Investing in self-storage units is easily one of the best ways to launch a real estate career. If you own a self-storage facility, you’re one step ahead of potential competitors for the summer. But with storage unit rates finally relaxing after skyrocketing during the COVID-19 pandemic, you may be wondering how to price your storage units in the coming months.
Although there are many different factors that affect storage prices over time, keeping track of these variables can help you determine reasonable rates for your units while still generating a profit. In this article, we break down some of these factors and describe a simple way to determine an appropriate monthly rate for your storage rental.
Factors that Influence Price
As mentioned, there are a variety of factors that influence self storage prices per month. Here are a few of the factors you should consider as you price your units.
Location and Market Trends
As is true for any rental marketplace, self-storage unit rates tend to vary in different locations, trending higher in some cities and lower in others. According to SpareFoot, an Austin-based self-storage listing site, cities with some of the highest rates per month of storage rental include Los Angeles ($170.37 per month), San Diego ($129.75 per month), and New York ($119.88 per month). On the other hand, cities like Oklahoma City, St. Louis, and Louisville have significantly lower rates for an average 10×10 non-climate-controlled unit, at $79, $89, and $90 per month, respectively.
Some states are certainly more lucrative for self-storage investing than others. But you can find a successful local market for self-storage in any state. By understanding key locations for storage and considering what drives customers to self-storage, you can place your facility at a location you know will generate higher revenue than the state average. Facilities located near a major university, for instance, will always attract renters and allow you to increase rates.
Size
Size is likely the next most influential factor that affects storage unit rates. Self storage sizes and prices have a predictable relationship: While rates generally increase as square footage increases, the monthly cost per square foot in each size tends to decrease. Here are the average monthly prices of storage units January through March of 2023 according to SpareFoot:
Size
Price per square foot
Approximate monthly rate
5 x 5
$1.94
$48
5 x 10
$1.32
$70
10 x 10
$1.07
$107
10 x 15
$0.93
$140
10 x 20
$0.78
$160
10 x 30
$0.53
$158
As you can see, larger sizes equal higher prices and lower rates per square foot. However, keep in mind that there is generally less demand for larger units (10 x 20 and 10 x 30). The size most commonly sought out by renters is 10 x 10.
Self-storage units come in a variety of types, which can influence their pricing as well. Depending on what’s popular in your local market, for example, you may see price variations depending on whether the unit is drive-up or indoor access. Drive-up units are more convenient and accessible for most renters, while others might prefer the security and privacy afforded by indoor access units. Vehicle storage units tend to be larger than regular ones and will likely cost more as well.
Amenities
Any amenities you offer in your units or to your self-storage renters will also increase their monthly rates. Climate controlled units are generally around 30-50% more expensive than non-climate-controlled ones. Likewise, premium amenities like electricity and high-end security also correlate with an increase in price. Many facilities now offer electronic entry via mobile phones or a kiosk system, allowing renters to access their units independently from on-site security. Electronic security eases your management costs since you can effectively monitor and manage your units remotely, but they also may increase your utility bills and cost you money to install and maintain. Renters who choose these options should understand that an increase in price is expected for those amenities.
Seasonality
According to SpareFoot data, summer is the most popular month for self-storage demand. Prices tend to peak in the summer months of May through September, as these months are the most popular for moving. Plus, between spring cleaning efforts beginning in the early months of this period and most university semesters ending in May, it makes sense why these five months generate the most revenue for self-storage investors. Most investors increase their prices during these months and decrease them again during the off-season.
Availability
A self-storage facility’s availability also affects its rates. Facilities with limited availability and almost all units filled are likely in high demand in the neighborhood, so they can afford to increase prices. On the other hand, a struggling storage unit facility may have to lower prices to attract customers. Your prices will likely fluctuate depending on your availability from one season to the next.
Full-Service vs. Traditional Storage
Lastly, your storage unit rates may vary depending on whether you offer full-service storage. Also known as valet storage, full-service storage is an emerging trend in the storage industry wherein the storage company itself visits renters’ homes to pick up their belongings and stores them in a shared storage location. Then, when the renters want to end their leases and receive their belongings back, the company delivers them.
Full-service storage tends to be more expensive since delivery fees and drivers are required in addition to typical storage and security costs.
Additional Costs for Renters
In addition to the above factors which influence price, self-storage renters are often responsible for additional fees, such as taxes, administrative fees, and insurance. These fees may be built into the rental rate, but renters are usually responsible for showing proof of insurance for their stored belongings separate from the unit’s rate. Many facilities offer storage insurance coverage directly to renters who need it, but some renters’ belongings will already be covered by their renter’s or homeowners’ insurance policies. In general, storage insurance tends to be highly affordable at only $10-$30 for $2,000-$5,000 worth of coverage.
Pricing Your Units
Given the above factors, how should you approach calculating an appropriate but profitable rate for your self-storage units?
Here’s our recommendation:
Start with size. Calculate a base rate for your unit based on price per square foot in the local area you’re renting in.
Estimate and add the value of amenities like climate control, security, electricity, etc. If you offer any distinct benefits for your renters related to their units or the services you offer, determine approximately what that benefit is worth in your market.
Compare to local market rates. How does the number you came up with compare to local rates? If it’s substantially off, you may need to adjust based on local demand to remain a viable option compared with your competitors.
Adjust seasonally as needed. As demand waxes and wanes throughout the year, you may need to adjust your prices. If you’re unsure how much to adjust, try tracking local facilities’ price fluctuations during the on- and off- seasons.
Conclusion
Pricing a self-storage unit can be tricky, especially since rates vary so widely across the industry and between seasons. However, by considering each of the above factors, choosing a rate can be a systematic process sure to lead you to success in the self-storage industry.
