Let’s be honest: We’ve all heard about those facilities that haven’t changed their rates in years.
Many operators out there get lost when it comes to self storage rate management.
You may even be in that boat—and if you are, that’s OK! We’re here to help you get your mind around setting rates.
Whether you’re operating a new facility or just trying to get better at rate management, we’re here to deliver some expert advice on how to manage your self storage rates.
This article is going to focus on setting your street rates or standard rates. If you’re looking for advice on managing rates on your existing customers, check out this post on rate increases.
Now, are you ready to become a master of determining how much to charge for a storage unit?
The good news? Setting your street rates is actually deceptively simple!
The bad news? It requires a little bit of thinking.
There’s no magic number that every self storage facility across the nation can target for a given unit. Even if you just take a unit with the same exact size, features, and other factors, the Goldilocks rate will be different at different facilities.
In fact, consumers don’t always make their buying decisions based on price. Just take a look at this data:
A study from Stanford University on how pricing affects consumer purchases found that 13% of consumers chose the lowest price, 17% of consumers chose the highest price, and 70% of consumers made a decision based on something other than price. Another study by First Insight found that quality is becoming more important than price to many consumers.
To really illustrate how different it can be, a storage facility right down the road from you could have a much different ideal street rate for a given unit than your own facility!
So, how does it work?
While each facility—even the ones really close to each other—can demand different rates for the same units, that doesn’t mean you should ignore the competition.
If you’re starting out from scratch, looking at your nearby competitors is a great way to get a read on what is right for your market.
Use this as a baseline, adjusting if needed for the costs of operating your business.
The competition is important, but your occupancy is the most important factor for setting street rates.
If you only base your prices on what the facilities around you are doing, you may be leaving money on the table by either overcharging or undercharging.
In fact, Universal Storage Group recommends that as soon as a unit hits either 90% occupancy OR has 3 units remaining, you start raising rates on it.
There are many factors beyond price that can impact the popularity of one facility’s units over another, including:
Any one of these factors (and more) can mean that a given unit type at your facility is way more popular than the same type at a facility a block away.
Imagine for a moment that there is another storage facility just down the street from you. Your prices might be much higher on 5x10 storage units, but you’re still nearly full. Then you realize: Your facility is just a little bit closer to and a little bit easier to access for all of the new neighborhoods that were just built up the road.
It’s a small difference, but that’s all that was needed.
If you only looked at competition data, you’d be missing out on money.
Now that we’ve looked at our competition and considered our own occupancy, we can use this data to help us boost the attractiveness of low-occupancy storage units.
This tip comes right from the experts at Universal Storage Group.
The idea is really simple, but it can have a big impact on your rentals. You raise the rates on units surrounding a given unit size in order to make that unit a more attractive deal.
I’ll use the same example USG did in a recent presentation they gave:
BEFORE
10x10 at $85, over 90% occupancy
10x15 at $100, high vacancy
10x20 at $115, over 90% occupancy
Now, raise the rates on the high-occupancy 10x10s and 10x20s:
AFTER
10x10 to $95
10x15 stays at $100
10x20 to $129
Because 10x15 was low occupancy, we left the rate alone. Now, it is an easy upsell from 10x10 to 10x15 (“only $5 more!”), and it’s a whole $29 cheaper than the next size up.
There are some other special circumstances that may impact your street rates. Let’s take a look:
Where you look to find occupancy data will change depending on what software you use to manage your facility.
For SiteLink, perhaps the most common property management software, there are two places you can look:
But not matter what software you use, it should have a report you can pull to view the occupancy breakdown by unit type. This is what you need to get started on using the pricing strategies above!
There are some alternative pricing strategies out there in addition to strategies that complement the one listed above.
Value-based pricing is a self storage pricing methodology where you set unit rates based on the perceived value of the unit.
This means that instead of making all of your 10x10s cost $85, you might make the ones people want more—say, ground-floor units near the gate—cost a little bit more.
The airline industry uses value-based pricing by charging different prices for different seats based on their desirability. For example, they may charge more for aisle and window seats versus a middle seat. Seats in the front of the plane or that have more legroom also cost more.
In self storage, value pricing means putting higher prices on your more desirable storage units. So what makes one storage unit more desirable than another? Accessibility and convenience are two key factors. After all, a storage unit that is centrally located, near the gate, on the first floor, near an elevator, or that offers trailer access will be viewed as more desirable than other units of the same size. As a result, you can charge higher prices for these desirable units.
It’s like creating a “first class” section for your storage facility.
Other amenities that you can charge higher prices for include higher ceilings, larger doors, power outlets, or air conditioning.
By highlighting these amenities on your website and in your pricing, you’ll be giving your customers a choice of choosing to pay more for a more desirable storage unit. It also means that you can offer more affordable units to customers needing lower prices and then upsell customers willing to pay more.
On your storage facility’s website, you should organize your storage units into tiers. An example would be “Standard, Best Value, and Premium,” and then setting rates appropriately.
StoragePug has found that 35% to 40% of customers upgrade units when given the choice. It may surprise you that many customers will pay $10 more per month for a unit located near the front of your facility!
This is probably the most foundational pricing strategy that exists.
This means you set prices for storage units based on the costs of operating your facility, which includes wages, utilities, software, hardware, marketing, and any other expenses.
Once costs are determined, a mark-up is added and then that amount is divided across your units according to expected occupancy.
Cost-based pricing is often used in manufacturing as a way to set prices that will ensure a profit. It is the bare minimum strategy you should start with, making sure your rates are at least high enough to break even.
However, this pricing strategy doesn’t consider demand or competition. As a result, you should use the strategies highlighted earlier in this article once you have determined your bare minimum rates using cost-based pricing.
Raising rates for your existing tenants is also important.
It’s outside the scope of this article, so I recommend checking out this article that is entirely about rent increases!
This post covers a range of topics, including (but not limited to):
Raising rates on existing tenants is important.
Some self storage owners resist raising rates for fear that it will cause customers to move out. Unless you’re raising rates by an extreme amount, most customers expect periodic rate increases. After all, it happens in almost every industry. The key is to make small periodic increases over longer time frames—such as after 6 months of occupancy or once a year.
Ultimately, the best rate management strategy considers what is happening at your storage facility first and foremost.
By keeping your storage facility’s unique market conditions and occupancy rates in mind to inform your pricing strategy, you’re sure to choose street rates that lead to stable occupancy and maximized income.
Here are some of my other favorite posts to check out!
At StoragePug, we build self storage websites that make it easy for new customers to find you and easy for them to rent from you.
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