By John Scheibe
I was looking through the September 2013 issue of "Inside Self-Storage" magazine when an ad caught my eye: an announcement for the first Latin American self-storage tradeshow, Nov. 4-5, in São Paul, Brazil. Sponsored by the Brazilian Self Storage Group, the show promises to be a groundbreaking event, bringing together professionals of the nascent local industry for the first time.
The ad took me back to the mid-1970s. I was 18, living just south of San Francisco and unsure what I wanted to study in college. I decided to return to Brazil, where I'd been spent my boyhood, the son of American parents. I thought I'd stay there six months, enough time to refamiliarize myself with the country in which I'd been raised. I ended up staying six years. When I returned to the United States in the early 1980s, the self-storage industry had taken firm root. It would be several more decades before the industry would blossom in Brazil.
Brazil has the world's sixth largest economy in terms of nominal gross national product. Eight out of every 10 Brazilians live in cities, and the middle class grew by an estimated 50 million people from 1999 to 2009.
Brazil has 115 cities with a population of 225,000 or more. It's largest city, São Paulo, has more than 20 million people in its metropolitan area. With the great majority of Brazilians living in cities, storage space is often at a premium. Brazilian consumers are hungry for the latest gadgets and quickly buying them, as well as appliances, refrigerators, dishwashers and more.
Brazil has roughly 200 million people and less than 100 self-storage facilities nationwide, so there's vast industry opportunity. A recent feasibility study found that self-storage business has the capacity to generate more than $1 billion annually in the country. GuardeAqui Self Storage, which started its operation in São Paulo, recently announced plans to open 50 facilities across Brazil by 2017.
I became acquainted with self-storage through a good friend Ive known for many years. Hes worked in the industry for most of his life, beginning with some of the first facilities built in the Los Angeles area. He later developed some of the first facilities in England.
My wife and I visited several Brazilian facilities this year. All of them appear to be doing very well. The most established was on the south end of Belo Horizonte, a city with more than 5 million people in its metro area. A facility representative told us he's been in business for more than 10 years and has an occupancy rate of 87 percent. He said theres plenty of unmet demand for self-storage in the area.
We were also told that one of the initial obstacles was getting consumers used to the idea of a do-it-yourself business like self-storage. Middle- and upper-class Brazilians have historically depended on servants to do a lot of their manual work. But all of this is quickly changing as they adapt to life in the 21st century.
My wife and I are in the process of choosing a location to open our very own self-storage facility. Were considering a warehouse that has the capacity for expansion, as well likely convert it in phases. There are many warehouses in Belo Horizonte and other cities. We hope to have the first phase completed within two years.
Were also looking at partnering with Brazilian and U.S. investors to raise some of the capital for the project. Brazil has taken some positive steps recently to encourage foreign investment, including eliminating a tax on overseas investors.
Working in Brazil can be a challenge for foreigners who know little or no Portuguese. It also helps to understand a lot of the cultural nuances as well as how business is conducted there. In this sense, I feel very blessed to have grown up in the country and have a close network of friends there.
The challenges to doing business in Brazil are easily surmountable, even for those who are new to the country. For starters, Brazilians are known for their warmth and willingness to help. Brazil also has numerous firms including legal and real estate companies that are very knowledgeable in assisting foreign investors. Policy-makers know that creating a business-friendly environment is key to Brazils future prosperity and economic growth. As an example, theres no capital-gains tax for Brazilian investors.
Our recent visit to Brazil only served to reinforce our belief that the self-storage industry has a very good future, one with almost unlimited opportunities.
John Scheibe is founder and general manager of Go Self Storage Brazil LLC, a development company focused on establishing and operating self-storage facilities in Brazil. For more information, call 805.338.2315; e-mail [email protected]; visit www.goselfstoragebrazil.com .