor is location—more specifically, region or community location. While rental rates will vary widely from region to region, they can be drilled down more specifically to community type. For example, whereas demand may be high in an ur- ban area, there may be several competitors in the area as well, which could create price wars due to an ample supply of storage. On the contrary, in a rural area, where larger homes may have attics and basements that can be utilized for storage, demand could be minimal. Although one may assume that rental rates
would be higher in urban areas due to increased operational costs, the data doesn’t reflect that. In fact, according to the SSA 2013 Self Storage De- mand Study, 9 percent of storage renters in urban areas paid less than $25 per month. At only 4 percent each, that percentage is more than both suburban and rural areas combined. However, on the high end of the price scale, only 7 percent of units in rural areas cost $150 or
more per month; whereas, 11 percent of units in suburban areas and 10 percent of units in urban areas fall into that price range. Moreover, when combining data for the cheapest three price ranges, regardless of location, more than half of all units cost less than $75 per month. One variable that we will examine later in this section is how rental rates are affected when looking for specifically at the top 50 metro areas. While it may not seem logical, the data actually shows more
uniform costs across the board. The most common monthly rental rate paid for storage units in urban, suburban, and rural
Chart 3.1 – Monthly Unit Cost by Region
Less Than $25 Per Month $25 to $49.99 Per Month $50 to $74.99 Per Month $75 to $99.99 Per Month $100 to $124.99 Per Month $125 to $149.99 Per Month $150 Per Month or More
0 Percentage of Renters Source: SSA 2013 Self Storage Demand Study 8 16 24
South West
Midwest Northeast
32
40
Chart 3.2 – Monthly Unit Cost by Location
Less Than $25 Per Month $25 to $49.99 Per Month $50 to $74.99 Per Month $75 to $99.99 Per Month $100 to $124.99 Per Month $125 to $149.99 Per Month $150 Per Month or More
0 7 14 21
Suburban Rural
Urban
28
35 Percentage of Renters Source: SSA 2013 Self Storage Demand Study 2015 Self-Storage Almanac 47
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