Self-Storage in South Africa: A Closer Look at the Industry’s Evolution—and Future

Herbert Wolpe Comments
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If you wanted to go into the self-storage business in South Africa 10 years ago, it would have been difficult because it was almost non-existent.

In the years to follow, however, a few agricultural-land owners began building 25 to 50 garages on their plots on city outskirts. They developed the properties in phases as they generated cash flow, building an average of 300 units per facility. These facilities enjoyed an average occupancy of 90 percent and a decent rental income.

Many were similar, as developers copied one another. They built brick garages with iron roofs, roller-shutter doors and brick-paved roads, all offering the same basic service, product, price, design and layout. The quality of the buildings was generally quite high, and the higher the quality, the higher the rental rates and occupancy.

Most of these businesses targeted the residential market, though they didn’t offer added services such as insurance or credit card payments to customers. Almost no promotions or advertising were used, other than Yellow Pages ads. The consumer was largely unaware of the industry’s existence.

There were no clouds on the horizon―for a while. But eventually, when the entrepreneurs woke up, South Africa was in the middle of a gigantic property boom and, in most cases, the high cost of land meant self-storage development opportunities were not viable. Those who were able to build new facilities were those who already owned suitable land to develop.

It was also extremely difficult to buy an existing facility as the original developers were getting excellent returns and had no motivation to sell. Nor were there any specialty self-storage property-management companies, or an association to welcome potential investors into the industry.
 
Building an Industry

Two years ago, having just sold a business―and having a real estate background as well as a passion for property development―I became fascinated with self-storage. This was just as the property market began to collapse. I saw the opportunity to purchase affordable land for storage development in prime areas, but there was no industry information readily available, no road map or industry leader to follow. Essentially, there were no local experts in the field.

My son, Dylan Wolpe, attended a self-storage conference and tradeshow in Las Vegas to learn about the industry and look at the latest trends from the U.S. perspective. It was an eye-opener! Soon after, we founded Storage Genie, South Africa’s first self-storage management and development company. Storage Genie then funded the establishment of the Self Storage Association of South Africa.

Our goal was to grow the South African storage business under the umbrella of an industry-leading brand. Through Storage Genie, we strive to generate public exposure for the industry and provide services otherwise unavailable locally, such as facility-manager training, a national call center, and franchise opportunities.

There are now roughly 70,000 self-storage units in South Africa, with an average occupancy of 80 percent, meaning 56,000 units are occupied at any given time. There are approximately 3.5 million taxpayers in South Africa. If we assume 60 percent of tax payers to be potential consumers for self-storage, we have a pool of 2.1 million customers. Taking all of this into consideration, we see the South African industry is under exposed, people are unaware of the concept, and we’ve only tapped into 2.6 percent of the potential market.
 
Moving Forward

As the self-storage industry grows in South Africa, it also evolves. Innovations have been introduced such as precast concrete building systems, which allow a 400-unit development to be completed in just six months at half the cost of brick buildings. Sectional title developments are also available for small investors, who can purchase and register any number of units in a facility, much like purchasing apartments in a complex.

Storage Genie is in the process of finalizing deals with American steel-building suppliers to import buildings based on a unique joint-venture strategy. The idea is the buildings are supplied on a rent-to-buy basis. Storage Genie provides the land and management, and the building supplier shares the revenue and future profit from resale.

The prospects for the South African self-storage industry look very bright, and we’re looking forward to an exciting future.

Herbert Wolpe is a founding member, CEO and team leader at Storage Genie, a self-storage property-management and development company catering to the South Africa market. To reach him, e-mail info@ssasa.co.za.

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