National Self Storage Market Update Winter 2019 - m3property
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National Self Storage Market Update Winter 2019
Key Points The higher-profile location of many new facilities has partly
contributed to rising consumer awareness of the industry
How are these drivers performing?
• Sydney and Melbourne are the strongest investment however another key contributing factor is the digitalisation
markets for self-storage. Investment demand remains of marketing which has enabled centres in lower profile DEMOGRAPHIC
strong and yields continued to tighten over the 2019 locations to reach target markets through digital streams. As the population grows, demand for services and products grows. The Australian
financial year.
+1.6%
population is growing at a strong rate, however, varies by location, with capital cities
Individuals are the primary customer of self-storage Population Growth
experiencing the strongest growth.
• Equated market yields tightened by circa 230 basis facilities. According to IBISWorld, revenue derived from Year to December 2018
points between the 2014 financial year and the 2019 individuals accounts for 63.1% of total self-storage industry
Older people often look to downsize or travel, and this may prompt them to put some or
financial year. revenue. Business customers account for the remaining
all of their belongings in storage. Self-storage facilities in areas attracting a higher
39.6% of industry revenue (IBISWorld). Revenue from
• Centre occupancies have fallen over the past three 15.5% proportion of older persons than others (often due to lifestyle factors) will benefit from this
businesses has grown as a share of total revenue of the
years as a result of softer economic conditions and to % of Population 65+ yrs trend. The proportion of the population aged 65 and over is expected to increase to
past five years, predominantly due to growth in the online
a lesser extent, increased competition in some locales. as at June 2018 17.79% by June 2028.
retail sector.
• The industry is likely to face several headwinds over
the short- to medium-term – including growth in the What are the key drivers of SOCIOECONOMIC
peer-to-peer market (i.e. storing goods in other
people’s spare rooms, sheds etcetera), growth in
self-storage demand? Higher income households typically have a greater capacity to
pay for self-storage. m3property has found a moderately strong
work-store supply (which might impinge on demand The key drivers of customer demand for self-storage are positive correlation between median household income and
from large storage users) and new supply putting displayed below. average self-storage rates (after discounting) . +11.9% Total
pressure on revenue in some locations.
+7.2% More than One Semester
• However, positive drivers of demand going forward SELF STORAGE DEMAND Aust. University Students Studying Abroad
include population growth, growth in online retailing, KEY DRIVERS 2016 to 2017
increased mobility of students and workers, continued +2.8%
Average Weekly Earnings When students study overseas, there is often a
urbanisation and expected improvements in the DEMOGRAPHIC FACTORS
Six months to November 2017 to six months to November 2018 requirement to store possessions in a storage facility.
residential market, particularly in the number of Including:
housing transfers (i.e. people moving houses). Population growth
Marriage and divorce rates BUSINESS
The Evolution of the Storage Ageing of population
Growth in e-commerce will encourage small online retailers to increase +4.8%
Industry SOCIOECONOMIC FACTORS
their demand for self-storage space. Whilst growth in online retail has Online Retail Growth
slowed, it was coming off a period of extremely robust growth between May 2018 to May 2019
1 Including:
The self-storage industry has grown substantially over the January and September 2018.
Wage growth
past decade. From June 2009 to June 2019, the number of
Student and worker mobility/agility
self-storage facilities nationwide has risen by an estimated Small to medium businesses (SMEs) are a source of demand for self-
Urbanisation
12.83% (IBISWorld). Industry growth has been driven storage space. Business growth is forecast to average 2.5% per annum
by rising customer awareness, urbanisation, strength over the five years to June 2024, being supported by a number of factors, +3.0%
in the residential market and growth in demand from BUSINESS FACTORS including the weaker value of the $AU and Government incentives for Number of Businesses
Including: Year to June 2018
businesses. Furthermore, until recently, there have been small businesses.
Online retailing
limited feasible alternatives to self-storage for individuals
New business start-ups
or businesses with storage needs.
