Another outcome has been a natural slowdown in the rate of new development. During the boom years of 2005 to 2008, the industry was growing by approximately 40 percent year-on-year. That rate of growth has fallen significantly.
Despite tough economic trading conditions, the growth in gated-security estates and high-cost, smaller dwellings with little or no storage space, and the rapid urbanization of previously disadvantaged communities is still driving the industry forward. South Africa also has a unique situation in which it has an unusually high number of expat, middle-class citizens working in foreign destinations. These expats typically still have one foot firmly planted in South Africa, with their personal belongings safely stored for their return.
Customers who use self-storage today generally do so because they have a need for the product, rather than it being a lifestyle choice. Consequently, there is still a large untapped market, as there is little public awareness of the true benefits of self-storage.
The user profile is changing somewhat. The domestic user base was once dominated by those in short-term need due to a home renovation or moving to a bigger house, an overseas work assignment or the like. Now renters include the domestic user who has been forced to move into a smaller home or lost a job.
The commercial sector, primarily driven by the small- to medium-size operator, has seen a similar trend. Businesses that were previously looking for additional space are now looking to store goods while they relocate to smaller premises.
In both the domestic and commercial market, the customer is more price conscious and will look for the best deal. He will also ensure he does not rent surplus space, taking the time to pack, stack and store items to maximum effect. To counter such trends, the more sophisticated operators have reacted accordingly, offering specialized pricing and discount structures, transportation, and other value-added services and products.
The S.A. self-storage industry is continuing to grow; however, the impact of the current market cycle could mean a number of first- and second-generation facilities will fall by the wayside completely or be acquired by stronger operators. A number of facilities that close shop will be stores with unprofessional setups, or where self-storage hasn’t been the sole or main business activity of the entrepreneur.
Gavin Lucas is the founder and CEO of SASSI Self Storage Group in Cape Town, South Africa. The company has a portfolio of seven S.A. self-storage facilities under the brand name Stor-Age Self Storage. Mr. Lucas is a qualified chartered accountant and previously worked for KPMG. For more information, visit www.saselfstorageinvestments.com.