The involvement of Equity International brings a whole new level of sophistication to the Brazilian self-storage market. But even with the company's resources, the task of finding suitable locations, either for conversion or new development, is hindered by the rapidly rising costs for land and buildings. The company is just now developing a project in Riberao Preto, one of the largest and wealthiest cities in the interior of the State of Sao Paulo, according to Adriano Araujo, director of operations for Guarde Aqui.
All attempts to open new facilities involve obstacles. The complicated bureaucratic government agencies have little or no knowledge of the self-storage product. “The approvals continue to be slow and time-consuming," says Araujo. "We continue to be viewed as distribution centers and traffic-generators. The requirements are outrageous and nonsense.” Add to this the additional barriers to entry such as land or building costs, high duties on imported supplies, limited or no local expertise, and virtually no operating software in the native Portuguese. Yet the demand keeps growing.
Expansion Despite Difficulties
Development challenges have not stopped the explosive growth of self-storage throughout Brazil, where there are now more than 100 facilities. Most are in the major capital cities such as Brasilia (which just opened its first facility in July), Belo Horizonte, Porto Alegre and Rio de Janeiro, to name a few. “It is expected that there will be continued expansion in other interior capitals,” says David Moura-George of StokArea, a new Sao Paolo company that plans to grow to four facilities.
There are an estimated 200 million people in Brazil. Even though only a portion of that population is potential self-storage consumers, there are still more than 40 million prospects being served by less than 6 million square feet of storage.
It's also important to keep in mind that the customer base is predominately commercial—close to 70 percent compared to 30 percent in the U.S.—due to the lack of alternative logistic solutions for small businesses. However, Moura-George indicates StokArea is seeing a slow growth in consumer business, bringing the mix closer to 50/50.
There are fewer than 300 self-storage facilities in all of Latin America. With a population of more than 500 million, the region's growth potential is easy to see. Though there are still many challenges, opportunity clearly abounds. As more and more small operators surface, the common issues will ultimately be addressed. Government agencies will grasp the uniqueness of this business segment, more local resources will be developed, and sophisticated operators will bring a much needed rise to the level of operation.
David Blum owns and operates Better Management Systems LLC, a consulting practice he launched in 2003 to assist self-storage clients worldwide with issues of self-storage feasibility, development and management. He currently works in Europe, Greece, Israel, Mexico, South America and the United States. Since entering the self-storage industry in 1996, he has also worked as a district manager for Storage USA and vice president of operation for Budget Mini-Storage in South Florida. He helped co-found the Florida Self-Storage Association in 1998 and is a frequent contributor to industry trade publications. He can be reached at 954.255.9400 or firstname.lastname@example.org.