With interest rates on a downward spiral for the last 25 years, Income growth at historical lows and even lower inflation, economic indicators could apply pressure for Self Storage rate increases in the future.
How will Self Storage sites build income in a low interest, low inflation environment?
Self Storage traditionally has enjoyed rate growth over many years, a factor of being in catch up mode from the heady days of the GFC. Some operators applied regular increases especially through the mid 90’s – you could set your alarms by them!
We live is a vastly different economic world post GFC. Wages growth has declined along with interest rates and inflation is minimal.
Evidence still exists that many operators still provide very generous offers of prepayment discounts. These discounts cost much more than just the percentage discount offered, they manifest themselves more than tenfold at valuation time.
With a prepayment discount, you deny your facility of any planned rent increase for the period of the prepayment, adding to the discount offered.
Every time rates are adjusted to meet the market or to promote a specific sized space, all those who occupy a similar space end up with a concession.
Modern Self Storage software like SiteLink Web Edition has an inbuilt feature called “Price Optimiser”.
There is a big relationship between the price you offer and the prices that spaces are rented for on a daily basis.
The science behind rent increase is complex – and whilst we have some great mathematicians working on the complex calculations behind rent increase theory so you don’t have to, how do you create a supply/demand model to your pricing?
- You must capture every inquiry and log them. Every call, every web inquiry. You must capture the size your offered and the size they are interested in.
- Understand your competitor. Understand their pricing logic, even if they don’t seem to have one.
- Understand the supply of spaces in your local area. Is there a new site with plenty of occupancy?
- Your web presence must be on trend and on message
The basic law of supply and demand dictates that as the supply of a certain space dries up, the price increases. But how do you manage this?
Sitelink’s “Price Optimiser” technology employs powerful models designed by industry pros that have been proven to work. Ask our support team to show you how Price optimisation can reduce your dependence on price increases and discounting to earn income.
