Why Self-storage Keeps Skyrocketing

July 2 2024

The alternative subsector of self-storage is fast becoming an asset any serious investor should be seeking to add to their portfolio.
Why Self-storage Keeps Skyrocketing

Across the alternative asset subsector, the appeal of self-storage continues to rise as the fundamentals behind its growth strengthen.

Always solid, interest and investment in the subsector grew remarkably during the pandemic and continues to soar. 

The reasons are many. 

Downsizers, also known as ‘rightsizers’, are using these facilities when making the move from a large family home to an apartment or over-50s land lease community because they offer a long-term storage solution for heirlooms, including furniture, or boats and vehicles that are used irregularly. 

Meanwhile, Gen-Z has become one of the largest groups of users of self-storage, driven by a need to reduce household footprints in the face of rising rents and plummeting vacancies. 

“The Gold Coast lifestyle and desire to live beachside of the Gold Coast Highway is resulting in a demand for high-rise/apartment living,” says Adam Grbcic, commercial property specialist at Kollosche.  

“Those who seek this lifestyle need somewhere for the boat, jet ski or caravan.”  

Working from home has also played a part as the space required for a home office has taken over that which may have been used for storage, while the monetisation of hobbies through social media sites, such as Etsy, eBay, Facebook Marketplace and Gumtree, has the warehousing needs of home-based entrepreneurs exceeding their garages’ capacities. 

The popularity of self-storage has led to a lifting of the bar for the facilities, with improved security and technology most notable. 

This, along with increasing demand and rising insurance costs, means monthly rents have risen during the past few years. 

For an investor, this popularity is an obvious drawcard. The self-storage industry reports national occupancy rates nudging 90 per cent and the inherent low to zero-risk of tenancies for owners is also hard to ignore. Put simply, if a tenant defaults on rent for a contracted period, the owner or operator clears out the unit’s contents, sells them and the unit is ready for a new tenant. 

New facility completions peak 

Despite the continuing construction crisis, in 2023 more than 200,000sq m of new supply entered the self-storage market – a new peak.  

The supply pipeline was dominated by Queensland, with 43.2 per cent of completions nationally, driven by strong and sustained population increases and housing supply issues.  

This year, there has been a further 52,220sq m of self-storage come online, again with Queensland leading the way, accounting for more than half. 

For the rest of the year, another 76,320sq m is expected to be completed, and there’s no prize for guessing which state has the lion’s share. 

“Self-storage has also been popular for developers because it has not only filled a demand, but the barrier to entry is lower, which means it incorporates a larger buyer pool, including first-time commercial buyers, especially SMSF buyers,” Adam says. 

Self-storage tends to be tightly held, but with so much in its favour, it is a subsector to keep an eye on by any investor looking for diversification, and a solid asset class that seems in no hurry to do anything but grow.  

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