Rental Rates • Section 8 D


etermining the right unit pricing and knowing when to adjust those prices is essential for any self-storage op- erator. Doing so will not only bring you closer to your


ROI sooner rather than later, it will continue to determine the success of your facility for years to come.


Rental rates have long been considered the barometer


of the self-storage industry. Rising rates signal a strong de- mand for self-storage units, often motivated by factors such as a growing population base or a robust level of new home construction in the area. On the other hand, falling rents often foreshadow challenging times for self-storage opera- tors. Rents may lag as storage businesses grapple with issues such as new storage businesses entering the market or a se- rious economic downturn dramatically impacting the local economy.


It is important to note that rental rates do not always rise


and fall dramatically. In general, they tend to trend upward over time; but, at some self-storage stores, rates may remain stagnant over long periods of time. In these types of situa- tions, owners and operators can face unique challenges as a direct result of the stationary rents, such as grappling with expenses when the facility’s income fails to keep pace with inflation.


Some self-storage professionals, however, remain ex-


tremely reluctant to raise rental rates. Even when occupancy levels are high, these operators fear that an increase will make tenants angry or drive current renters to the less ex- pensive competing stores in the area. They may also worry





2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2


$57.28


  *


$59.00 3.0% Despite the potential drawbacks, rental rates must be ad-


justed regularly to optimize income at self-storage facilities. As units are leased, rental rates for popular sizes with few available spaces can be increased to bring more dollars into the business. Likewise, sizes with many open units can be discounted to attract renters to spaces that would otherwise remain vacant. Many of the nation’s large, publicly traded self-storage REITs have computer programs that adjust rates automatically on a day-to-day basis based on the facil- ity’s occupancy level. Rents at these facilities are constantly fluctuating with a focus on maximizing income rather than maximizing rental rates.


  


$79.75 * $82.29 3.2% $55.33 -6.2% $78.16 -5.0%


  $125.68


*


  $162.94


*


$129.23 2.8% $167.59 2.9% $126.34 -2.2% $162.58 -3.0%


$49.36 -10.8% $70.86 -9.3% $115.15 -8.9% $148.68 -8.6% $49.96 1.2% $71.37 0.7% $55.63 11.3% $79.96 12.0%


$115.18 0.0% Source: Union Realtime and the 2017 Self-Storage Almanac * Data Not Available 


2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2


$71.17


  *


  


$101.45 *


  $158.25


* $73.52 3.3% $104.87 3.4% $162.83 2.9%


  $207.25


* $213.39 3.0%


  $196.98


*


$202.85 3.0% $193.72 -4.5% $179.82 -7.2%


$149.22 0.4% $181.21 0.8% $125.99 9.4% $161.57 8.3% $196.27 8.3%


It is important to note that rental rates do not always rise and fall dramatically. In general,


they tend to trend upward over time; but, at some self-storage stores, rates may remain stagnant over long periods of time.


that increasing rental rates will have an immediate, negative impact on occupancy rates and that a full recovery from the fall-off in tenants will be difficult to realize down the road.


  $254.26


* $260.28 2.4%


$60.72 -17.4% $91.73 -12.5% $147.47 -9.4% $195.60 -8.3% $247.25 -5.0% $54.55 -10.2% $83.21 -9.3% $134.93 -8.5% $178.56 -8.7% $225.52 -8.8% $54.71 0.3% $82.24 -1.2% $133.12 -1.3% $176.54 -1.1% $222.77 -1.2% $59.26 8.3% $88.95 8.2%


$142.08 6.7% Source: Union Realtime and the 2017 Self-Storage Almanac * Data Not Available 2018 Self-Storage Almanac 89 $188.95 7.0% $242.80 9.0%


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