There are many theories about customer rate increases. Self storage owners and operators are often second guessing themselves about when to give rent increases and how much of an increase is the right amount. Many times to correct answer is market specific, but I have found there are a few tried and true rules that work well in most situations.
I am always my most aggressive when it comes to customer rent increases in February and March, really for two reasons:
1. In a typical market that sees typical market rate fluctuations, it is not uncommon for your lowest rates of the year to be found in these months. This makes it easier to adjust customer rates to match current rates without running as much risk of hitting the customer “too hard”. For example;
A. In the peak months, current rate a space may be $99 and customer rate at $74. Getting them up to current rate is a 32% increase – much too big a pill for most customers to swallow so you have to either give them a smaller increase or run the risk of a lost customer.
B. In the slower months like January and February, chances are you have reduced your current rate. In this example, say your current rate is $84 – now you’re only looking at a $10 rent increase to get this customer up to your current rate. You’re still getting a 13.5% increase, the customer is now at current rate and you run a much lower risk of losing the customer.
2. The other reason why I am more aggressive in February and March is because the peak season is right around the corner. In the event the customer does move out, you know that unit won’t sit vacant for very long as opposed to a move out in October that may sit vacant all winter.
Another thing I want to mention is, unless a space type is at 100% occupancy, I rarely raise a customer to 100% of current rate. For example, if current rate is $89, customer is paying $79 I will only raise them to $87 or $84. This gives your manager the ability to let the customer know, even with the rent increase, they are still paying below the current rate.
As I mentioned, there are many theories regarding customer rate increases, and I’ve heard other theories that I like, but this method has always worked very well for me. Now is one of the best times to give rate increases.
Monty Rainey has 20+ years in self storage management and is the owner of RPM Storage Management, LLC of New Braunfels, TX.