Evolving Trends in Self Storage – Part 1 Land Cost Increases

As the self storage industry continues to develop in size and becomes an increasingly sought after investment by both consumers and investors, trends in self storage development are progressively changing as owners and investors look to maximise cost effectiveness.

The main cause for this evolution is centred around the market and although the factors involved in influencing changes are considerable, those discussed here fall into the following areas:
– Increasing cost of land
– Demands of local planning and neighbourhood committees

The self storage industry began in Australia in the early 50’s, with a few sites more often than not, adjoined to existing business. It was not until the late 80’s that the industry in Australia and New Zealand began to come into its own, with a significant rise in the number of purpose-built centres erected exclusively for self storage.

Now there are in excess of 100 self storage facilities in Australia and New Zealand, ranging in size from small 10 unit sites in regional areas, through to multi-storey 1000+ unit centres in major cities. The industry also offers a range of specialised storage solutions, such as climate controlled storage, document storage, management and vehicle and boat storage just to name a few.

Self storage in Australasia continues to be used primarily by domestic clients, looking to store personal items that they do not have room for at home, or need to access easily away from home. There is although, an in creasing demand from commercial clients, looking at using self storage as a business tool. With commercial clients increasing and residential clients becoming more in tune with what self storage can offer them, the products, services and facilities that a self storage site offers is evolving along with the buildings themselves.

As more of the public becomes educated as to the value of self storage, our industry’s ability to evolve quickly has never been more important. As public awareness has increased, storage demands have increased, which in turn has given rise, not only to the number in self storage developments, but how these developments, look, function and utilise their opportunities.

Land Cost Increases
The ever-increasing cost of land, (caused by increased competition from commercial and other real estate development), has significantly decreased the availability of economically feasible sites both in Australia and New Zealand. As a result, cost-effective designs in highly sought after positions have become for many out of reach.

Michael Wilson of Steel Storage Group states that, “land prices in capital cities are making the traditional self storage model unfeasible. When finding appropriate land, the industry has to be a lot smarter about how to make it work. A lot more investors are looking at cheaper land options off main road areas, as it’s almost impossible to find main road frontage at an economical price”. Michael also suggest, “this means putting more of your investment dollars into marketing”.

Marketing and brand enhancement is one way to offset the position vs. location trend facing self storage investors today. Ken Elliott of Storbuild Australia speaks about position vs. location for self storage facilities. “Good position encompasses a piece of land where you have thousands of cars travelling past your site everyday,” he states. “Good location on the other hand encompasses a piece of land in a high customer catchment area”.

The self storage industry is generally a very localised market, with the majority of customers travelling less than 5 or 10 kilometres to a centre. Ken adds, “Main road frontages are always excellent to have, but very expensive these days these days and very scarce. Figures showing the number of hits on the selfstorage.com.au website shows that people are researching at home before committing to storage these days, therefore I’m finding, a good location with a good catchment area will be the way self storage investors lean in the near future”.

Larry Mingins of Kiwi II Construction agrees and adds, “sites away from main roads can have a cost advantage, but one needs to keep in mind the additional expense required to market their whereabouts”. He also states, “the storage industry is becoming more prominent over the internet, so a lot of customers are not choosing their storage solution on a site seen basis”. Larry also believes the increase in land costs in New Zealand have had a direct effect on the increase in multi level developments. “Over the past ten years specifically in the storage industry, there’s been plenty of change to the style of construction and design of a facility due to the increasing costs of land,” Larry advises. “Multi level developments have increased greatly due to the cost effectiveness in utilising significant space. We should also expect to seen an increase in build over projects where the site has become highly valuable”.

Ken of Storbuild Australia states he is also receiving an increasing amount of enquiries for 2nd and 3rd story constructions. “Sometimes its cheaper to demolish and rebuild, rather than build over the top of an existing structure, but you also have to factor in loss of trading for existing customers if there isn’t an alternative on site to their existing storage space”.

Another solution to land prices that innovative investors are already choosing are additional or multiple sites in the same or surrounding catchment areas or what some call satellite sites. Larry Mingins adds, “some sites are part of a businesses master plan so they get their exposure from within the business itself. The business can therefore coerce traffic to their additional sites where occupancy may be lacking”.

Travis of Kiwimark Constructions also adds to this solution, ” people are looking harder at converting existing buildings and also looking at the possibilities of starting new satellite sites away from their main facility or heard office. They use these satellite sites as referral sites to their already full centres. Prices in provincial towns of New Zealand are now rising too. All of these factors suggest that land prices are changing the way people build and how they make it work, especially in the main cities of New Zealand such as Auckland and Wellington”.

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