Movin' Out: Using Numbers To Understand Why Tenants Leave

They say when one door closes, another one opens. This describes the self-storage tenant journey in a nutshell, although that door is probably more akin to a revolving one. Every month, tenants come and go, with the facility owner’s goal being to keep as many as long as possible. What are the factors that determine how long a tenant will stay? To get into the psychology behind their behavior, it helps to understand the concept of move-out probability. 

The move-out probability (MOP) in self-storage refers to the likelihood that a customer will vacate their storage unit within a given period. To come to any sort of conclusions, you’d first need to collect historical data in order to identify move-out trends based on rent increases, unit size, length of stay, time of year, and so on. Next, you’d need to conduct research, gaining an understanding of local market dynamics that could impact move-outs, such as housing turnover and economic conditions. Last, you’d want to revisit your customer retention strategies to be sure you’re implementing proactive measures to reduce move-out probability, like offering clear customer communication, flexible payment plans, and loyalty programs.  

“It would be very difficult and time-consuming to do this manually, as each tenant has unique needs and behaviors,” says Dr. Ahmet Kuyumcu, CEO of Prorize, a revenue management technology company that launched in 2006, winning the coveted Franz Edelman Award for advanced analytics. “Your best bet is to use a revenue management platform with predictive technology.” 

Kuyumcu adds that if operators aren’t crunching the numbers or employing a technology that does it for them, that they may rely on limited data to guide decision-making, which can be risky. “If one or two customers complain about rent increases and move-out as a result, an operator may be biased not to increase rents because they assume that all move-outs are happening because of rent increases,” he says. “But was the rent increase the catalyst for higher move-outs? Perhaps it was natural churn, or a competitor lowered rates. Or, it could have simply been a seasonal thing. There are a variety of reasons that move-outs could have occurred that had nothing to do with the rent increase. However, by not considering these possibilities, the operator might avoid raising rents to the detriment of the bottom line.” 

Informing Rent Increases 

Not long ago, raising rates was just a guessing game. “Operators would have to make a hypothesis, trying to determine how much they could raise rates while keeping churn to a minimum, and then they’d test it,” says Jackson Stevens, CEO of SpareBox Technologies. The company was formed just one year ago by several data analysis and technology experts who’d worked internally for SpareBox Storage, and they already have over 1,000 facilities using at least one of their products. “Sometimes those operators would get lucky, and other times they’d be licking their wounds.” 

Thankfully, technology has turned educated guesses into informed decisions. Today’s predictive platforms are able to drill down into customer dynamics to identify segments of customers who are most sensitive to rent increases, and thus more likely to move-out in the wake of one, and those who are less sensitive and more prone to staying put. This has proven to be invaluable for many operators. 

“Our platform provides valuable insights into MOP by analyzing various factors. It measures the expected churn without rate increases and compares it to the actual churn one and two months after a rate hike, using baseline customer data for reference,” says Kuyumcu. “This works hand in hand with our demand forecasting module as well. Because think about it. If you’re 100 percent occupied and going into a season where you expect demand to be high, raising rates is low risk. But if it’s a slow season and you’re only 75 percent occupied with customers already paying above street rates, well, you probably want to leave those customers alone. Our data-driven algorithms decide which customer should get which increase.” 

Dr. Warren Lieberman, CEO of Veritec Solutions, which has been helping self-storage owners and others since 2001 with decision support tools such as revenue management and pricing analytics, says that when it comes to existing customer rate increases, or ECRIs, many operators follow the “7-11 rule. They typically institute the first rent increase after seven months, followed by an additional increase every 11 months thereafter.” 

However, he is well aware of the “pricing game” that has been happening lately, so much so that it’s become a topic of discussion at every industry workshop, on every self-storage podcast, and in many MSM stories. 

“They bring people in with low rates, and then raise them aggressively in three months,” says Lieberman, who acknowledges that this can be a successful strategy. “Our analysis shows that any action that stimulates demand is going to have a positive impact on revenue. So, if low introductory rates bring in customers, that strategy is working.”   

To illustrate his point, he offers the following example: At your normal rate, you’re able to move in five tenants in one month. Eventually, one moves out naturally. Now you have four tenants from that period. At a greatly reduced rate, you’re able to move in nine tenants. After a few months, you raise the rates aggressively. One moves out naturally and two move out due to the increase. Now you have six tenants from that period at a close-to-market price. 

