Guest Author: Tracy Sells, Harbor Storage Group
Executing rate increases to existing tenants or raising street rates is oftentimes viewed as a cumbersome and daunting process. Thus, it is often avoided. Revenue management can be an uncomfortable subject, but it doesn’t have to be. You may even be thinking, my facility is 90% occupied so why would I need to consider increasing rates? Evaluate this. When it comes time to sell, maximizing profit margins and displaying competitive rates within your local vicinity will optimize your facility’s valuation. Consider the following four reasons it may be time to increase your rates.
1. When was the last time you raised rents for your existing tenants? Have you considered the first increase after five months, and then another increase annually thereafter? I recommend following a model like the Real Estate Investment Trust’s (REITs) where unit rate increases are passed on to customers on a regularly scheduled basis.
2. It is important to understand when it comes to rate increase strategies, one size may not fit all. For example, if you are highly occupied on 5×5 climate controlled units and the demand is high, you may increase that price more than you increase the price on a unit type with lower occupancy and less demand. Is your facility highly occupied for a particular unit type? Evaluate your pricing by unit type and increase street rates on those units with high occupancy and high demand.
3. Consider which type of unit features translate to premium rates. Are you charging more of a premium for units closest to the gate or elevator? How about outside units near an exterior light or camera? Customers are willing to pay more for specific unit features if it means increased convenience and peace of mind knowing belongings are secure. Price units higher than those farther from the gate and sell tenants on the benefits of those conveniences. For more information on Value Pricing, read this blog post.
4. Lastly, align rate increases with your peak rental seasons! Many markets are entering the traditional rental season with historically high occupancies brought on by changes to the economy from Covid-19. I recommend leveraging this current environment, and understand demand increases are expected during the Spring and early summer so price accordingly.
Managing rates can be overwhelming! Do not let these obstacles get in the way of maximizing your facility’s NOI. Not sure where to start? Tracy Sells with Harbor Storage Group has partnered with The Storage Group to offer highly customized consultation programs and educational sessions to facilities looking to get started. Contact us today for more information and a 30 minute free consultation.