Rental Rates:

A recent article in the Mini Storage Messenger reviewed the recent history of rental rates on a national basis. The following month, we were treated to a study of occupancy rates in the same magazine. We thought we might take a closer look at this information based on the Messenger’s survey and see if we could find something that might be helpful to our clients. While we can’t be sure that we have identified “real” trends, I think that we have some tidbits that will wiggle your antennae and give you something to think about. We took a long look at the rental rate increases that have occurred since 1991 and found several interesting facts as the chart in Figure 1 will testify. First, most of the rental rates have not grown with inflation as many believe. In fact, only the smallest unit size managed to beat the CPI (Consumer Price Index).

Secondly, the rents seemed most inelastic (resistant to change) as the size and the dollar amount went up. In light of the fact that median household income grew just 1.5% between 1984 and 1994, adjusted for inflation, this may be impacting our ability to raise rents. Lastly, during the 1991-1995 period, there were only three minor declines in rent for any year for any size of unit. In 1996, rates have shown declines in all but the smallest size units (5x5). Rather than draw hard conclusions from this limited information, we thought we might pose some questions to our readers and ask them to comment by calling their Argus broker or our 1-800-55-STORE toll free line.

1991-1995
Unit Size	Annual Aggregate Rent Gain	Total Rent Gain	Total CPI	1996 Rental Increase*
5x5	3.7%	18.4%	16.3%	+0.2%
5x10	2.6%	13.2%	16.3%	-2.8%
10x10	2.2%	11.0%	16.3%	-4.3%
10x20	0.8%	4.2%	16.3%	-0.1%
20x20	-0.16%	-0.8%	16.3%	-0.7%
*Through August - Figures obtained from Mini Storage Messenger

Figure 1

• Question 1

It appears that rates have not kept up with inflation in the best of times. Thus, can we expect inflation to be a driving force in the future, especially with some overbuilding beginning to appear in various markets around the country?

• Question 2

There appears to be some concern that higher rates (apart from overbuilding impacts) are beginning to reduce overall demand. In your opinion, are you seeing any evidence of a “glass ceiling” in rental rates, that is, are rates just too high for some customers? In the past, some thought that the market could bear about any price. Is that true?

• Question 3

For the last five years, rates have been generally rising for all types of units. Now, in 1996, they are beginning to move south. Is this a change in the trend or are rates just taking a breather? Please call us to give us your thoughts and we will include any new insights in our next Market Monitor when we talk about occupancies.