If you are using a tilemap you could use your tiles to sort your units so that you only check a few units instead of a large amount. When a unit moves pop it from a list of units on the tile it is moving from and push it onto the tile it is moving to. It may be on the same tile but adding and removing things from a list (doubly linked) is pretty quick or you could check before you pop it. This has lots of uses especially with drawing order but for picking it can be useful as well.

I would also recommend using circles instead of squares for picking. As long as you leave all of the distances squared it can be quite fast and if units do become closely situated you can see which one is closer to the mouse click instead of just which rectangle was clicked into first. The reason I say this is that circles have an origin just like your units should. Since you have already checked the distance from this origin there is less work to be done than with rectangles in the event of a click being in multiple units space.