The Australian self-storage industry is well-established and still growing. Though a lack of funding provides obstacles to new development, some of the largest players continue to expand, and there are even new entrants to the market. One niche finding a foothold is the mobile-storage business, which is realizing accelerated growth.
Finance and Development
One of the biggest obstacles to continued growth in the Australian self-storage market is financing. “We don't have the range of lenders available to our operators that U.S. operators do, hence financing options are more limited,” says Dallas Dogger, CEO of Centreforce Technology Group, an Australian company specializing in self-storage software, websites and security. In addition, some banks still consider the industry “too risky” despite its established presence. As such, interest rates are higher for self-storage development projects than for other commercial real estate ventures.
However, the market has seen some signs of expansion. There are a number of new sites under construction in major cities, and a few new developers are entering the market. “Land remains the No. 1 cost, and combined with banks wanting essentially a 50/50 lend, new sites remain a challenge,” Dogger says.
An influx in development may come from APN Property Group, an Australia-based real estate fund manager that specializes in the Asia-Pacific market. The firm could be readying for new self-storage investment activity, according to an August report by “The Australian.” APN reportedly told investors it is in early talks with a specific company about the sector, and industry sources speculated it could be a "rival global player."
APN operates a $206 million AUD National Storage Property Trust that invests in 37 storage facilities leased to National Storage Property (NSP). In 2011, NSP created a joint venture with Chicago-based real estate investment management firm Heitman to purchase 20 properties for $175 million from APN Funds Management and the Investec Property Opportunity Fund.
Kennards Self Storage, one of Australia’s largest operators, continues to add to its portfolio, which consists of 74 locations in Australia and New Zealand. Earlier this summer, the company was granted a special-use zoning change that will enable it to build a new facility in the Kemblawarra Business Park.
Kennards also opened a facility in Klemzig last spring and recently converted an iconic Coca-Cola factory in North Sydney to self-storage. The conversion project, which opened in September, includes a large retail area, Wi-Fi access and customer-lounge spaces. It also accommodates vehicle storage.
Other operators have left the business. In February the owner of Ezy Access Storage in Toowoomba, Queensland, sold his five-year-old property for $3.5 million. Matt Walsh of Highway Frontage Real Estate, who brokered the transaction, told "The Chronicle" that the owner's decision was due to his lack of industry experience. Walsh said the new owners would likely continue to use the building for self-storage.
Although the last six years have not been particularly prosperous for Australian businesses, Dogger says a change in consumer sentiment should bode well for the self-storage market. “Housing prices are improving again, and that stimulates housing sales. That, in turn, will increase opportunities for the self-storage industry.”
Mobile Storage Moves Up
The evolution of mobile-storage has been rapid in Australia, according to Molly Wiley, marketing manager for TaxiBox, a new operator on the scene. The service was first introduced to the market about seven years ago, and has since grown to include 15 mobile-storage companies nationally, predominantly in Melbourne and Sydney. “The last three years have seen a faster ramp-up in further entrants, with new operators in Brisbane, Adelaide, and very recently even Perth,” Wiley says.
TaxiBox started in Melbourne in 2010 and expanded its service to Sydney in December 2012. This year it launched phase two of its national expansion strategy with the addition of interstate moves and transportation service.
This past summer, Smartbox opened a new 7,000-square-foot facility in Hillsdale, Sydney, to meet the growing needs of its business and residential customers in the region. The new facility is near Port Botany, a major seaport, and offers outdoor storage for vehicles, boats, trailers and caravans in addition to mobile storage. The company operates another facility in Melbourne.
The outlook for the mobile self-storage industry in Australia remains positive, although further competition is beginning to squeeze margins for some facilities, Wiley says. "We have yet to see the emergence of a clear leader in the industry, and this space is still to be explored; although some operators have begun to make headway toward positioning themselves as the top national operator in this niche within self-storage."