RESIDENTIAL MARKET
In addition to growing, the self-storage industry has also RESIDENTIAL MARKET FACTORS Homeowners may choose to rent self-storage whilst they move
evolved considerably over the past two decades. Self- Including: -9.3% 2017FY to 2018FY between houses. Whilst national housing transfers have trended
storage facilities have evolved from being located on large, Housing transfers downwards since 2015FY (and may decrease further), they are
sprawling sites in outer locations, often with poor accss Long-term/extensive renovations
+1.6% p.a. 2019FY to 2024FY
expected to increase from the 2021FY with five-year growth of
Housing Transfers
and visibility, to being modern facilities, often multi-level, Affordability 1.6% per annum forecast through to the 2024FY.
on high-profile sites such as main roads in inner locations. Dwelling size
-14.5%
The declining size of new apartment builds is a positive source of
Avg. Apartment Size
self-storage demand.
2008FY to 2018FY
Soures: ABS, HIA, NAB, IBISWorld, Australian Government Dept. of Education and Training, m3property Research
| Page 2 Page 3 | National Self Storage Market Update
Sydney and Melbourne Industry Disruption The outlook is positive
are leading the investment The word ‘disruption’ is now a somewhat common part
Demand for self-storage is expected to increase over the
market of the real estate industry. Co-working, online retailing,
short- to medium-term. Demographic, socioeconomic
artificial intelligence and electric vehicles are some
and residential drivers are all expected to drive demand
The self-storage industry is highly fragmented and examples of current and growing ‘industry disruptors’.
from individual users going forward. Other factors such
comprises a large number of small and mid-sized players. Within the self-storage sector, disruption is emerging in
as growth in online retailing and the number of SMEs are
There are a small number of large national chains, with three key forms, outlined below:
also expected to result in increased storage needs from
most operators being single-location businesses owned
Warehouse or work-store units: Warehouse / work-store business customers.
by individuals. Because of this, the industry operates in
units are generally sized between 50 square metres and
two tiers. However, despite the demand outlook being positive, we
150 square metres. Because of this, they could potentially
expect that occupancy rates in some facilities could come
Self-storage values are highly dependent on the facility’s compete for customers with large storage requirements
under pressure due to the overdevelopment of storage
catchment and management’s ability to find a suitable who may occupy multiple units in a storage facility.
facilities in some locations. Furthermore, competition
pricing equilibrium. There is strong demand for high-quality
Peer to peer marketplace: The peer-to-peer marketplace in the industry is becoming increasingly price focussed.
assets above the $5,000,000 price point.
has grown rapidly over the past five years. Uber, Airbnb, These factors have the potential to result in an increase in
The investment market continues to be driven by Sydney Airtasker and Parkhound are examples of peer-to-peer discounting or incentives offered to customers.
and Melbourne, in line with population growth figures. operators. In the storage industry, Spacer was launched in
Source: m3property Research Mobile storage and peer-to-peer storage options are
Melbourne has decreased the population gap to Sydney, 2015 and provides an alternative to traditional self-storage
expected to gain further market share going forward.
which is starting to be reflected in lower adjustments in Australia. Spacer allows people to rent out their under-
However, major storage operators are anticipated to
in capitalisation rates based on the respective macro utilised space (for example parking spaces, bedrooms,
continue to increase their focus on convenience, security
locations. Brisbane remains the third-strongest investment Self Storage Yields and $/Storage Unit garage, backyards, sheds et cetera) and is currently
12.50% $25,000 and the provision of value-add and specialised services.
market in Australia, with the population growth in Tasmania operating in Adelaide, Brisbane, Canberra, Gold Coast,
putting the adjustment in Hobart for the macro location to Hobart, Melbourne, Perth and Sydney. From a customer Other trends we expect to continue / develop are:
10.00% $20,000
be in line with Adelaide. Adjustments for non-Capital City perspective, Spacer is often more affordable and more • As environmental awareness and ‘green’ initiatives
metropolitan areas are currently approximately 100 basis 7.50% $15,000 flexible relative to traditional self-storage. In 2017, National continue to grow in the corporate sphere, business
$/Unit
Yield
points. The adjacent map shows typical capitalisation rate Storage began a partnership with Spacer by acquiring a customers are expected to increasingly reduce their
adjustments relative to Sydney (the tightest market). 5.00% $10,000 25.8% stake in the business. requirements for document storage. This is already a
Mobile storage: Mobile storage is another potential trend that has grown over recent years.