“As you can see, this strategy can work. There is nothing wrong with aggressive rate hikes, but it’s important that the communication is clear,” says Lieberman, emphasizing the word clear. “Storage facilities used to advertise 50 percent off the first three months, so everyone knew the rate would double in 90 days. Now, some just list a price without highlighting that it’s a discount and then shock people with an aggressive rate hike down the road.” 

This is a problem because most people don’t have a concept of what self-storage should cost in their head. “When they see a unit for $39 per month, they may think it’s reasonable,” Lieberman says, “so three months later, when they get a notice that it’s $99, they’re caught off guard. Take something like milk, for example. If a consumer sees a gallon for 99 cents, they know it’s cheap. If they see it for $9.99, they know it’s expensive. This just isn’t the case with self-storage, so use those tactics if they’re working, but be transparent about it.” 

Kuyumcu is not keen on the REIT strategy, especially when transparency is lacking. “We don’t recommend that our clients follow suit,” he says. “We know it can be tempting for the short-term revenue boost, but it’s not good for the customer experience. I do not believe it is good for the industry long term.” 

To elaborate on the potential harm these tactics could cause operators, he points to the hospitality industry. In that world, some social sites and review aggregators have begun taking customer ratings into account, potentially altering the hotel’s traditional AAA or Forbes rating. “A hotel may have been deemed a five-star operation, but if customers are saying it is a three-star experience, this is what is highlighted,” says Kuyumcu. “Once that happens, the hotel is not able to achieve the high rates they want because those negative reviews have lowered their rating.” 

Ultimately, Kuyumcu says the focus should be on maximizing revenue in the long term and keeping tenants on your good side. 

Stevens acknowledges the varying philosophies on ECRIs, but he says that some people’s hands are tied. “For a while, they may have been hesitant to pull the trigger on rate increases, but because of the competition, they’re being forced to start doing them–and doing them more aggressively.” 

Helping in the decision-making, of course, is move-out probability.

“Understanding move-out probability will help clients achieve their revenue goals without taking a big hit in three months when half the people who took the bait move out,” says Stevens. “Obviously, when using aggressive ECRIs, move-outs are expected when the hike takes effect. But if you’re prepared for it, and know what to expect and can reconcile that, you’re still in good shape.” 

The Economic Impact 

The economy is weighing on the minds of most these days. Many political pundits believe the re-election of Trump was due in large part because of his promises to fix the economy. So, it’s no surprise that trying times can have an impact on MOP. “Rising costs of housing and food have put extreme pressure on consumers, and as a result, we experienced record-high vacates of storage units in 2024,” Jason Koonin, CEO of Sunbird Storage in the U.S. and Bluebird Self Storage in Canada, told MSM for “The 2025 Outlook,” which ran in last month’s issue of Messenger. 

This doesn’t surprise Stevens. “It’s not 2021 anymore,” he states. “Most facilities aren’t at 98 percent occupancy, with everybody happy and leaving early for the weekend. Now, many are really sweating, and that’s where we come in. Our technology helps them see how to close the gap between what they forecasted and the current reality.” 

Stevens says their tool has analyzed several scenarios that apply to the state of the economy. “During economic downturns, move-out probability might increase due to financial strain on customers. In this case, self-storage is a discretionary spend and on the chopping block.” 

There is another possible scenario, however. In this universe, Stevens says that self-storage unit isn’t discretionary, but rather a necessity. “They may be stuck in a holding pattern. They can’t move into a larger home or office, but they refuse to discard their stored belongings, so they essentially have no choice but to keep the unit.” 

Predictive tools help in decision-making as they can look at factors like median household income, employment status, and so on to predict whether the economy is likely to have an impact on the facility tenants; if it doesn’t appear to be, then it becomes less risky to raise rates.  

Convenience Counts, Size Matters 

It may not surprise you to learn that unit convenience can impact someone’s sensitivity to price increases. After all, many customers are willing to pay a premium for prime units—those with easy access, close proximity to an elevator, or situated in one of the most brightly lit and secure corridors. However, it may surprise you to know that all units fall onto a “convenience spectrum,” so to speak. It’s something Lieberman has discovered through the Veritec platform. 

