More investors look to self-storage

Andrew BattJune 17, 2015

The self-storage industry has rapidly expanded throughout Asia, fulfilling ever-growing market demand for more storage space.

In its latest report, real estate firm CBRE has revealed that consumer demand is strong, due to favourable demographic trends and robust office and e-commerce expansion – with Hong Kong, Tokyo and Singapore leading the trend. In response, investors in the region are being increasingly drawn to this alternative asset class.

In Hong Kong, with an estimated stock of 2.6 million sq ft of rentable self-storage space, CBRE’s latest study showed there is a large shortfall in self-storage space. Over the next decade, there will be a need for an additional 158,000 sq ft of rentable self-storage space . This scarcity of available sites could hinder the expansion of the sector in the short term.

“As a result of favourable demographic and economic trends in the Asia-Pacific region, investor interest in the alternative sector of self-storage has picked up in recent years – interest which was demonstrated by the huge success of the recent Self-Storage Expo Asia which drew in some 200 participants.

“The improving sentiment is also reflected by the multiple self-storage investment deals we’ve seen over the last couple of years and the increase of interest from global real estate funds,” said Darren Benson, Executive Director, Industrial & Logistics, Brokerage Services, CBRE Asia.

According to CBRE’s latest 2015 APAC Investor Intentions Survey conducted in January 2015, 7 percent of investors surveyed had already invested in self-storage, with an additional 9 percent interested in the sector.

Location of self-storage sites is of great importance to consumers. The majority of the self-storage facilities are converted from old industrial buildings, as they are usually located near residential and retail clusters. The trend has brought nearly four-fold rental incomes to property owners in comparison to industrial use.

“The outlook for the self-storage sector is positive, especially in Hong Kong, and also Tokyo and Singapore,” said Jonathan Hsu, Head of Occupier Markets Research, CBRE Asia.

“There are significant opportunities for growth in this sector but we should be aware of three key risks: the overall awareness of self-storage; the scarcity of suitably located and priced properties; and the short lease terms and land tenure in Asia.

“Given the lack of available properties to convert and the lower awareness of self-storage, the organic expansion of self-storage, despite the strong demand, will remain challenging in the short-term which is also why we believe the focus will also be a consolidation of players to create scale in multiple markets,” Hsu concluded.

CBRE self storage infographic

Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg

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