Setting rental rates for a new facility
A new facility has no rent history, so its first rates are an educated guess. The goal is a guess you can defend and adjust quickly. This guide gives a method, not market numbers. It covers surveying competitors, checking your break-even, building a rate card and changing rates as units fill. Every figure in the examples is an example input, not market data.
What you are pricing
Price each unit type separately. A unit type is a size plus its features, such as a 10x10 with climate control on the ground floor.
Renters compare similar units, not your whole facility. A drive-up 10x10 and an upstairs climate-controlled 10x10 are different products.
Decide three things for each unit type:
- Street rate: the advertised monthly rent for a new tenant.
- Move-in offer: any discount for new tenants, with clear terms and an end date.
- Fees: admin fee, late fee and any lock or insurance requirement, as your lease and state law allow.
Your lease must state fees and how rent changes. See self storage rental agreement clauses.
Step 1: Survey the competition
SBA's market research guidance says to identify competitors and ask what potential customers pay for alternatives. For storage, that means a rate survey.
- List every facility a renter could reasonably drive to instead of yours. Start with your feasibility study's trade area. See self storage feasibility study.
- For each one, record street rates for the unit types you will offer.
- Record features: climate control, drive-up, floor level, access hours, gate type, on-site staff.
- Record current move-in offers and admin fees.
- Note the date. Rates change, so a survey is a snapshot.
- Repeat for the same facilities at least monthly during lease-up.
Use each facility's own website or a phone call as your source. Write down where each number came from.
Adjust for differences
Competitor units are rarely identical to yours. Note whether each is better, similar or worse on location, condition, features and access.
A newer building with better access may support a rate at the top of the range. An awkward location may need to sit lower. Keep notes on why, so you can revisit the call.
Step 2: Check your break-even
SBA notes that finding your break-even point helps you price smarter. For a storage facility, that is the occupancy where rent covers costs.
- Add monthly operating costs: payroll, taxes, insurance, utilities, software, marketing and repairs.
- Add monthly debt service.
- Add the two for total monthly costs.
- Multiply each unit type's count by its planned rate to get rent at full occupancy.
- Divide total costs by full-occupancy rent. That is your break-even occupancy.
If break-even sits very high, your rates, costs or financing need a second look.
Step 3: Build the rate card
Set an opening street rate for each unit type. Base it on the survey, adjusted for your differences.
Check that rates step up sensibly with size. A larger unit usually costs more per month and often less per square foot. Make sure no larger unit is cheaper than a smaller one of the same type.
Step 4: Choose a move-in offer
A move-in offer trades early revenue for faster lease-up. Decide what you can afford before you advertise it.
| Offer | How it works | Trade-off |
|---|---|---|
| Discounted first month | First month at a reduced rent. | Easy to explain. Cost is limited to one month. |
| Free month | One month free, often the second month. | Strong draw. Costs a full month of rent per tenant. |
| Reduced admin fee | Waive or cut the move-in fee. | Small cost, small effect. |
| Introductory rate | Lower rent for a set period, then the street rate. | Lease must state the change clearly. |
Write each offer's terms in one sentence. Put the end date on the website and in the lease paperwork.
Be careful how you advertise. The FTC says advertising must be truthful and non-deceptive. State the total price and any required fees.
Step 5: Adjust during lease-up
Your opening rates are a starting point. Change them based on how each unit type rents.
| What you see | What to consider |
|---|---|
| A unit type is renting much faster than the rest | Raise its street rate or reduce its offer for new tenants. |
| A unit type is barely renting | Check the rate against your survey. Test an offer before cutting the street rate. |
| Many prospects call but few rent | Check how your rate and fees compare once totaled. |
| Competitors change rates | Update your survey and review the affected unit types. |
Change one thing at a time and give it two to four weeks. Otherwise you cannot tell what worked.
Keep a log of every rate change with the date and reason.
Rate increases for existing tenants
Once units fill, you may raise rents for existing tenants. Check your lease and state law for required notice. [SOURCE NEEDED] (state notice rules vary).
Give written notice in the form your lease requires. Keep a copy in the tenant file.
Watch move-outs after each increase. If they rise sharply, the increase may have been too large.
Raise rents in steps you can explain. Track the revenue gained against the revenue lost from extra move-outs.
For the broader operating picture, see run it well.
Frequently asked questions
Should I price below competitors to fill faster?
Not by default. A move-in offer can speed lease-up and still protect your street rate. Cutting the street rate lowers revenue from every future tenant.
How often should I check competitor rates?
At least monthly during lease-up, and whenever you notice slow rentals in a unit type.
Where can I find market rates for my area?
We do not publish market rates. Survey local competitors directly by website or phone and record the date and source.
Is break-even based on physical or economic occupancy?
Economic. Break-even depends on rent collected. Discounts and unpaid rent mean you need more units rented to get there.
Can I raise rent on existing tenants?
Usually, if your lease allows it and you give the notice your lease and state law require. Check with a local attorney.