The Challenges Facing Japan's Self-Storage Operators and the Solutions They Create to Meet Them

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By Tatsuya Saji

The self-storage business is growing slowly and steadily in Japan, especially in major cities such as Tokyo and Osaka. According to a recent study by private marketing-research company Yano Research Institute, the size of the Tokyo self-storage market in 2010 was more than 26 billion yen ($340 million), and it's growing. One of the reasons is the huge demand for the service.

There are approximately 128 million people living in Japan, an island smaller than the state of California. Typical two- and three-bedroom houses are 80 to 100 square meters and cost 20 million to 35 million yen or more, depending on how far they are from major cities and train stations, schools, shops, etc. The Japanese generally live in smaller houses in areas of higher population density. Living space in Japan is 13 times more dense than that of New York City. Needless to say, people are hurting for more space.

Lack of Awareness, Legal Concerns

Operators of self-storage businesses in Japan face many of the same challenges U.S. operators once experienced. One of the biggest obstacles is public awareness of the service.

The Japanese don’t yet recognize self-storage as a convenient lifestyle option. We call self-storage facilities “trunk rooms,” “suitcase rooms” or “shunou box (storage boxes),” as units are much smaller than those in Australia, Canada and the United States. People know what they are but not how to effectively use them.

Also, the price of self-storage might seem a little too expensive for general consumers for what they get. It seems the overall marketing strategy needs a few improvements to create better public awareness.

Two other obstacles Japanese operators regularly grapple with is rental agreements and  tenant defaults. Many use rental agreements based on the 1991 “Act on Land and Building Lease,” which was made to better protect tenants. It’s not an uncommon practice to hold off on auctioning unpaid units or delinquencies. Instead, operators will move a unit’s contents or hold them for long period to avoid a possible legal mess. In addition, rental agreements among operators vary greatly in their language. The Rental Storage Association of Japan is working toward standardizing these agreements to protect operators.

Simply renting a unit is vastly different in Japan than it is in the United States. Many operators have a tendency to shy away from renting multiple units within the same day. Bringing a truckload of personal goods to the facility and renting a unit is almost impossible in Japan. The process in which to secure a unit needs to be simpler.

Most Japanese self-storage companies operate facilities with no onsite manager. Quraz, one of the major operators, is an exception. The company’s style of operation and service is similar to that of a U.S. facility in many ways and is rated high in the country.

Financing New Construction

The Japanese self-storage industry is still in it’s infancy and relatively new to general consumers and financial institutions. A lack of awareness is one of the biggest obstructions for operators when it comes to financing and marketing. It’s hard for new investors to enter the self-storage business. Most financial institutions in Japan don’t recognize or have enough knowledge of the business as a main category of real estate.

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