2.50% $5,000
Yields continue to tighten disruptor to the self-storage market. Mobile storage includes • Self-storage centres are expected to increasingly
0.00% $0 storage that is stored both at dwellings or packed and then offer goods collection / parcel pick-up as an ancillary
During the 2019 financial year, the average equated market 2012 2013 2014 2015 2016 2017 2018 2019 stored offsite. Mobile storage has a number of barriers to service. This is another trend that has developed over
yield was 7.47%, having tightened 30 basis points from the Financial Year
entry, including high transport costs, high overheads when the past two years and is expected to continue given
2018 financial year. The average initial yield was 6.69%. Average of $/Unit Equated Market Yield Initial Yield
commencing, related third-party insurance issues and continued growth in e-commerce.
The average rate per self-storage unit was $18,787, down Source: m3property Research council issues with storing mobile boxes on the footpaths.
7.6% from $20,325 during the 2018 financial year however • New development is likely to continue to take the
up 38.03% from the 2014 financial year. A comment to make about the above-discussed alternatives form of multi-level centres. New development is
Self Storage Equated Market Yields to traditional self-storage is that whilst they have a growing increasingly located in inner and middle-ring metro
The average equated market yield tightened circa 230 12.00%
presence in capital cities / major cities, smaller regional locations where large parcels of land are scarce as
basis points over the five years from the 2014 financial locations may not have as readily available access to
11.00% well as expensive. This has encouraged developers
year to the 2019 financial year. Yield compression can these alternative forms of storage. to build upwards during recent years and this trend is
be, at least in part, attributed to the ongoing increasing
10.00% Furthermore, they typically do not offer the same expected to continue.
awareness and maturity of the self-storage market, but
also the general economic conditions, low financing costs convenience or security to customers as traditional self- • In the investment market, we expect that yields have
9.00%
and increased demand from corporate purchasers. storage, of which a good portion now offer 24 hour / 7 day room for some further tightening over the short-term.
8.00%
customer access and digital CCTV footage. Whilst difficult We then expect that yields will remain at a low level for
m3property has also noticed that there is a decreasing to quantify, it is prudent to note that small older centres the medium-term. Our forecast takes into consideration
premium being applied between Prime and Secondary that do not offer the convenience or security that new
7.00% forecasts for employment and population growth, retail
assets, likely to be largely attributable to the scarcity of centres typically include may be more susceptible to loss sales, house prices, house transfers and bond rates.
Prime assets being available for acquisition. 6.00% in patronage if monthly rates are not competitive with the
Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19
Since 2012, initial yields have averaged 102 basis points alternative forms of storage noted previously.
higher than equated market yields. Source: m3property Research
| Page 4 Page 5 | National Self Storage Market Update
Key Contacts
Casey Robinson Ross Perkins Jeremy Hoffman
Research Director Managing Director Senior Valuer
Qld | +61 7 3620 7906 Qld | +61 7 3620 7901 Qld | +61 7 3620 7912
casey.robinson@m3property.com.au ross.perkins@m3property.com.au jeremy.hoffman@m3property.com.au
Craig Berridge Michael Schwarz
Associate Director Divisional Director
Qld | +61 7 3620 7916 SA | +61 8 7099 1808
craig.berridge@m3property.com.au michael.schwarz@m3property.com.au
m3property.com.au /m3property
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purposes only and has been derived, in part, from sources other than m3property and does not constitute advice. In passing on this information,
m3property makes no representation that any information or assumption contained in this material is accurate or complete. To the extent that this material
contains any statement as to the future, it is simply an estimate or opinion based on information available to m3property at that time and contains
m3property
assumptions, whichStrategists
may be incorrect. m3property makes no representation that any such statements are, or will be, accurate. Any unauthorised use6 or
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