In an article published in 2013, it is stated that the growth rate of the self-storage market has been about 10% annually but is it still the case as of now, and what is your view of potential growth in the next 10 years?
The domestic self-storage supply has continued to grow consistently 8-10% relative year over year through to 2020, although the buildup and nature of that growth has evolved and fluctuated, more specifically;
1. Outdoor containers have not seen growth in the past few years.
2. The quality of indoor storage product has significantly improved with operators/developers focusing on dedicated ground-up new facilities with street presence and actual real estate value, in contrast to the generation subleasing a single floors of old office buildings. So all-in-all there has been a shift to higher quality in past five years, which I think is great for the industry long term.
Looking back at data published about 10 years ago comparing the US and Japan market size and penetration rates, what has changed and how has the market evolved?
10 years ago many analysts suggested that the US market was already fully saturated. The industry continues to grow at records levels at all-time low cap rates. The global real estate bubble and frothy pricing in the past few years has made profitability difficult in the US impacting growth. Same thing here in Japan really with all-time low office vacancies and cap rates for all real estate sectors.
What do you see as the major difference between Japan and overseas storage businesses?
The biggest difference between US and JP market (ignoring market size and history) is the institutional capital. In the past 5 years Japan is starting to see more institutional capital come into the market, and similar to what happened in the US four decades ago it’s the availability of credible financing and commitment from institutional investors that will be the real catalyst for growth. The US market is way too big to compare, but the JP market is slowly chasing after and certainly on its way to expand.
In this report one of the top issues Japan`s self-storage operators are facing is lack of awareness. What do you think could be done to solve this problem?
Awareness of the self-storage market is still low, but actually there is more demand than supply. The challenge for operators is to correctly price that demand. Ultimately supply growth will continue to drive awareness growth and as mentioned above the increase in higher quality dedicated storage facilities really helps to build positive product awareness for the industry.
How do you think technology has changed the self-storage industry?
Self-storage is obviously not a technology product, and also is not a high engagement service (like service office, hotels, student housing or sports gyms) which is actually what makes storage attractive as a business. In that sense most of the technology enhancements have come in the form of systems for businesses to operate more effectively and more efficiently in providing sales and service to their customers, a lot of which is naturally online. Currently, technologies are used more on the back-end side of the business rather than where customers see or directly interact.
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