KSS eKourier July 2022

FEATURE

STORAGE LOOKING BACK AND FORWARD

The last two years have been good for storage in Australia and New Zealand, and this trend continues in 2022 with strong results driven by both occupancy and fee rate growth. Average occupancy in like-for-like stores is estimated at 88%. I would suggest that for the established operators it is closer to mid to low 90’s. According to recent Self Storage Association of Australasia industry data (2021) the average storage fee rate is ~A$304 per square metre per annum. As a result, revenue has been strong with the more established operators achieving double digit growth, helped also by a reduction in the use of discounts and incentives. ment since the pandemic, we have observed a significant demographic shift in people moving away from the major cities to more regional locations, largely for lifestyle reasons. Improved occupancy in regional stores that have historically experienced low fee rates, combined with new customers with different price expectations has allowed greater capacity for fee rate growth, in turn leading to a higher rate growth in regional rather than major city locations. Most significant population shifts have occurred in states such as Victoria and New South Wales to other Australian states that offered potentially a better lifestyle. The resilience and success of the storage industry has been attributed to a macroeconomic level of population and national wage growth. Australia has seen neither of these for the last two years. Rather, the pandemic has caused disruption for many people and self storage is driven by disruption; you could say the 4’D’s can be consoli- dated under one “D” for disruption. As we well know international travel and overseas migration slowed to almost zero as expected with closed borders. Another interesting factor has been that because of the changing work environ-

Interstate migration patterns were disrupted as mentioned, while birth and death rates showed relatively little change. In 2020, Australia's population grew by 136,300 people, or 0.5% and this is a sharp decline from the 1.5% population growth in 2019. Australia is considered among the most mobile of societies in the world with 15% of the population changing their address within Australia in the year prior to the 2016 Census, and 39% changing their address in the five years prior to the Census May 2018. I imagine the next census results will indicate a sharp spike in these statistics. Data released in 2021 by the Self Storage Association of Australasia indicated that the industry continues to expand in size, estimating 1,570 self storage facilities across Australia and 490 in New Zealand with more than six million square meters of space servicing nearly half a million self storage customers. The estimated combined turnover of $1.5 Billion augurs well for the industry. The introduction of new storage supply has been a little slower over the last 24 months but is estimated to increase by 12% on the East Coast alone in 2022 according to recent data from the Self Storage Association of Australasia. The rate of existing supply across Austral- asia is 2.11, up from 2.04 in 2020 (measured as floor space in square feet per capita for ease of comparison). New Zealand’s rate of supply leads Australia, at 2.34 (NZ). Australia has fared well economically during the pandemic with economic growth currently at 3.3% and unemployment down to 3.9%, techni- cally a 48-year low. ‘ into storage and more importantly, people who have never needed or experienced storage before now do ‘ The pandemic has driven more people

There are going to be many challenges and unknowns facing Australian businesses in the near future. The low unemployment rate, low to no immigra- tion, and populations leaving the major cities, are causing major disruptions to many businesses who are finding it challenging to maintain their workforce. Job vacancies are at record highs, close to 50% higher than the prior year. Australians are taking advantage of this situation to seek more favourable working conditions. For most people this is positive however the reality is it will drive up costs. Supply chain disrup- tion is hurting many businesses who rely on imports to provide their products and services. We can see the effects on supermarket shelves that are empty. In addition, there are growing concerns around rising inflation although many believe this could be a short-term event related to the pandemic. None the less it is being watched closely and the Reserve Bank is responding, with cash rate increases. No one is sure how long the height- ened demand for storage will last. The Self Storage Association of Australasia’s recent data indicated that our customers of today are our customers of tomorrow. Customers storing today indicated a 50% chance of needing storage again in the future. The pandemic has driven more people into storage and more importantly, people who have never needed or experi- enced storage before now do. Has this created a new base of customers for the future? Awareness of self storage has increased and I’m optimistic this will be true for the industry. The combination of expected signifi - cant new storage supply, high storage fee rates and high occupancy results will inhibit revenue growth. Combined with higher costs, may create some headwinds into the future. Time to brush up on those sales skills! What does the future hold for self storage in Australia?

Darren Marshall Chief Operating Officer

13 Kennards Kourier July 2022