Mind The Gap: Using Street And Web Rates To Understand Demand

Posted by Noah Starr on Mar 19, 2025 4:02:07 PM

Self-storage demand can sometimes feel like a mystery. One day units are full, and the next, customers are vanishing. But what if the key to understanding it lies in the subtle difference between two numbers (street rates and web rates)? That gap isn’t just about discounts; it is a direct link to understanding self-storage demand.

This article is an excerpt from our longer 10-part series. To read the entire series, please go to TractIQ.com/resources.

First, let’s begin with some context and a few definitions. Self-storage customers sign monthly leases, which can be a double-edged sword. Storage operators often increase customer rental rates as the demand for storage grows within a market. This responsiveness helps operators capture revenue quickly in times of strong demand. On the flip side, as demand weakens, customers can leave at a moment’s notice.

Due to the fast-paced nature of self-storage operations, advertised rental rates vary widely at the facility level. Let’s define some key terms that are foundational to understanding self-storage pricing dynamics:

Web Rates – The rates advertised online, often discounted to attract price-sensitive shoppers.
Street Rates – The street rate for a particular unit is the rate that a customer would be charged if they were to walk in off the “street” to rent a unit in person at the facility.

See an example from a CubeSmart facility below.

5-by-5 Web Rate = $31.80 per month
5-by-5 Street Rate = $53.00 per month

Now that we have a foundational understanding of street and web rates, we can further explore what these rates and their relationship tell us about self-storage demand.

2018 To 2020

From 2018 to 2020, discounting rose by 50 percent as demand softened and supply increased. The chart below shows average street and web rates across all unit sizes and facilities in the country. It also shows the average difference between the rates aggregated per unit (yellow line).

Average Street Rates Vs. Average Web Rates (2018 - 2020) chart

In late 2019, demand decreased as more uncertainty entered the market. The uncertainty was fueled by several factors:

Policy shifts at the Federal Reserve,
Trade negotiations, and
The yield curve inverted.

New storage supply was also beginning to lease up after a record year in 2018. According to the 2020 Self-Storage Almanac, the total value delivered in 2018 was estimated at $5.25 billion, a 33 percent increase from 2017.

The period from 2022 to the end of 2024 was challenging for the self-storage industry for two main reasons: increasing interest rates and oversupply.

Due to the uncertainty, added competition, and a decrease in self-storage demand, operators started discounting web rates as indicated by the upward trend of the yellow line. We also observed an immediate spike in April 2020 as COVID picked up and operators drove discounting up to nearly 30 percent from about 20 percent the year prior.

2020 To 2022

From 2020 to 2022, as demand boomed after COVID, discounting decreased by 50 percent. The chart below shows data for that period when self-storage demand increased to unprecedented levels.

Average Street Rates Vs. Average Web Rates (2020 - 2022) chart

The increase in demand was driven primarily by the COVID pandemic. For example, street rates increased from $1.56 in June 2020 to $2.20 in September 2021, a 41 percent increase.

During this time, people relocated from city centers to suburban areas. Interest rates were low, making it more affordable to change residences, which is a major storage demand driver.

As a result of lower interest rates and migration from city centers during COVID, demand for self-storage significantly increased. Evidence of this can be seen in the chart, as discounting started to decrease in late 2020 (yellow line).

2022 To 2024

From 2022 to 2024, softening storage demand increased discounting by 120 percent. In the chart below, you can see the period from 2022 to the end of 2024 was challenging for the self-storage industry for two main reasons:

Increasing interest rates and
Oversupply.

Average Street Rates Vs. Average Web Rates (2022 - 2024) chart

Because the market was so “hot” from 2020 to 2022, developers were justified in building more self-storage due to high demand. According to the U.S. Census Bureau, self-storage construction spending of $6.9 billion in 2023 marked a 24 percent increase over 2022.

While 2023 marked a record year for self-storage construction spending, self-storage demand peaked in 2021.This is an unfortunate lag in timing, as newly built self-storage projects began to deliver in 2023 during a time of decreasing demand.

Oversupply creates more competition between operators and shifts pricing power to the customer. In Q3 2024, the difference between street rates and web rates was approximately 40 percent. This level of discounting even exceeds early-COVID levels, which was approximately 30 percent at its peak.

REIT Discounting Strategy

The Average Street Rates Vs. Average Web Rates chart below shows street rates, web rates, and the average difference of those rates for just the public self-storage REITs. You will notice that the minimum value of the street/web rate percent difference is approximately 15 percent, while the maximum value is approximately 42 percent. This is a wide spread and shows that as demand decreases, REITs compete for customers by aggressively discounting and offering the most competitive prices.

REITs can afford this strategy for a few reasons:

REITs have robust revenue management teams and change rates quickly using complex algorithms.
REITs have a volume advantage. The cost of a single customer defecting from a single store is low.
REITs have large cash reserves and the lowest cost of capital. The REIT table shows cash balances and weighted average interest rates on all debt for the REITs as of Sept. 30, 2024.

Strategies For Non-REITs

The Average Street Rates Vs. Average Web Rates Non-REITs chart shows street rates, web rates, and the average difference of those rates for non-REIT operators. As shown in this chart, the minimum value of the street/web rate percent difference is approximately 18 percent, while the maximum value is approximately 30 percent (1200 bps), which is less than half of the REIT spread (2700 bps).

Most non-REIT operators do not have the revenue management teams that the REITs do, so they do not change prices as often nor as aggressively.

Despite all of this, non-REIT operators do respond over time, with a steadily increasing discount rate from approximately 18 percent to approximately 30 percent leading up to COVID.

Discounting Correlates To Occupancy

How do self-storage operators respond when demand dries up? They aggressively discount rental rates to attract whatever customers remain.

Paying attention to street and web rates provides valuable insights as we all look to make smarter, data-driven investment decisions in 2025 and beyond.

The three REIT charts show the discounting difference for each REIT compared to occupancy, our proxy for demand. You will notice an inverse relationship between the discounting difference and occupancy. As discounting increases, occupancy (demand) decreases, and vice versa.

Take a look at the Extra Space, Cubesmart, and Public Storage charts. If we take a step back, what story does this data tell us?

A wide spread between street and web rates typically signals less self-storage demand because operators are competing more for customers by discounting web rates.
A tight spread between street and web rates typically signals more self-storage demand because operators don’t need to discount web rates as much when more customers are renting storage.
REITs are major drivers for rate discounting trends with non-REIT operators typically following the same trends in less aggressive ways.

Paying attention to street and web rates provides valuable insights as we all look to make smarter, data-driven investment decisions in 2025 and beyond.

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Noah Starr is CEO at TractIQ.