How Self Storage Value Is Affected By Rates And More
Did you know that Self Storage Values are affected by rates?
Whilst we live in uncertain times, Self Storage rates have demonstrated a steady increase on an average basis since 2008. Blackwell’ Storage Fee rate index has shown that Melbourne particularly has risen close to 17% since 2008. Speak to your local SiteLink Software support team for any assistance.
Brisbane has shown the slowest level of increase at about 7% since 2008. Blackwell qualifies this index saying that the data is based on the Storage fee that was actually obtained by the Centre, not just the asking price.
Self Storage facility values are largely calculated on the return the Self Storage facility delivers to the ownership. There are many factors controlling these returns. Management, expenses and funding all contributing to the bottom line.
Some sites have reported a slowdown in call rate or enquiries. Overall, Australia is suffering at this level and Self Storage is no different. Not every business owns a mine and some sites in some areas are finding business tough.
Self Storage is linked significantly to the residential building industry and Queensland has the dubious honour of having the least amount of new building starts in 2011.
Suppliers to the Self Storage industry have also reported significant downturns in repairs and maintenance and new starts.
Rod Steley, of Steley CAP, a respected expert in loss adjustment and dilapidation reporting says that Self Storage owners may very well be doing themselves out of significant upside in their business by not maintaining facilities up to current standards. “Many facilities that were built over 20 years ago and the standards that applied then do not apply now. A new owner may have to go to the expense to bring an older facility up to scratch. This can cost thousands. Public liability and professional indemnity have all changed in all Self Storage facility owners should review their cover”. Rod says
Self Storage agreements do not always cover you for every eventuality, you can’t contract out of common law and your Self Storage facility that was up to scratch 25 years ago may not be now.
A programme of building maintenance and regeneration should be a continuing program as the facility ages so the costs can be amortised over a longer period reducing cash flow demands and maximising current day value.
When better economic times return, Self Storage owners will be just that little bit older and they may very well be looking to move on from the industry. This is where the buyers can pounce. The valuers will always take into consideration the condition of your property, how it is run and moreover, how much a new owner might have to spend to bring the facility up to scratch. This is even more evident if new facilities have been built in the area and are better quality and better run than your own.
Whilst businesses like Steley CAP can advise and report on your current building on commercial compliance, it’s important to make sure that you’ve got Self Storage rates absolutely optimised to bring in the very best return possible.
How is this done? SiteLink Software features a rate management module. Used correctly this module can increase your Storage fees by as much as 15% per year. Many Self Storage sites and groups already use this module ads included in the standard SiteLink Software fees.
Revenue Management in SiteLink is made up of two sections:
Unit Revenue Management.
Unit Revenue Management manages the prices of the vacant units . There are four standard plans and there are three custom plans and these plans can be fine tuned to suit each store.
Specific unit types can be excluded from the plan and staff have a choice of using the standard rate or the revenue managed rate when available.
Each plan is controlled monthly by seasonal table which means that in certain months where demand is high rate increases can be more aggressive as to months where business is not so obvious.
Within each plan, owners can take a Conservative to an aggressive approach with rent increases. Rounding is available for each plan.
Tenant Rate Management
Tenant Rate Management is used for existing storers and for those facilities with occupancy is in excess of 80%, without using tenant rate management there is no question that revenue is being missed by not conducting regular rent increases. Globally an annual target can be set for rent increases. A major feature of tenant rate management is the ability to apply rental increases based on postal codes, a technique learned from the petroleum industry and other high-value businesses including large retailers who have different prices for the same products in different suburbs. Self Storage should not be any different. Commercial and residential tenants can be treated differently impending rate changes are displayed prior to any increase being sent to the customer.
By managing the rates of not only existing storers but also of new customers, Self Storage operators are maximising income, which will be recognised by a valuer and they will apply a value accordingly. Most Self Storage facilities that do not apply rate management techniques are undervalued.
Larger Self Storage operators employ staff to monitor and to ensure that tenant rate management processes are in place. There costs are easily absorbed by any rental increase obtained by them.
Some Self Storage operators are asking how to improve their business, but the improvements lie within, locked up in undelivered rental increases to existing customers. Combine that with poor debt recovery and every dollar lost is about 10 on the valuation. The flipside to this equation is the same-every dollar of extra revenue that does not have a cost associated with it will deliver around $10 of extra valuation. It is the easiest way to increase the value of your facility.
Managing the rates at Self Storage site is not a difficult task but one that requires constant monitoring of the competition, ensuring that your prices are competitive and understanding unit rate management is the first important step to getting prices actually right at your site.
Facility buyers will always look for bargains and it’s really important that you maximise the value of your facility so that the hard work is paid for at the time of the sale. Whilst it is important to leave some growth for the new owner, it is also essential to make sure that you are earning what your facility is worth and that your customers are paying the right price to store at your facility.
SiteLink Softwares’ Unit Rate Management and Tenant Rate Management tools are designed just for this purpose and in their own right are worth the monthly subscription fees alone. Used properly, these tools can generate anywhere from 6 to 15% annual increases in rent without the traditional ‘lets put up the rates up in January by 5%” model” that most sites use.
With Unit Rate and Tenant Rate Management, no two units may be rented for the same amount and in the past that is thought to have been and issue, but for those who use these tools, not so.
The Self Storage industry itself has not grown very much since 2008, demand for Self Storage in some markets has been stronger than others and there are very few markets that cannot withstand a rental increase. Occupancy, the trigger for any rent increase. Using the built-in tools in SiteLink will help you maximise your income and in time increase the value of your facility and is one of the easiest ways to do so.
Invest the time to learn these tools and you will be paid handsomely for it. Don’t leave cash on the table by not optimising your site.
To contact Rod Steley, Click Here Rod Steley can appraise your site and advise you on updating.
To find out more about Unit rate and Tenant Rate Management Click Here
Book an online demo today and see for yourself how SiteLink makes it easy to manage your self storage facility to the highest standards. Simply fill in the form below to get started.
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