“We all know those five units by the elevator are in demand, but it’s broader than that,” he says. “The next 10 units may be less sensitive to a rate increase than the next 10 down the hall. And those 10 will be less sensitive to an increase than the 10 after that.” 

Lieberman says this is an exciting development that operators can definitely capitalize on. “Think of it this way: When it’s time to raise rates, you might add an extra two percent to those first 10 units, 1.5 percent to the next 10, and one percent to the next. And then the remainder just get the regular increase. Those extra percentages on those 30 units can really add up.” 

The size of a rental unit can also be a factor for MOP. Kuyumcu says that, in general, people renting a large unit tend to stay longer and are less susceptible to price increases. For one, they may be a commercial client using the unit as an extended arm of their business; they’re typically not going to fuss over a rate increase unless the business is in dire straits.

Individual renters may also be less sensitive to increases if they have a large unit because, typically, that unit is full of a lot of stuff–heavy stuff. “Whereas someone renting a 5-by-5 can easily pack that up and move to a less expensive facility, someone with a full 10-by-30 doesn’t want to go through the hassle of moving,” he says, adding with a laugh that “They may not be happy about it, but for them it beats the alternative of moving!” 

The Importance Of Autopay 

If you can get tenants to treat their unit like a Netflix subscription that automatically renews each month, MOP drops considerably, says Stevens. “Of the 19 data points Prophet looks at, autopay is by far the highest predictor of whether or not someone will move out. When tenants ‘set it and forget it,’ well, they do tend to do just that—forget about it.” 

It makes sense, and would explain why a manager’s ability to increase enrollment in autopay often comes up in MSM’s annual Manager of the Year submissions. In 2024, for example, PJ Richards, director of learning and project management at Metro Storage, nominated manager Darryl Bridges for the recognition citing that, among other things, Bridges has been able to “increase autopays by 37.3 percent year over year.” This feat has been attributed to a 12 percent increase in revenue and keeping occupancy at 91 percent. 

Demographic Dos And Don’ts 

Demographics can play an important role in MOP, however it’s important to be careful about what data is used. “It’s best to stay away from demographic or geographic information about customers,” warns Lieberman. “You don’t want to exacerbate income inequality, or be price insensitive in a specific ZIP code or market that results in some kind of gender or ethnic discrimination. Even if it’s unintentional discrimination, it’s still illegal and you could wind up facing a lawsuit.” 

Kuyumcu agrees, which is why the Prorize platform analyzes the demographic of the facility in the surrounding areas. “For instance, if most of your tenants are rural residents, and research shows they tend to be more sensitive to price increases, you’ll want to proceed cautiously when implementing ECRIs,” he says. “You might also consider tenant attributes such as commercial versus residential usage, autopay versus manual payment preferences, or even the distance between where they live and where they store their belongings. For example, tenants who live far from the facility are less likely to move their items due to the inconvenience of the distance, making them more likely to tolerate a higher ECRI. These demographic insights are safe to use and help ensure you stay clear of any legal risks.” 

Making Your Move 

With all of the data and insight a platform with move-out probability capabilities can put at your fingertips, why are some operators not embracing it? It could boil down to feeling like they’re not in control, however this couldn’t be further from the truth. 

“Prophet is a recommendation engine, not an all-powerful oracle saying ‘This is how it should be and don’t dispute it,’” says Stevens. “During onboarding, the operator establishes inputs that the algorithm abides by, like the maximum dollar value increase, the highest percentage increase, the occupancy threshold, the highest acceptable MOP, and so on. That way, they can be as aggressive as they want to be, or not at all. They always have control of the levers.” 

Kuyumcu concurs. “Operators can set the frequency and limits for rent increases, and the algorithms operate within those parameters to determine eligibility and calculate the optimal increase for each rental to maximize expected revenue. Ultimately, customers have the flexibility to accept or adjust Prorize’s recommendations based on their specific circumstances.” 

“We’ve basically flipped the process on its head,” says Lieberman. “Veritec helps facility operators understand not just who you can increase rates on, but who not to. This allows you to raise rates with less churn, which is of enormous value to the facility and their customers.” 

–

Brad Hadfield is MSM’s web manager. He’s also a staff writer for MSM.  

COMMENTS