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 marketcurrently the company's strongest geographic sectorand 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.

Insights From National Storage

National Storage, another large Australian self-storage operator, has made similar observations: The market has been flat, but there's been an increase in net area occupied across the company's portfolio. In an effort to be different, the operator has developed a strategic alliance with a national removals firm, co-branding marketing material, trucks and building facades. Both companies' call centers have implemented warm call transfers, and get a quote Web pages authorize e-mail exchange of key customer information.

National Storage is spending much more time in the online space, driving traffic to its website as well as its online reservations and move-in module. The company is also using social media to increase brand awareness. There's a greater focus on search-engine marketing and optimization.

Company sales have been significantly impacted by staff turnover. In response, National implemented a dedicated a call center to handle sales inquiries for the company's 58 stores. This was a significant achievement and an industry first in Australia. The center allows National to concentrate its sales-training efforts in one place rather than across multiple facilities nationwide. Enabling the company to stabilize and better control its conversion rate during times of economic difficulty, the center has been very successful.

Insights From Other Market Players

Other self-storage groups around the country report very similar information to the major operators. Ian Oliver of Capital Self Storage in Canberra said his company continues to focus its online strategy. The Internet is a growing area of business, with a large number of Web-savvy customers renting spaces via online move-in technologies.

The advantage of online move-ins is they are completed at normal prices, contributing to a profit increase at a time when occupancy growth has been subdued. Several operators are now focusing on revenue management as a key tool to increase income from existing customers rather than driving higher rates at a time when pricing pressure is sensitive for new business.

Self-storage operators are watching expenses very closely and choosing their purchases carefully. This has affected many long-time industry vendors, causing a notable reduction in suppliers and increased withdrawal from the market.

The Self Storage Association of Australasia continues to grow but at a much slower rate due to the lack of new entrants to the industry. The association board is working on strategies to enhance member services such as a new marketing manual and an update to its procedures manual. It also reports observing more industry delinquencies, which could indicate customers are having trouble paying their storage bills.

Industry awareness continues to be an issue in Australia, with little coordination or effort among operators to improve the situation. Self-storage is still a mystery to many consumers, and this remains a challenge operators must address.

The gap between larger operators and the rates they command and the middle-tier, lower-order sites is growing. This is largely due to the online marketing efforts made by the larger players. Small players are finding it difficult to compete with larger operators online, and this is being reflected in rates, with a disparity of as much as 40 percent between the largest and smallest operators within the same market.

The outlook for 2013 is very much the same but with more industry consolidation, which is resulting in increased occupancy due to a lack of new construction. It will only be a matter of time before finance is easier and economic pressures spur operators back into expansion mode.

Dallas Dogger is the CEO of Brisbane, Australia-based Centreforce IT Pty. Ltd., an installer of self-storage access-control, CCTV and door-alarm systems throughout Australasia. For more information, visit www.centreforceit.com.au.