- There has been a significant uplift in operating performance across the Australasian industry in 2021.
- This growth reflects the resilient nature of the industry and the benefits of change as a demand driver.
- Institutional investors are driving the continued consolidation of the self storage industry.
Despite the challenges presented by the pandemic over the past 18 months, market metrics for the self storage sector continue to strengthen and maintain resilience. The Self Storage Association of Australasia (SSAA) recently engaged Cushman & Wakefield to explore the success of the sector.
Data from the SSAA Industry Snapshot 2021 shows an estimated 2060 self storage facilities are thriving across Australia (1570) and New Zealand (490) and more than 6 million square metres of net storage area hold the possessions of nearly half a million self storage customers.
The rate of existing supply across Australasia is 2.11, up from 2.04 in 2020 (measured as floor space in square feet per capita for ease of international comparison). New Zealand’s rate of supply leads Australia, at 2.34 (NZ) to 2.07 (AU). The annual turnover for the Australasian self storage industry is estimated to be north of $1.5 billion.
According to Linda Sharkey, Divisional Director – Self Storage at Cushman & Wakefield, positive movement in the average occupancy level and average storage fee rate being achieved across Australia are the two key drivers of self storage revenue growth.
“The achieved average storage fee rate across the Australasian market moved 2% from $298 in H1 2020 to $304 per square metre per annum in H1 2021. Furthermore, the average occupancy level being achieved increased 5% from 83% to 88% across the entire market. Some markets have seen significantly stronger movement” she said.
Revenue growth has been strong across the market
Ms Sharkey said the combination of all three elements has resulted in strong revenue growth in most markets across Australia with Queensland and Perth being the standouts.
“Demand is being driven by changed circumstances with the pandemic, increased household discretionary spend, the rising trend of renovating and the increased rate of interstate and intrastate migration”.
The SSAA Self Storage Industry Gauge, part of the SSAA’s Indicator Series, measures the strength of the self storage market using weighted scores against various demand drivers. The Gauge produces a score out of 5. The 2021 score is 3.7 up from 2.3 in 2020. This is despite one of the key demand drivers, population growth, being notably weak. Ms Sharkey said the 2021 result is attributed to an increase in discretionary inflation, an increase in the residential sale rate, and the level of disruption brought about by the pandemic.
The sector continues to undergo a transformation, with consolidation driven by institutional demand.
“The investor market continues to be led by Abacus Property Group and National Storage. Blackstone, a new entrant to the self storage market, has also been successful in acquiring two significant self storage portfolios in 2021, bringing the total 2021 transaction volume to almost $900 million up to October 2021.
“This is considerably greater than previous years (just under $450 million in 2020 and circa $200 million in 2019). Self storage portfolios are in particularly strong demand amongst the three major investors”.
Ms Sharkey went on to say that Capitalisation rate compression has been in the region of 75-100 basis points since the onset of COVID-19. The average capitalisation rate across the institutional market is currently in the region of 5.7%.
With the increasing interest in self storage assets and the lack of acquisition opportunities available, a self storage development boom lies ahead.
“The increased interest in the sector and the impressive income defensiveness demonstrated through the pandemic is fuelling a surge in new supply.
“The number of self storage facilities in the three East Coast cities is set to increase by 12% next year, significantly higher than previous years where the number of facilities had been increasing at a rate of 2-3% per annum. In short, we are going to see and hear a lot more from this sector in 2022” she said.