How to Optimize Storage Unit Rents

By Gary E. Wilson, President & Designated Broker, Wilson Management, Inc.

Here is the counterintuitive thing about self-storage: a full facility is often an underpriced one.

Occupancy is the number operators watch, and it is the number that hides the problem. A building at 94% with rates that have not moved in five years looks like a success on every report and is quietly collecting well below what the market pays. Meanwhile a facility at 88% with a managed rate roll may be earning considerably more.

This is a practical method for finding out which one you have, and what to do about it.

Step 1: Separate your two rates

Every storage facility runs two rate structures simultaneously, and conflating them is the most common analytical error in the asset class.

Street rate is what a new customer pays today for a given unit type. It moves with local competing supply, seasonality and demand. It is the number a prospect compares when they search.

In-place rate is what your existing tenants actually pay — whatever they moved in at, plus whatever increases have been applied since.

In a facility that has never managed this deliberately, in-place rates sit well below street rates and the gap widens every year, because nothing in the ordinary course of business forces a repricing. Storage tenancies are month-to-month and can run for years with no renewal event to trigger the conversation.

The exercise: list every unit type. For each, record the current street rate, the average in-place rate, and the occupancy. The distance between the two rate figures is your recoverable revenue, and it is invisible on any occupancy report.

Step 2: Check your street rates against the actual market

Street rate should be set from local competing supply, not from what you charged last year plus inflation.

That means checking what comparable facilities within your catchment are advertising for equivalent unit types — same size, same access type, climate-controlled or not. Storage demand is intensely local; a facility three miles away in a different submarket is not necessarily a competitor.

Where your street rate is materially below the local range for a size that is full, you have found the easiest revenue in the building.

Step 3: Run existing-customer increases deliberately

This is the part operators avoid, usually out of a fear that raising rates will empty the facility.

That fear deserves examining honestly, because storage has an unusual property: moving out is expensive for the tenant in a way that has nothing to do with money. Vacating a unit means renting a vehicle, finding help, physically relocating everything, and giving up a weekend. Faced with a modest increase, most tenants weigh that effort and stay.

That does not make increases free. Applied bluntly they generate move-outs, complaints and reviews. The approach that works:

Schedule them. Review tenants on a defined cycle based on tenure and their gap to street rate, rather than whenever somebody notices.

Make them proportionate. A tenant far below street can absorb a larger correction than one already close to it. A single flat percentage across the whole roll is simpler and worse.

Notice them properly, in the form and timing your rental agreement and applicable law require.

Measure afterwards. Track move-outs following each cycle. That is what calibrates the next one by evidence rather than by nerve.

The number that matters is not the move-out rate. It is revenue net of move-outs. A cycle that loses a small percentage of tenants while lifting the roll materially is a good outcome, and judging it purely by whether anyone left leads to the wrong conclusion.

Step 4: Price each size as its own market

Rate per square foot is not uniform across unit sizes, and demand is not either.

Smaller units almost always command more per square foot than large ones. Demand for particular sizes shifts with local housing patterns — a catchment with more apartment renters generates different demand from one with more homeowners downsizing.

The work is identifying which sizes are chronically full and which chronically sit empty, then responding differently to each:

Chronically full sizes are underpriced. A size that never has vacancy is telling you the rate is below what the market will bear.

Chronically empty sizes need the rate moved down, not held up. An empty unit produces zero at any price, and operators frequently hold out on the hard sizes and collect nothing rather than something below target.

Where a size persistently fails to sell, the question is also whether it can be reconfigured — large units subdivided into the sizes that are in demand.

Step 5: Measure what your promotions actually buy

First-month-free is close to universal in storage, which makes it easy to adopt without examining.

It works when the tenancy that follows is long: the discount buys a customer who stays for years, and the real cost of leaving keeps them. That is a good trade.

It is a poor trade when tenancies are short. A three-month tenant who took a free month paid two-thirds of your advertised rate. If your promotions are mostly attracting short-stay customers, the promotion is not acquiring anyone — it is discounting the customers who were coming anyway.

The check: compare average length of stay for discounted move-ins against undiscounted ones. If they are similar, the promotion is working. If discounted tenancies are materially shorter, it is a price cut wearing a marketing label.

Concessions should be a lever pulled where occupancy needs it, at the sizes that need it — not a permanent feature of the rate card.

Handling the reaction

Even a well-judged increase produces some reaction, and how it is handled determines whether it costs you tenants.

Expect calls, and answer them. A customer who phones about an increase is usually deciding whether to stay, and the conversation is the decision point. An operator who is unavailable, or who cannot explain the increase beyond "costs have gone up", loses tenants who would have stayed.

Have a consistent position. Whether you hold firm, offer a smaller increase, or offer nothing should be decided in advance rather than negotiated tenant by tenant. Inconsistency spreads — storage customers talk less than apartment residents, but they do talk, and a facility known for backing down when challenged will be challenged every cycle.

Know what the alternative costs them. A customer weighing a modest increase against renting a van, recruiting help and spending a weekend moving usually concludes that staying is cheaper. Saying so directly is not a hard sell; it is the actual arithmetic, and most customers have not done it.

Watch reviews. Rate increases are a common trigger for negative reviews, and a review left in frustration outlives the tenant. Handling the conversation well is partly reputation management.

Track who leaves. If move-outs concentrate among tenants who received the largest increases, the increments were too aggressive. If they are spread evenly, the increase was not the cause.

What to watch monthly

Four numbers, reported separately because they move independently:

• Occupancy by unit type, not building-wide
• Street rate and average in-place rate by unit type, with the gap
• Move-ins and move-outs, including move-outs following each increase cycle
• Delinquency, aged

A single headline occupancy figure hides which of these is happening, and the responses differ completely. Occupancy can rise while revenue falls. Revenue can rise while tenant count falls. Both are useful outcomes in the right circumstances and alarming in the wrong ones — and you cannot tell which from one number.

A worked example

To make the arithmetic concrete, consider a facility with 300 units where the average in-place rate sits 20% below the current street rate.

Closing even half that gap across the roll — through a scheduled increase cycle applied proportionately, with the largest corrections going to the tenants furthest below street — lifts revenue by roughly 10% with no change to occupancy, no capital spend and no additional marketing.

Suppose that cycle produces move-outs among a small share of tenants. Those units then re-let at the current street rate rather than the old in-place rate, which means the vacated units come back at a higher figure than they left at. The move-outs are a cost in vacant days, and a partial gain in repriced units.

That is why revenue net of move-outs is the number to judge the cycle on, and why judging it purely by whether anyone left produces the wrong conclusion. A cycle with zero move-outs is not necessarily a success — it may simply mean the increase was too small to be worth running.

The figures here are illustrative rather than a projection for any specific facility. What is not illustrative is the mechanism: in most under-managed storage facilities, the recoverable revenue is sitting in the gap between what new customers pay and what existing ones do.

Where to go next

Our Storage Revenue Management page covers how we run this continuously, and Self-Storage Facility Management covers the wider service.

For a view of how your facility is performing against what it could be, request a free analysis or contact us.