Information Memorandum for Insurance Broking And Risk Manage

KENNARDS SELF STORAGE

About Self Storage

Below is a summary of the Self Storage Industry provided by Colliers International.

A self-storage facility is a place where people pay a rental amount to store items at the facility. Self-storage facilities emerged in Australia in the late 1970s following the development of the self-storage industry in the US. Today, there are more than 1,800 facilities located throughout Australia and New Zealand combined. Self-storage customers generally sign a monthly agreement and are provided a space within the facility being either boxes, lockers, units, containers and covered/uncovered outdoor hardstand. The client mix typically comprises 70% individuals and 30% businesses. There are different types of self-storage facilities. The facilities vary from general hardstand with containers to multi-level with various on-site amenities that comprise CCTV video surveillance, on-site managers, exterior lighting, electronic gates, lifts, hire vehicles and individual unit alarms. A typical facility consists of an average NSA of approximately 4,000m² to 6,000m² and can be accessed 24/7.

According to the Self-Storage Association of Australasia (2013 Demand Study), 5.0% of the general population (Australia/New Zealand) are currently using self-storage.

The industry has undergone considerable growth since its establishment and is currently experiencing a buoyant period with continued high levels of acquisition activity forcing general yield compression.

There appears to be two key trends emerging over recent years. The first is the emergence of the major operators expanding their operations via acquisitions of other facilities or through an increased number of management/franchise structures. The second is the growth in population driving an increase in apartment living resulting in a greater need for self-storage. These two trends have influenced a buoyant period for the sector with higher than average levels of acquisition forcing general yield compression. However, the outbreak of the Novel Coronavirus (COVID-19), has impacted global financial markets and therefore market activity is being impacted in many sectors. As at the date of this valuation, we are faced with an unprecedented set of circumstances given the unknown future impact that COVID-19 might have on the real estate market.

Demand Drivers Demand for the self-storage sector is influenced by the key underlying trends are as follows:

Growing and Ageing Population – Australia’s population grew by 1.5% during the year ending in 30 September 2019. All states and territories recorded growth excluding the Northern Territory. Victoria recorded the highest growth. Natural increase and net overseas migration contributed 37.5% and 62.5% respectively to total population growth for the year ended 30 September 2019. Like most developed countries, Australia's population is ageing as a result of sustained low fertility and increasing life expectancy. This has resulted in proportionally fewer children (under 15 years of age) in the population and a proportionally larger increase in those aged 65 and over. As the population grows Australia becomes more densely populated resulting in the average household size falling and with the ageing population downsizing to smaller homes or retirement living complexes. The outcome reflects a reduction in storage space within the average household. Increase in Apartment Living – Over the past 25 years, the number of occupied apartments (including flats and units, excluding townhouses) in Australia has increased by 78% to 1,214,372 dwellings at the 2016 Census. This steady increase in apartment living is primarily due to the growing population, current economic climate, more affordable market segment, a shift in social acceptance of apartment living, appetite for living close to work and lifestyle amenities. This has delivered smaller household sizes with less storage space.

Life Events – People Moving/Renovations – The increase in homeowners either moving or undertaking renovations leading to an increase for storage space for the short term.

Information Memorandum Kennards Self Storage June 2020 3