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

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Major banks in Tokyo might consider financing a self-storage project, but interest rates would be 0.3 percent to 0.5 percent higher than those of other real estate projects such as apartment complexes, office buildings or other traditional rental properties. For self-storage development, the hurdle is much higher in general, and lenders or investors require high-rated credits and security for new projects.

In addition, there are still many self-storage facilities constructed using freight containers as storage units. These are often lucrative because they require less investment. While they’re less expensive to rent, they don’t have the security features of traditional self-storage. However, many cost-conscious consumers can’t differentiate between the two products. Many operators would like to see stricter zoning ordinances to control locations where facilities with freight containers are built and operated.

A Flexible Offering

The Japanese yearn for the American lifestyle. For many, it’s only in movies where people get to have large houses with extra space and rooms for hobbies or whatever your heart desires. People pay extra fees for outdoor parking near their residences, as they don’t have private garages. It may be hard to believe, but having a private garage for your car is a dream for the average Japanese.

Reise Inc., one of the Japan's top storage operators, has introduced “Reise Hobby," a new flexible space that can serve as a storage/garage/hobby room. One way the Japanese market is overcoming the lack of space is through a new flexible offering. Reise Inc., one of the country's top storage operators with approximately 360 traditional self-storage facilities in Tokyo and Osaka, is expanding its business share with new rental-space ideas. The company’s head engineer and designer came up with the “Reise Hobby” concept for new flexible space that can serve as a storage/garage/hobby room. It features a secure indoor garage and space for automobiles or motorcycles on the main floor, and a mezzanine or full floor on the upper level.

Reise currently operates fives of these new hobby-concept locations. Each achieved nearly 100 percent occupancy within a few months of opening. The average rent is between 78 million yen to 93 million yen ($1,000 to $1,200) a month. There’s also a waiting list for new tenants. The rooms are not designed as apartments, so tenants are not allowed to live there, but people seem to enjoy the lifestyle with extra private space away from their homes. Reise is planning to build more and is already discussing a rental-rate increase.

While the self-storage market in Japan is growing, operators and investors still face many changes, including finding suitable land for development, a lack of readily available financing, legal questions  and, most important, public awareness. However, the driving demand for the service will help the industry overcome these obstacles and continue toward growth and prosperity.

Tatsuya Saji is CEO of Trade Winds International Inc. He’s lived in United States for  more than 30 years and worked as a consultant for the self-storage industry in Japan, where he’s involved with the largest and only government-endorsed self-storage association, the Rental Storage Association of Japan. For more information, e-mail rsaji@trwinds.com .

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