By Dallas Dogger
The last year of the Australian self-storage market can be summed up with one phrase: “Steady as she goes!” Very few Australian operators have expanded, and there have been few new entrants to the market.
While the Australian economy is relatively strong, business confidence overall is weak, and unemployment hovers around 5 percent. Recent elections have seen conservative governments returned to power in New South Wales and Queensland after long periods of socialist government. Most of these states have spiraling debt.
In Queensland, 14,000 public-service jobs have been shed to assist the government in bringing the budget back into line. This has meant a short-term spike in unemployment in some areas, which in turn can affect the lease-up rate of self-storage.
In addition, housing turnover is low due to deteriorating values, and consumer retail spending is very soft. The result is we have seen more aggressive pricing practices by self-storage operators trying to win new customers, and some areas have seen significant reductions in street rates.
In July, the Australian government implemented a carbon tax. It's difficult to judge the full effect of this new tax on self-storage, but as it is designed to target large carbon emitters like coal-fired power stations, the effect filters very rapidly to the self-storage market, especially via electricity prices.
Electricity charges have increased 51 percent in three years. Over the past four years, water rates are up 83 percent, insurance is up 52 percent, and land tax is up 57 percent. With the carbon tax applying to waste disposal, we can expect increases in this area as well. Self-storage operators have little recourse but to pay these additional fees and put upward pressure on their rates.
Insights From Kennards Self Storage
In the eyes of Sam Kennard, CEO of Kennard's Self Storage, which operates more than 20 facilities throughout Australia and another eight in New Zealand, the Australian market has deteriorated over the last 12 months, with some areas remaining stable. But Kennards is very active in the New Zealand market—currently the company's strongest geographic sector—and it has seen a surge in business there. New Zealand endured a long slow-down period from 2008 to 2011, and the recovery is very welcome. Occupancy levels are higher and continue to grow, with street prices increasing.
Kennard believes it's important to invest in facility staff as well as their sales and customer-service skills. He sees these areas as critical to the business. In addition, the company's online strategy will continue to evolve, with a new website the company claims will distinguish it from competitors.
While no other self-storage operators are developing in the Australasian market, Kennards is building a number of new sites, including a conversion of an iconic Coca-Cola factory in North Sydney, Australia. As the project develops, the design has evolved to include a bigger retail area, Wi-Fi access and customer-lounge spaces.