Kennards Self Storage Owner Warns Against ‘Crazy’ Development Climate in Australia

As self-storage development in Australia picks up steam, some observers are advocating for greater restraint from builders, investors and municipalities. Sam Kennard, managing director of Kennards Self Storage, which operates more than 85 facilities across Australia and New Zealand, has indicated the company passed up some project proposals it deemed bad for the market only to watch other operators get funding and pursue similar developments, according to the source.

“The problem is that asset prices are quite high, which makes it difficult for new projects to stack up,” Kennard told the source. “There are some crazy projects planned, and I hope good sense prevails—[either] the bank doesn’t fund them or the developer realizes the capital costs are way higher than thought. But some have been built, and they are struggling with anemic occupancies.”

There are 45 self-storage projects in various stages of planning and development in major Eastern Seaboard markets Adelaide, Gold Coast and Perth, with 20 under construction and 15 having been greenlighted, according to Urbis Pty. Ltd., an Australia-based public-policy evaluation and consulting firm. The development activity in those markets represents a 10 percent to 12 percent increase in market supply. “It’s the highest level of self-storage development activity we have ever observed,” said Tim Creighton, a senior valuer at Urbis.

Urbis tracks self-storage demand, rental rates, occupancy and revenue along the East Coast of Australia and in Auckland, New Zealand, through its Urbis Storage Index (USI). The USI monitors self-storage performance from more than 70 facilities in seven categorized zones. Along the Eastern Seaboard, occupancy has fallen 2 percent in the last six months to 85 percent, while rental rates have increased 3.4 percent during the same period, outpacing inflation, Creighton told the source.

While some Australia markets face saturation, others like Bondi, North Sydney and St. Kilda could represent smart geographic investments. “This is where there are no storage operations of scale, demand is high and density is strong,” Creighton said.

Kennards is a family-owned business based in Sydney. It opened its first self-storage facility in 1973 in Moorebank, Australia. Kennard has been vocal about Australia’s development boom, including authoring an article on market dynamics for Inside Self-Storage earlier this year.

Urbis has tracked the storage industry in Australia and New Zealand since 2008. For more than 30 years, the company has provided market-evaluation, research and strategic-advisory services to several sectors including commercial, education, government, healthcare, industrial, residential, retail, telecommunications and tourism.

Source:
The Sydney Morning Herald, 'Crazy Projects' as Capacity Booms in Self Storage

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