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Kennards Self Storage News & Updates

Category archive: Industry Facts

Australia’s Ups and Downs

As Published in the ISS (Inside Self Storage) International Issue 2018.

By Sam Kennard

Prices climb, occupancies slide as competition intensifies

The Australia self-storage market saw a 2.2 percent dip in occupancy in the second half of 2017, while rate per square meter increased 3.4 percent. New supply is opening across the country, and there are 50 new facilities in the pipeline. As a result, some submarkets will likely enter a phase of subdued occupancy and revenue.

The December 2017 Storage Index released by Urbis Pty. Ltd., which tracks self-storage demand, rental rates, occupancy and revenue along the East Coast of Australia and in Auckland, New Zealand, revealed that actual storage rates had increased by 3.4 percent over the preceding six months. (This is the rate paid by existing customers, not prevailing street rates for new renters.)
The observations from the field at my company, Kennards Self Storage, are that competition is biting hard and aggressive pricing is becoming commonplace. Indeed, our same-store analysis reveals our move-in rate is 0.7 percent lower than the same time last year. This is the first time move-in rates have fallen since we began analyzing this data.

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Is Self Storage Overbuilding Imminent in Australia? A Prominent Operator Examines the Market

Despite high property prices, new self storage projects continue to spring up across Australia. The managing director of the Kennards Self Storage brand questions whether overbuilding is on the horizon and offers a performance overview of existing operations.

Kennards Self Storage Rydalmere, NSW

Despite high property prices, new self-storage projects continue to spring up across Australia. The entrepreneurial spirit is high “down under,” with many established operators adding new locations, and small and new investors entering the sector.

The investment metrics for new projects are increasingly marginal, but the lack of alternative opportunities and the continuing capitalization-rate compression are still justifying new development—for now. Is overbuilding imminent in this well-established market? Let’s look at local operating performance and other factors.

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Challenges Confront the Self Storage Disrupters

Kennards-Self-Storage-Hoxton-Park-2

There has been some noise recently in Australia about self storage industry disruption from peer-to-peer storage providers. Unsurprisingly, this noise often corresponds with capital raising efforts and web site launches. Consequently, I am frequently being asked for a view about the impact and risk to the industry.

I appreciate that by diminishing the impact, I may appear as the arrogant ignorant incumbent. Some may even see Kennards Self Storage as the likely Kodak of the self storage sector. None the less, here I go.

Recently one Australian self storage disrupter start-up, Spacer, has stated an ambition of growth to achieve 8-10% market share of the markets it operates in. It has also raised capital and successfully acquired a US peer known as Roost.

Spacer were not the first, joining a list of peer-to-peer storage disrupters who attempt to match people with some spare room with people who need more room. In principle, the idea seems sound and should get some traction.

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Self Storage Valuation Guidance Note Available From API and PINZ

Kennards-Self-StorageMacquarie-Park-45As a property class, self storage is one of a stable of ‘Going Concern’ asset classes. Not only do typical valuation considerations of location and quality impact value, but also the role of management and marketing.

Like hotels, that have constant rotation of paying customers coming and going, self storage has a management intensity that distinguishes it from more passive property assets.

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Grading Self Storage Centres – A Guide For Investors And Analysts

Kennards Self Storage Frenchs Forest - snapshot5Many property asset classes differentiate the investment quality of particular assets with gradings of A, B and C to help investors, valuers, analysts understand the transactions and value of assets. In Australia and NZ, the self storage industry has not consistently proven to price assets according to varying quality.

The self storage industry will gain standing and improve professionalism if practice like this gets traction and use. It would provide valuable insight for investors, valuers and lenders who try to assess the assets they have an interest in.

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Strong Fundamentals Continue in U.S. Self Storage Sector

Kennards PenrithThe latest business briefing from Cushman and Wakefield on the state of the U.S. Self Storage Industry reveals robust business fundamentals and a continued strengthening in investor appetite.

Notable observations in the report:

• Average Capitalisation Rates have now gone below 6%, and were 5.9% for second half of 2014. This is a 22 basis point improvement on first half.

• Capitalisation Rates peaked in 2009 at 8.55%, and are now 243 basis points lower.

• Investors continue to be discerning about asset quality with ‘Class A’ self storage facilities seeing an average capitalisation rate of 5.5%, while ‘Class B’ is at 6.4% and ‘Class C’ 7.5%.

• Transaction volume is set to exceed $3 billion in 2014.

To read the full Cushman and Wakefield Storage Briefing Click Here.

Cubesmart Acquire 26 Storage Centres in $223M Deal

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The New York Storage Exchange listed Storage REIT, Cubesmart, has agreed to acquire 26 self storage centres for $223 million (USD).

This transaction follows the other significant portfolio trades by the self storage REIT’s in the last two years.

The properties and spread throughout California, Florida, Illinois, Nevada, New York, Ohio and Rhode Island.

The SEC filing did not disclose trading occupancy, capitalisation rates or asset quality details.

A Snapshot about Cubesmart

• Owns and operates 539 self storage centres across the USA.
• Market Capitalisation: $3.8 billion
• Occupancy grew 390 basis points last year to hit 9.5%.
• Net operating income increased 7% in 2013.

Author: Kennards Self Storage

Extra Space Storage Releases 2014 Half Year Results – Highlights

Salt Lake City based storage REIT, Extra Space Storage, has released its 2014 second quarter trading results.

Continuing the theme already established recently by Public Storage, Extra Space has enjoyed buoyant conditions and good operating performance.

The Extra Space Storage results offered the following same store (443 storage centres) highlights:

  • Quarter End Occupancy increased to 92.4%, from 90.8% the prior year.
  • Storage rental and insurance income grew by 7.9%.
  • Same store – Net operating income grew by 9.9%.
  • Acquired $91.2 million of new property (8 storage centres).

Extra Space Storage pursue only limited new development activity. New store growth does include de-risking the development and construction phase by pre-committing to acquire when Certificate of Occupancy is obtained.

Extra Space has also grown its portfolio by actively pursuing third-party management contracts.

A Snapshot of Extra Space Storage

  • 1,100 locations (U.S.A. only)
  • Total Annual Review $600 million
  • Market Capitalisation $6.1 billion

Author: Kennards Self Storage

Public Storage Release 2014 Half Year Results – Highlights

Public Storage has just released its second quarter results with some impressive trading results.

A few highlights of their same-store comparison group (1 983 storage centres):

  •  Average Occupancy has grown to 94.7% for the latest quarter. This is an improvement from 94% in 2013.
  •  Occupancy at the end of June had eclipsed 95% and was sitting at 95.1%
  •  Rent per available square foot (REVPAF) is up 5.4% to $13.75 on average for the quarter.
  •  Revenues have increased by 5.3%

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Australian Storage REIT News – July 2014

National Storage (NSR)

National Storage is Australia’s only pure self storage REIT on the ASX. It has a portfolio valuation last reported of $278 million.

NSR listed on December 18th, 2013 at $0.98, last $1.29 (high $1.35).

The first 6 months results yet to be announced. Distribution guidance was provided on June 24th stating each security would receive $3.8c which is 7.7% of the $0.98c list price (compared with 8% forecast in the 2013 prospectus for 2014 calendar year).

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