Self-Storage in Australia and New Zealand: Growth and Occupancy Stagnant While Outlook Remains Hopeful

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Oversupply in Some Markets

Kennards Storage, another of Australia’s largest operators, saw signs of improvement in occupancy and rental price growth in 2010, but it proved to be short-lived. “2011 has been a flat year for the storage industry,” says owner Sam Kennard. “But it’s better than other industry sectors, such as housing and retail. We should not be too unhappy about ‘flat!’”

Kennards Self Storage is one of the largest self-storage operators in Australia.Among the Kennards Australian portfolio, there remain pockets of strength that offset the weaker areas. In some areas, asking rental rates are even declining as result of the aggressive competition. However, markets such as the Gold Coast suffer oversupply, and it will take years to overcome this challenge.

For the past two years, Kennards has concentrated on expanding its existing self-storage facilities. The portfolio increased by approximately 2,000 new spaces and 90,000 square feet. Another 2,500 spaces are in the pipeline for the next 12 to 18 months.

In New Zealand, where Kennards has eight facilities, the industry has suffered a long period of recession or insipid economic growth since 2008. This has led to occupancies dropping dramatically in some locations. However, since May, Kennards facilities have seen broad-based growth in occupancy at all of its locations. This will feed into storage-price strengthening. “It’s nice to see this turning around now,” Kennard says.

Online Marketing

For some operators, the gap between the big operators and the small mom-and-pop stores is widening. With the rise of the Internet, larger operators were quick to pick up on the demise of the Yellow Pages as a primary source of inquiry.

Since 2007, operators are receiving more customer inquires via the Internet, but some operators have yet to pick up on the trend. Now they’re finding out the hard way as calls have dropped off and they’ve been left behind.

Lean Growth Ahead

In general, 2012 will likely be a year of continued lean growth as banks are still tight on lending, interest rates are still high, and investor confidence is still average despite the majority posting consistent incomes. The self-storage industry has weathered the global financial storm better than most, and there’s an optimistic view that there will be pent-up demand when the economy improves. As real estate activity improves so does the fortune of self-storage operators.

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. For more information, visit www.centreforceit.com.au .

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