by Jane H. Sauls, CCIM
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by Jane H. Sauls, CCIM
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The Federal Reserve left interest rates unchanged this month.
That wasn’t the surprise.
The surprise was what came next.
While rates remained between 3.50% and 3.75%, Federal Reserve officials signaled they are in no hurry to cut rates. In fact, nearly half of the policymakers believe rates may need to move even higher before year-end as inflation remains well above the Fed’s 2% target.
The message is clear.
Don’t build your business around the hope of lower interest rates.
Build it to succeed where rates are today.
For self-storage owners, that changes the conversation.
For the last two years, many owners have delayed refinancing, postponed selling, or held onto 2022 pricing expectations believing lower interest rates were just around the corner.
Today, that assumption deserves another look.
The owners creating value in today’s market aren’t waiting for the Federal Reserve to solve their problems. They’re focusing on the one thing they can control every day:
Operations.
- Every dollar of recurring net operating income directly impacts value.
- Every delinquent account collected…
- Every expense negotiated…
- Every online review earned…
- Every tenant retained…
- Every rental rate optimized…
Those are the decisions that move valuations.
Today’s buyers are underwriting conservatively. They’re assuming slower rent growth, higher operating expenses, and interest rates that remain elevated. They are stress-testing deals, not hoping the market bails them out.
That means sellers must do the same.
If You’re Preparing to Sell or Refinance
Ask yourself four questions.
1. Is every dollar of income repeatable?
One-time auction proceeds, administrative fees, and other nonrecurring income should never be the story. Buyers and lenders want to understand the property’s sustainable earnings.
2. Have I cleaned up my operations?
Late payments, inconsistent rental rates, poor documentation, and unresolved maintenance issues all reduce confidence. A clean operation creates a stronger valuation long before a buyer ever walks the property.
3. Do I truly know what my property is worth today?
Not what it was worth in 2022.
Not what your neighbor sold for.
What is it worth today based on current cap rates, current interest rates, current occupancy, and today’s operating expenses?
That answer should drive every major decision, from refinancing to capital improvements to disposition.
4. Could someone else step in tomorrow and successfully operate my facility?
If your business depends entirely on you, buyers see risk.
The more transferable your systems, processes, and customer experience become, the more valuable your business becomes.
Moving Forward
This month begins something new for The Underline.
Sauls Commercial Real Estate will be partnering with XPS Solutions to explore how day-to-day operational decisions influence value, and we believe this collaboration will continue to add meaningful value for our readers.
We’ll cover topics including revenue management, call conversion, customer experience, expense control, marketing, technology, and operational efficiency.
These aren’t simply operational discussions.
They’re valuation discussions.
Because every operational improvement has one purpose:
Creating a more valuable asset.
We’ll also continue bringing you the market updates, valuation trends, economic indicators, and industry insights you’ve come to expect from The Underline.
The Federal Reserve will continue making decisions we can’t control.
Our competitors will continue making decisions we can’t control.
The economy will continue changing.
Fortunately, the greatest driver of your property’s value has always been something you can control.
How you operate it.
Until next month…know your numbers, protect your NOI, and keep building value.
MARKET TRENDS
| Dec 1980 | April 2019 | April 2022 | Prior Month | Current Month | |
|---|---|---|---|---|---|
| US Regular Gasoline Prices ($ per gallon) | 2.69 | 4.17 | 4.47 | 3.83 | |
| Price of Eggs (per dozen) | 1.55 | 2.52 | 6.22 | 2.19 | |
| Whole Milk ($ per gallon) | 2.98 | 4.01 | 4.13 | 4.2 | |
| 10-Year Treasury | 12.84 | 2.53 | 2.75 | 4.48 | 4.47 |
| Prime Loan Rate | 20.35 | 5.5 | 3.5 | 6.75 | 6.75 |
| 30-Year Mortgage | 14.43 | 4.08 | 5% | 6.53 | 6.49 |
STAY IN THE LOOP
