Material suppliers, particularly steel, are finding the general downturn in the construction industry is causing massive shortfalls in sales figures. They’re now reducing their prices as fast as they increased them during the shortages from just a few years ago. If owners are thinking about using this slow period in their business as a time to lift the appearance and performance of their facilities, now is the time to do it. Deals are everywhere.
Australia has yet to enter a “recession,” technically, and there is some conjecture that the country will. Unemployment is still low (less than 6 percent), and the full force of unemployment increases are to be felt. Some operators report collections are becoming more difficult and, given the tight market, that’s to be expected.
The finance market has become concentrated, with the big banks taking over smaller rivals. This has led to some additional tightening of lending criteria, more than the pricing and risk pressure resulting from the financial crisis. Financial covenants are tighter, which invariably means any self-storage funding requires greater equity from investors. However, the Australian banks are not closed and are continuing to lend to existing customers.
The last 12 months have also given some operators the chance to review operations with cost-reduction in mind, and some have implemented key changes and staff reductions.
The federal government has pumped $40 billion into the local economy in an effort to underpin current business. It remains to be seen if it flows to the self-storage industry, although a number of operators have reported their debt reduced after their customers received stimulus checks.
Overall, the industry has an optimistic view with the current period being seen as one of consolidation and review.
Dallas Dogger is the CEO of Brisbane, Australia-based Centreforce IT, an installer of self-storage access-control, CCTV and door-alarm systems throughout Australasia. Sam Kennard is the managing director of Kennards Self Storage. For more information, visit www.centreforceit.com.au and www.kss.com.au.