Like any other consumer, self storage tenants do not enjoy rent increases. People don’t want to pay more, but it’s a fact of life. It’s important to remember that whether you’re renting an apartment, a parking space, an acre of farmland, or a self storage unit, there is no way around increases, especially in the present inflationary economy.
Energy costs and taxes have increased and inflation makes supplies more expensive. Even though managers don’t want to deal with a barrage of customer complaints and owners don’t want to lose tenants, rent increases are a necessary part of a successful self storage business model. That being said, how do you know when to increase rates and by how much?
In any case, there is a small bright spot in this situation. The majority of tenants understand and expect a year-to-year or lease-to-lease rental rate increase. For your business, the key is understanding which tenants’ rates to increase first, how tenants should be informed, and how to respond to potential complaints. Pinnacle Storage Managers can help you take the guesswork out of managing revenue to maximize return. We can predict customer activity and measure customer reactions so that when prices fluctuate, you know how to respond.
Use Your Unique Business Features to Decide When to Increase Rates and By How Much
Every self storage market differs. Each facility has a different customer base, a different management style, and different tenant relationships. A simple method is to increase rent on a yearly schedule. This won’t be a surprise for your tenants, and you’ll be better able to integrate the projected earnings into your budget.
Consider these factors before you implement increases.
- Current tenants should not be subjected to increased rent rates before you adjust your standard web rates to reflect the same price or more. If a current tenant checks your website and notes that a new renter can pay less for the same size unit, they will be upset.
- Loyalty counts. You can’t make even your best and oldest customers exempt from rate increases, but you can show them your appreciation with a small loyalty discount. If they see on the website that new rentals pay more per month than they do, they’ll be less likely to complain.
- Typically, renters will complain about rate increases, but very few will leave given the significant time and effort to pack up and move to a new facility. If a long-term tenant moves out shortly after a rent increase, they were probably planning to move anyway. Rest assured that their space will soon be occupied by another renter who is happy to pay full price.
- Temperature extremes are an ideal time for rent increases. It’s logical that people don’t want to pack and load boxes in sweltering heat and humidity, nor do they want to move in the middle of a snowstorm with temperatures below zero. When tenants find moving inconvenient, they are less likely to gripe about increases.
Whatever you decide, stick to what works best for your unique business situation. Consistency is key.
Be Strategic When Deciding Which Tenants See Increases First
Be strategic when implementing rent increases. Your facility’s occupancy numbers can inform your decision. For example, if your facility is seeing near 100% occupancy, this signals that your rates are too low. Use common sense and logic by sorting tenants into groups before you roll out a price increase.
- Delinquent tenants tend to be more tolerant of price increases than customers who pay on time. They pay more than a typical tenant in fees each month, and they still don’t move. Tenants who pay on time are generally careful with their money.
- Upstairs and indoor tenants will more easily tolerate price increases because it’s more difficult to move out when you have to navigate steps or an elevator. Additionally, they feel like they’re getting more for their money with indoor climate-controlled units.
- Tenants who started their lease on a special discount are sensitive to price increases. Remember, they chose you because you were the cheapest in town for the first month, and somehow they seem to forget that the special discount was for only one month. An increase may encourage them to move, but if your rates are competitive, that space will be leased quickly.
Clearly Explain Rate Increases to Tenants
- Clearly communicate the increase amount in the rate increase letter. Don’t burden your tenants with a lengthy explanation on occupancy or patronize them with a lesson on inflation and the difficult economy. They are facing the same issues, and they don’t care anyway.
- You can reduce the number of unhappy tenants by giving them at least a month to budget for the new expense. Nobody wants to be surprised with a sudden increase in their monthly bill. In addition, text or email them a gentle reminder of the new price several days before the due date.
- If possible, explain a rent increase by referring to a noticeable property improvement. If you’ve just taken over the property and your renters haven’t seen regular increases, you will get complaints. Be sure to point out any new amenities, fresh paint, or enhanced landscaping. Even though they won’t be happy, this will provide them with tangible proof of the necessity for a rate hike.
Expect Complaints and Handle Them Appropriately
- The first step in handling complaints is to train your managers with best practices by . providing real life examples of how to handle calls and visits with difficult customers.
- Research competitors rates so that you can handle the people who say they can get a better deal at a different facility in the area. Have information on competitors. For example, how often do they increase rates, have there been recent break-ins, and is their customer service on the same level as yours. Have an elevator pitch prepared to help your customers understand what makes your facility more desirable.
- Remain calm and use fundamental customer service skills. Be sympathetic and briefly explain your reasoning. Make your tenant aware of the cost and effort of moving to another facility, and always be prepared with legitimate reasons as to why your business is worth an increase.
At Pinnacle Storage Managers, we know that every facility is unique. It’s important to consider customer reaction, retention rate, and net increase in revenue. If a particular method isn’t the right fit for your company, we’ll try something else. There will always be a next time. With advance planning and high-level customer service, rate increases will be little more than a minor obstacle