Why Self Storage is a Commodity: Why It's Okay for Existing Tenants to Pay More Than New Tenants

In self storage, it's not uncommon for existing tenants to find themselves paying higher rates than new customers who just walked in or booked a unit online. While some may view this pricing strategy as unfair, it’s actually rooted in the economics of selling a commodity. Self storage operates much like other industries where demand dictates pricing, and it's similar to the concept of “space” being a commodity on an airplane.

John C. Lindsey , in his book The Sexy Side Of Self-Storage: An Insider’s Guide To A Necessary Commodity, captures the essence of the self storage industry as a space-oriented commodity business. In many ways, self storage is like the airline ticket analogy: when you board a flight and sit down, the person next to you may have paid a significantly different price for their seat. Some bought early, others bought late, and their fares vary accordingly. The same concept applies to self storage.

Self Storage: A Commodity Where Pricing Fluctuates

At its core, self storage is about selling space—whether it’s a 5x5 unit or a 10x30. It’s a commodity, similar to the seat on an airplane. Just as ticket prices for an airline seat vary based on demand, so do storage unit rates. If you’re on an airplane, you might notice that some paid less than you, while others paid more. You’re all getting the same basic service, but the price each person paid varies based on factors like booking timing, promotions, or even loyalty status.

The same goes for self storage. When a facility needs to fill units, operators may offer discounts or incentives to new tenants. These promotional rates encourage people who need self storage to take action and reserve a unit. Once they become tenants, though, it's unrealistic to expect the introductory price to remain the same indefinitely. Just as an airline adjusts ticket prices based on seat availability, storage facilities adjust rates based on occupancy levels, market conditions, and other factors.

Let's also not forget the "sticky factor" of self-storage, driven by another valuable commodity: "time". Renting and loading a moving truck or hauling multiple loads in a personal vehicle to a storage facility is not a task most tenants want to repeat. Once they have organized their belongings in a unit, they are often reluctant to move again—even if their rates increase. The hassle of packing, transporting, and unloading into a new facility makes tenants more likely to stay put, despite price hikes, making self-storage less price-sensitive than other industries.

This inertia creates a unique tenant retention advantage for storage operators, who can raise rates over time with less fear of churn. Tenants value their time and the effort involved in moving, often opting to remain in their existing unit even when faced with higher rental costs.

Why Existing Tenants Should Expect Rate Adjustments

The average stay of a self storage tenant often lasts well beyond a few months and in many cases, years. As time goes on, market conditions shift, and it’s natural for operators to implement Existing Customer Rate Increases (ECRIs). These rate adjustments are not about being unfair but about reflecting the current market value of the rented space. Other than controllable expenses, the most impactful way to improve Net Operating Income (NOI) in the self storage industry is through ECRIs.

If operators worry about triggering a mass exodus of tenants with rate hikes, they can start small, gradually increasing rates to gauge tenant response. There is always a point where some tenants may decide to move to a cheaper facility across town. This, however, presents a perfect opportunity to educate tenants. Explain that while the new facility may offer a lower starting rate, they are subject to the same industry practices of rate increases, which may occur monthly if the competitor chooses to do so.

Embrace the Reality of Selling Space as a Commodity

For operators, raising existing tenant rates shouldn’t be viewed as unfair or problematic; it’s a natural part of managing a commodity-based business. By understanding the principles behind commodity pricing, storage operators can confidently implement ECRIs without fearing backlash. This industry is about maximizing the value of available space, just as airlines aim to fill every seat at variable prices to ensure profitability.

In The Sexy Side Of Self-Storage, John Lindsey articulates that self storage is indeed a necessary commodity, with value driven by demand. The more operators embrace this concept, the more they can justify price increases for existing tenants and optimize their revenue strategy.

Ultimately, self storage is no different from other industries where the cost of a commodity varies based on demand. Whether it's an airline ticket, or the space in a storage unit, pricing reflects market realities. Educating tenants on why these adjustments occur can help them understand the value they're getting and why rates are sometimes higher for long-term occupants. As with all commodities, it’s about selling the right product to the right person at the right price.

About the Author

Matt Wess is a seasoned expert in the self-storage industry, with over 15 years of experience spanning brokerage, acquisitions, and operations. As a recognized Top Voice in Commercial Real Estate on LinkedIn, Matt offers unique insights into self-storage trends, strategies, and investment opportunities. He has successfully transacted billions of dollars in storage facility acquisitions and is known for his practical, straightforward approach to helping owners and investors unlock value. Matt’s newsletter, Self Storage Newsletter: Unlocking Insights in Self Storage, provides in-depth analysis on topics ranging from market trends to due diligence, and is a must-read for anyone in the self-storage space.

When not working, Matt enjoys spending time with his daughters, staying active in sports, and exploring the great outdoors.