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The self-storage industry is in the midst of an unprecedented building boom fuelled by a growth in apartment living, new research has found.
The supply of storage units in Australia is set to swell by more than 10 per cent in less than two years, data from property research group Urbis shows.
Thirty one self-storage facilities have been proposed in Sydney, Melbourne and Brisbane over the next two years, nine of which were lodged by new market entrants.
Previously, less than three such facilities were built in each metropolitan location a year.
Urbis director David Blackwell said construction of new storage stock in metropolitan areas had gone up substantially in the past three years.
A balloon in apartment living was fuelling stronger demand for self-storage and would be the major factor in driving revenue growth, Mr Blackwell said.
Brisbane had the highest increase in people living in apartments of 25.5 per cent between the 2011 and 2016 census dates. Sydney’s apartment dwellers grew by nearly 19 per cent, while the number in Melbourne was up 9.41 per cent.
“Urbis has observed a strong correlation between higher-density living and the demand for self-storage in areas such as Waterloo in NSW, Hawthorn in Victoria and Fortitude Valley in Queensland,” he said.
“Demand for self-storage will continue to grow in areas such as Macquarie Park in NSW which is undergoing higher density residential development and significant population growth.”
Unit residents accounted for 28.8 per cent of self-storage users, despite only forming 13.6 per cent of the Australian population, separate Urbis research shows.
Mr Blackwell said self-storage companies were opting for purpose-built facilities, which could charge higher storage fee rates for better customer amenity, rather than converting warehouses.
“Urbis has seen an increased construction volume of premium purpose-built self-storage facilities by both national and state-based owners.”
The industry’s revenue in Australia is expected to hit $1.2 billion next year, the result of an annualised 3.7-per-cent growth from 2013 to 2018, according to an IBISWorld report.
Impact of disruption not felt yet
This strong demand had encouraged startups, such as Spacer and Spacelli, to enter the market. But Mr Blackwell noted that it would be challenging for these disrupters to provide the same level of service as traditional operators.
“Any market share obtained will be concentrated at the lower end of the market, being self-storage facilities situated in outer-city locations and which offer a secondary level of customer amenity, (such as) off-site management, poor presentation and limited security.”
Sam Kennard, managing director of Kennards Self Storage, the largest owner of self-storage properties, said he was yet to feel the threat of peer-to-peer operators.
“The feedback through the company isn’t one that suggests that they’ve got much traction yet,” he said.
Kennards, which has an estimated portfolio value of more than $1.45 billion, has five new properties scheduled to open in 2017, and five confirmed for the next two years, with the new sites located in Wollongong, Melbourne, Brisbane, Adelaide, Sydney and Auckland.
“We have an appetite to find more if we can, (projects are) constantly coming through the pipeline,” Mr Kennard said.
Expanding existing sites was another strategy Kennards was adopting to accommodate the growing demand.
“We’ll go back to redevelop (older properties) into a more intensive, multi-storey self-storage project, mostly in (inner) Sydney where the land pressure is most pronounced,” he said.
“Even in the north-west, Castle Hill area is really tough to get new sites for self-storage.
“That’s the only way you can get onto the real estate in the inner urban areas: to go up, like the apartments are doing.”
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