The Self Storage Market is Changing!

The Australasian self storage market is experiencing a noteworthy shift as major U.S. investment firms increase their presence. Two recent developments illustrate this trend: BlackRock’s acquisition of StoreLocal and the $1.2 billion takeover bid for Abacus Storage King by Ki Corp and Public Storage. This follows Blackstone’s entry to the Australian market with the acquisition of the KeepSafe Storage and the Fort Knox Self Storage portfolios in 2021. The move brings significant capital and global interest to our shores. But what does it mean for us?

BlackRock’s Strategic Entry

BlackRock Inc., a global investment firm managing $11.5 trillion in assets, is reported to be entering the Australian self storage market by acquiring StoreLocal, the fourth largest operator in Australia. This move is expected to enhance StoreLocal’s operational capabilities and expand its portfolio.

Public Storage takes a shot at Abacus Storage King

Concurrently, Abacus Storage King, a publicly traded real estate investment trust (REIT) operating across Australia and New Zealand, has received a conditional takeover offer from a consortium including Ki Corp and U.S. REIT Public Storage. This bid, reported to be valued at $1.2 billion, highlights the growing desire of U.S. investors to gain a presence in the ANZ self storage market.

Market Comparison

The U.S. self storage market is larger and more established than ours. Storage as a domestic and business solution is more widely understood in the United States. Self storage awareness is stronger in the U.S. A storage unit can be a common extension of the American family home. Residents of the U.S. are as familiar with self storage as they are with Big Macs or Frappuccinos. In fact, there are more self storage facilities in the USA than there are McDonalds and Starbucks combined!

So, what can we expect to happen with an influx of U.S. investment?

1. Additional Investment and Industry Consolidation

Large investment groups don’t stop after breaking into a new market. They will have growth prospects to deepen their footprint and increase their brand. They will create this growth through acquisitions of existing facilities, development of new facilities, and increased third-party management across the Australian and New Zealand markets.

2. Increased Self Storage Supply

Alongside acquisitions, major investors typically expand their portfolios through new developments. Increasing new self storage supply levels raises some concerns, especially in light of the approximately 80% surge in the self storage pipeline identified last year. While growth is generally a positive sign, and not all new supply poses a threat, rapid expansion risks tipping the balance between supply and demand, potentially leading to market saturation and impacted trading performance over the near-to-medium term in some sub-markets.

3. A more competitive landscape

With additional self storage supply and heightened industry consolidation, we are likely to see a more competitive landscape as major operators compete for new customers.

A broader spread between the major operator and local operator offering may emerge.

4. A Boost in Awareness for Self Storage

Major investors typically develop good quality assets in strong, highly exposed locations. This has the potential to increase awareness of self storage as a service amongst the general public, and should in turn, increase usage rates. It can also increase the standard of offer across the market.

Further, it is likely that new forms of advertising and marketing will grow across Australia and New Zealand as ideas from the U.S. are implemented here. This may include billboard advertising, more television commercials, and who knows, perhaps even our own “Storage Wars” TV show! Increased awareness should mean increased usage. The Self Storage Association of Australasia estimates that approximately 9% of the adult population uses some form of storage. Watch this space on whether that statistic increases in the coming years.

5. Technological Advancements

We may see an acceleration of advanced technologies flowing through the Australasian market, including automated kiosks, enhanced AI-driven pricing algorithms, and hi-tech security systems to improve operational efficiency and customer experience.

Implications for our Market

In summary, the influx of U.S. capital is likely to increase investment, fast track innovation, improve service offerings, and grow self storage awareness and usage. However, it is also likely to increase self storage supply and create a more competitive environment amongst operators. Our market is changing which will bring both opportunities and challenges.

Speak to Four Leaves today about how these changes will impact your business in the future.