The break-even move-out rate for an ECRI, in closed form, and why the answer depends on whether the size that empties is full or half-let.
A self-storage rate increase on existing customers pays as long as the extra move-outs it causes stay below i / (1 + i) of the customers notified, when the units they vacate are not re-let. For a 10 per cent increase that break-even is 9.1 per cent. Where the unit size is full and the vacated unit re-lets at street rate, the break-even roughly doubles, to 18.7 per cent. On an illustrative 300 customers paying £110 a month, a 5 per cent extra move-out leaves a net gain of £17,820 a year, less than half the £39,600 that ignoring move-outs suggests.
Worked in full in Self-Storage Real Estate by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
A store applies its existing customer rate increase, the ECRI, to customers who have been in for more than six months. Self-storage customers hold monthly licences, not leases, so every one of them can leave at a month's notice, and some do when the letter arrives. The operator wants to know how many can leave before the increase loses money. All figures are illustrative.
| Input | Value |
|---|---|
| Customers notified | 300 |
| Average in-place rent, a month | 110.00 |
| Increase applied | 10% |
| Extra move-outs caused by the increase | 5% |
| Street rate for a replacement, a month | 95.00 |
| Months to re-let, where the size is full | 3 |
| Move-in discount (half the first month) and marketing | 47.50 + 60.00 |
| Horizon | 12 months |
"Extra" matters: customers leave every month regardless, and only the move-outs above that baseline are caused by the increase. Measuring them means comparing notified customers with a control group, or with the same cohort before the letter.
Each customer who stays pays £121.00 instead of £110.00, £132.00 more over twelve months. Each customer who leaves because of the increase takes £1,320.00 of rent with them. Whether that rent is really lost depends on the unit.
Gain = (1 − x) × i × R; Loss = x × L. Break-even x = i × R / (i × R + L)
Customer lost, L = R: x = i / (1 + i) = 10% / 110% = 9.09%
Unit re-let, L = 572.50 a year: x = 132.00 / (132.00 + 572.50) = 18.7%
At the store's observed 5 per cent extra move-outs, 285 customers stay and 15 leave:
| Unit size | Gain from stayers | Loss from leavers | Net a year | Capitalised at 6.0% |
|---|---|---|---|---|
| Spare units, customer lost | 37,620 | 19,800 | 17,820 | 297,000 |
| Full, unit re-let | 37,620 | 8,588 | 29,032 | 483,875 |
| Ignoring move-outs | 39,600 | 0 | 39,600 | 660,000 |
| Increase | 3% | 5% | 8% | 12% | Break-even, lost | Break-even, re-let |
|---|---|---|---|---|---|---|
| 6% | 11,167 | 2,772 | −9,821 | −26,611 | 5.7% | 12.2% |
| 8% | 18,850 | 10,296 | −2,534 | −19,642 | 7.4% | 15.6% |
| 10% | 26,532 | 17,820 | 4,752 | −12,672 | 9.1% | 18.7% |
| 12% | 34,214 | 25,344 | 12,038 | −5,702 | 10.7% | 21.7% |
| 15% | 45,738 | 36,630 | 22,968 | 4,752 | 13.0% | 25.7% |
The break-even rises with the increase, but more slowly: i / (1 + i) bends. The table cannot say which column the store is in. That depends on how sharply customers respond, which is the one number an operator has to measure rather than assume. If move-outs rise in step with the increase, there is an optimum, and it is a measured property of the customer base, not a market convention.
The common mistake is to book the increase as if every customer stays: £39,600 a year, £660,000 of value at an illustrative 6.0 per cent capitalisation rate. At 5 per cent extra move-outs and spare units, the true figure is £17,820 and £297,000, 55 per cent less. The opposite mistake follows from it: an operator who sees move-outs rise after the letters concludes the increase failed, when, even in sizes with spare units, anything below 9.1 per cent extra move-outs means it paid.
Run the break-even by unit size, not for the store. A store at 85 per cent overall can be full in small units and half-let in large ones: the same increase can afford 18.7 per cent extra move-outs in the first and only 9.1 per cent in the second.
Twelve months is a deliberately short horizon. A customer who stays keeps paying the higher rent for as long as they stay, and a lost customer would have kept paying the old one, so a longer horizon scales both sides and leaves the customer-lost break-even unchanged: i / (1 + i) has no horizon in it. What a longer horizon does change is the re-let case, through the cost of replacing a customer, which is where what a move-in discount actually costs picks up.
The free workbook for this case includes the store's cohort model and the Rate Increase Planner, and the self-storage financial model carries the rent roll through to value.
An existing customer rate increase: a rent rise applied to customers already in the store, usually after several months of occupancy. Because storage customers are on monthly licences rather than leases, the increase can be applied at any time, and some customers leave in response. In the example a 10 per cent ECRI lifts the average rent of 300 eligible customers from £110.00 to £121.00 a month.
If a leaver's unit is not re-let, each stayer adds i × rent and each leaver costs the full rent, so the increase breaks even when the extra move-out share equals i / (1 + i). For a 10 per cent increase that is 9.09 per cent, for 6 per cent it is 5.7 per cent, and for 15 per cent it is 13.0 per cent.
In a unit size with spare units, a customer who leaves is simply lost: new enquiries would have filled the empty units anyway. In a size that is full, the vacated unit re-lets to a customer who would otherwise have been turned away, so the loss is only the vacancy, the move-in discount and marketing. That lifts the break-even for a 10 per cent increase from 9.1 to 18.7 per cent.
The increase decision is the subject of chapters 4 and 5 of Self-Storage Real Estate, and the free Rate Increase Planner fits your own move-out response to it. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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