Self storage has grown into a strong asset class in Australia and New Zealand, attracting private investors, listed REITs, and institutional capital. Like other forms of going concerns, valuing a self storage facility requires an understanding of both property fundamentals and the operating business that underpins performance. 

Going Concern Valuation

Unlike standard commercial properties, self storage facilities are typically valued on a “going concern” basis. This means the property is assessed not just as a physical building but as an operating business with an income stream. 

Two primary methods are used: 

  1. Capitalisation of Net Operating Income (Capitalisation) Approach

This method involves analysing the facility’s stabilised (or market) net operating income (NOI) by deducting operating expenses from gross revenue and applying an appropriate market capitalisation rate (cap rate, or market yield). The cap rate reflects risk, location, competition, facility quality, and performance. Any rental reversions are deducted from the core value. 

  1. Discounted Cash Flow (DCF) Approach

A DCF model projects future cash flows over a defined period (often 10 years), factoring in rental growth, occupancy changes, expense inflation, capital expenditure, and reversionary value at the end of the term. The future cash flows are discounted back to present value using an appropriate discount rate. This approach is particularly useful for “as if complete” valuations for Day 1 of Trading (turnkey) storage facilities, facilities in the early lease-up phase, or markets undergoing strong growth, as it captures the timing of future income streams. 

Key Drivers of Value

  • Occupancy & Demand: Stable, high occupancy coupled with year-on-year fee rate growth demonstrates strong market positioning. 
  • Revenue Management: Use of dynamic pricing tools and disciplined discounting policies can boost achievable rents. 
  • Facility Quality & Security: Well-presented sites with main road exposure, modern amenities, easy access, and strong security systems generally command higher rents. 
  • Catchment Area Demographics: Population density, apartment living, and transient residents drive demand. 
  • Operational Efficiency: Streamlined management and operating cost control enhance net income. 

Tips to Enhance Value

  • Adopt Dynamic Pricing: Automated pricing systems optimise rates in real time to capture demand. 
  • Use an Experienced External Marketing Company: It pays to engage a digital marketing company experienced in self storage rather than attempting to self-market your facility.  
  • Invest in Presentation & Technology: Clean, secure, and modern facilities improve both occupancy and achievable rent. 
  • Maximise Ancillary Revenue: Add services such as box sales, insurance, and additional revenue streams. 
  • Monitor Competition & Catchment: Stay ahead of local supply trends and adapt marketing accordingly. 
  • Professional Management: Skilled operators with strong sales processes and a recognised brand consistently outperform under-managed facilities. 

Valuing self storage facilities requires an understanding of both property and business metrics. By focusing on income optimisation and efficient operations, owners can drive higher valuations while positioning for long-term growth.