Self-Storage in the Far East: Extra Space Asia CEO Kenneth Worsdale on the State of the Market

The self-storage industry continues to flourish in the Asia-Pacific region, where it’s expected to reach 30 million square feet of rentable space this year, according to data-research firm Mordor Intelligence. A growing population combined with a focus on urban living has created a demand for the service in Hong Kong, Malaysia, Taiwan and other large cities. However, while operators in the continent are enjoying healthy occupancies, they still face a number of obstacles.

One of the largest companies in the area, Extra Space Asia, was established in 2007 and now operates a network of nearly 80 facilities in Hong Kong, Japan, Korea, Malaysia, Singapore and Taiwan. Though it has experienced incredible growth, it’s also intimately familiar with the challenges being encountered by fellow operators. We communicated with CEO Kenneth Worsdale to get more insight to this promising market and the trends emerging there.

What’s the general state of the self-storage industry in Asia?

In recent times, Singapore has emerged as a focal point for investments in the self-storage industry. The surge in urban residents and the escalating need for additional residential and commercial space have prompted a growing number of consumers to opt for our services as a practical alternative to storing valuable items at home or in their offices.

In recent decades, Singapore has witnessed a surge in property prices amid rapid economic growth along with an elevation in the housing expectations of younger generations. As the youth strive for independence and the creation of personal space, it's unsurprising that 80% view owning private property as a life goal. Additionally, the confluence of rising employment rates and office expansions is creating a propitious environment, unveiling novel and enticing prospects within the sector.

From our perspective, the swift expansion of the self-storage industry can be ascribed to a combination of social and business influences. Cultural and demographic changes, including population density, divorce rates, geographical dislocation and mortality rates, are key factors propelling the increased demand. However, business activities also contribute. According to investment-management firm JLL, nearly half of self-storage users in Singapore are corporations, indicating a consistent demand as businesses expand. The growing startup scene sees more entrepreneurs operating from home, driving increased demand for outsourced storage solutions.

What’s the status of new development in your market?

In general, new self-storage developments are predominantly done via building conversions due to the general availability of industrial buildings that can be repurposed for this use while shortening the lead time to market. However, despite higher interest rates and a general slowdown in macroeconomic activities, industrial property prices have remained resilient, in part due to underlying demand for quality logistics spaces and strong liquidity in the market, resulting in widening bid-ask spreads between buyers and sellers. Global inflationary pressures have also contributed to rising raw-material and labor costs, which impact new-project returns.

What challenges does the self-storage industry face in Asia?

In some countries, restrictions on foreign ownership of land or property presents challenges for self-storage companies looking to expand into new markets. This challenge isn’t unique to the COVID period, but border closures and travel restrictions didn’t make it any easier.

In countries like Malaysia where self-storage is still a developing industry, the concept is foreign to many. Most consumers still equate self-storage with warehousing, and changing this perception requires greater outreach and education.

It has always been one of our main marketing objectives to educate potential users about self-storage and the benefits of using it. The way we’re doing this is mainly through content marketing. This can come in the form of blogs, tutorial videos, thought-leadership write-ups, testimonials and so on. These efforts also serve as brand-building initiatives.

We also collaborate with other brands and companies that we believe have a similar target market to ours. Our approach may vary slightly from country to country, as we recognize the need to tailor the content and context to suit local preferences.

What are your predictions for the future of self-storage in Asia?

Our outlook is shaped by a commitment to innovation. In today's dynamic business landscape, we recognize the significance of staying at the forefront through continuous adaptation and forward-thinking solutions. That's why we prioritize innovation at every level of our organization, from product development to customer service.

In today's market, digitalization plays a vital role and can’t be overlooked. Making the shift is essential to gain an edge. Recognizing this, we have strategically embraced digital solutions to ensure we remain competitive.

For example, we recently introduced the Yes! mobile app, allowing customers to have a real-time overview of their account information and make seamless payments on-the-go while earning rewards as they pay. Users also have the convenience of forgoing the traditional lock and key, using smart locks that can be unlocked via the app. This enhances their journey, making it an effortless and hassle-free experience, which is indeed the ultimate goal.

This is a first for self-storage companies in Singapore. The app has also been launched in the Malaysia market, and we aim to launch it in Hong Kong and Korea this year.

I’m also proud to mention the upcoming launch of Extra Space Express, a fully automated, unattended self-storage solution in which customers can effortlessly rent a unit from anywhere, any time, and seamlessly manage their space without the need for in-person engagement.

Embracing sustainability could mark another new frontier for self-storage providers in Asia. Amid escalating environmental concerns, companies are encouraged to enhance their commitment to sustainability and mitigate pollution. Integrating “green” strategies not only diminishes a company's carbon footprint, it contributes to long-term reductions in operational costs.

We’re committed to becoming a socially responsible and sustainable business. In the near future, we plan to transition to a paperless and cashless operation, embracing digitalization as the way forward. This move not only reflects our commitment to innovation, it contributes to reducing our environmental footprint.

Moreover, our sustainability efforts extend to energy conservation. Currently, we’ve installed solar panels in four of our owned storage facilities in Singapore (Ang Mo Kio, Boon Keng, Euno Link and Kallang Way), with plans to expand this initiative to more Singapore facilities and our facilities in Malaysia.

At the heart of our business philosophy is a strong belief in giving back to the community. Through our corporate social-responsibility initiatives, we actively contribute to charitable organizations. Additionally, our team dedicates their time, skills and compassion to volunteering to the elderly, as we value their role in society. Our commitment to giving back goes beyond financial contributions; it involves personal involvement and heartfelt dedication.