Space Savers

Space Savers

By Jody Robb

Total Property - Issue 2 2016

In the self-storage sector, the “four Ds” are widely touted as driving demand: Death, Divorce, Density (with smaller homes requiring less storage space) and Dislocation (like a job transfer and moving in with a partner). In New Zealand, the self-storage sector is fairly fragmented with no dominant major owner across the country.

Australia’s largest company, Kennards Self-storage, has six facilities in the North Island and 84 facilities across Australasia with a market value of NZ$1.3 billion. Managing director Sam Kennard says he expects the company’s capital expenditure programme to exceed NZ$50 million this year.

The average net lettable area of a Kennard’s New Zealand self-storage facility is a little under 3,000m2 and the most popular unit size is 3x3 metres.

Kennard says securing land for future self-storage facilities is a challenge. “Self-storage is very capital intensive with significant investment upfront and can take three to five years for a centre to rent up to around 85 percent occupancy. There’s also some inherent risk so land prices need to reflect the time and risk of projects.”

Kennard says self-storage facilities invest in sophisticated security systems and will typically be on a major road with easy access. “Users are location-sensitive and usually prefer to have their goods nearby.”

He says self-storage requires professional management – “it is not a passive property investment”.

New Zealand owned National Mini Storage was one of the nation’s first self-storage companies opening its Penrose branch in 1991. Its ninth Auckland facility is under construction.

Managing director Paul McFadzien says this country is a market leader with multi-levelled facilities seen here since 1996 being replicated overseas. He says population increases are driving growth with residential customers typically comprising around 75 percent users at any location.

“Emerging locations are where there is a growing population with a level of disposable income,” McFadzien says. “The key challenges are land costs, location and the planning controls that apply.”

National Mini Storage usually has over 1,000 storage units per site and its Albany facility is New Zealand’s largest with 2,200 units.

“With facilities these days being multi-level yard size is not a major factor. As an industry, we look to achieve a net lettable area equalling 75 percent of the gross site area,” says McFadzien.

He says the industry is fairly uniform in relation to security provisions, but New Zealand’s use of electric fences for perimeter security differentiates it from global markets.

Scott Palmer, a private investor, has three Auckland self-storage properties in Onehunga, Panmure and Glen Innes.

He says redeveloping existing buildings is the most economic option given rising land costs.

“The challenge lies in acquiring suitable land or buildings for development in locations with strong traffic flows and good accessibility.

“The cost per square metre and the need for locations in the vicinity of residential, commercial and industrial property makes the investment equation difficult.”

Palmer says Hobsonville is a good example of an “emerging” Auckland location for self-storage units where extensive new housing development is underway.

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