Self Storage investment can be very lucrative, but, as with any investment, it’s wise to do some research first, rather than jump in boots and all.
One of the smartest things you can do, if this type of investment is on your mind, is contact the Self Storage Association of Australia. It’s the professional advisory body, which aims to be the reference point for anyone interested in the industry.
If you are just starting out on this journey, membership of the SSAA will give you a clear indication of the state of the Self Storage market in Australia, including covering the risks and the various investment options.
The Self Storage industry first started in America in the Sixties and here in Australia in the Seventies. In both countries, Self Storage properties are now considered a well-established class of commercial real estate.
Most people would think that investing in the industry involves buying a block of land and erecting a building, or renovating an existing property, but there are passive Self Storage investment options available too, such as through property trust investment.
The industry is currently strong in Australia, reason being that in good times and bad, people need places to store the stuff they don’t want to get rid of because they might just need it again one day.
Two years ago, market research firm IBISWorld Inc updated its report on Self Storage in Australia predicting the local market will continue to grow through 2019, but suggesting operators may increasingly reply on specialised storage options (such wine facilities, or high security operations) to maintain that growth.
Last year, a report by the National Australia Bank also saw good potential for growth in the industry, which is great news for anyone who is considering investing.
However, it is wise to remember that Self Storage is not a magical get-rich-quick scheme. As with any type of real estate you are investing in, you want return on your investment. Self Storage depends on occupancy from paying customers to provide that return.
Like any investment property, you need tenants. Vacant units do not pay the bills and Self Storage is exposed to vacancy through competition and over-supply as well as local economic factors.
Some units will be held by long-term tenants who keep paying for years, but many of your tenants will be short-term stayers – and payers. That being said, those short-term occupants are fairly quickly replaced by another group of short-term occupants and, hopefully, during that turnover period the most you will have to pay out between tenants, is the cost of cleaning the floor of each unit.
Anyone considering a Self Storage investment has to be aware that there is a huge amount of potential for both existing and future facilities to do well, however it can sometimes take time for that investment to pay dividends.