By Rachel Adams
You could call it beginner’s luck, but the boom experienced by the Asian self-storage industry after its debut in the early 2000s was more likely the result of operators putting their best foot forward to offer solutions for small spaces in high-density populations, all the while battling a lack of public awareness, high real estate costs and stiff competition.
Self-storage operators in countries like China, Malaysia, Singapore and Thailand introduced the as a solution to the limited space caused by dense populations. In conjunction with thriving economies and soaring the cost of real estate, consumers and businesses have turned to self-storage to fulfill their needs, while operators strive to meet the demands of this growing industry.
The Chinese Market
Operating under the brand name SC Storage, SC Logistics Co. Ltd. opened its first self-storage facility in 2001 in Hong Kong. The company now has 38 stores throughout Hong Kong and Macau. Like many operators in the region, SC Storage began expanding quickly as the demand for self-storage grew. “Right from the beginning, we saw the demand far outstrip supply, so we started to expand as soon as our first facility was full in early 2002,” says Kevin She, CEO and co-founder.
Unlike U.S. self-storage developers, most operators in Asia build from pre-existing industrial buildings due to the lack of space for new structures. Recent rises in the cost of real estate, however, have taken a toll on industry growth.
“There are no new industrial buildings being built, and due to the high value of real estate, many are being converted to office space or even hotels,” says Marilyn Leslie, president of MiniCo Asia Ltd., which operates three locations in Hong Kong under MiniCo Self Storage. “This drives the cost of old industrial buildings very high and makes expansion difficult.”
When MiniCo entered the Hong Kong market in 2002, there were 11 self-storage facilities. Today there are more than 150. As competition increases and public awareness grows, the industry adapts. “People’s expectation of self-storage has changed,” Leslie says. “Service has become more important. They want more than a flimsy room with questionable security and no service.”
Service is a priority at You You Space Security Self Storage, which opened its doors in 2010 in Shanghai. It's important to educate the market before focusing on expansion, according to CEO Steven Chen. “We believe self-storage is a service-oriented business," he says. "To establish a great service model is more valuable to us than to build many sites and then bear risks of paying too many fixed costs.”
Facility location is also becoming more important as the industry matures. “Due to the increase of facilities, people no longer have to travel long distances to access their goods,” Leslie says. “Initially, there were very few self-storage stores and so our customers came from all over Hong Kong. Now, a convenient location is more important to the success of a facility.”