Moving to a Mature NZ Market


Self Storage Association of Australasia

The New Zealand self-storage market is undergoing change as it grows.  It’s a time for sharper management skills as competition ramps up, writes Stephen Crowe.

Every self-storage market around the world has its own idiosyncracies, some of which can be attributed to cultural differences and differing styles of domestic life. But there are also a lot of similarities between markets in different western countries, which can also be put down to cultural and demographic similarities. New Zealand’s self-storage market has borrowed heavily from influences that have infiltrated from the USA and Australia in particular, as major players in those markets discovered that New Zealand’s industry was, until relatively recently, a fledgling market ripe for investment.

The self-storage industry is a retail market, relying on business and domestic users to make contact when they need a helping hand for their immediate plans. That often means needing extra space to accommodate the clutter in their lives. It all comes down to life and death, the family and the job. As lives change so do people’s expectations and circumstances, and the self-storage industry is ready and willing to help while people put their lives on hold or change direction.

The US self-storage market is a study in business growth, and most markets in other countries have taken a leaf from their book. According to a 2015 presentation by Michael Scanlon Jr, former President and CEO of the United States’ industry association, the Self Storage Association (SSA), the self-storage industry there generated $US27.2 billion during 2014, and perhaps surprisingly, over the past 40 years it has been the fastest growing construction segment of the US commercial real estate sector. At that time the US self-storage industry had 210 million square metres of storage space to rent, and its occupancy rate usually sits at about 90%. That’s a figure the international hotel industry can only dream about.

A new way to live

According to Forbes magazine, self-storage has been dealt a good hand and can expect to see growth — not spectacular, but reasonably consistent — for the foreseeable future. The simple reason is that there is a market need for space to store personal belongings, and increasingly business stocks of products, as urban areas change their demographics. A primary driver is the retirement of baby boomers, many of whom are now empty nesters living in large houses full of life’s accumulations. The push is on to downsize, and find a smaller home that provides the lifestyle without the clutter and the chores. That means the art collections, expensive furniture and personal mementos they can’t bear to let go of have to go somewhere until they’re passed on to the kids — self-storage offers a perfect solution.

Urban renewal in both Australia and New Zealand is changing the face of major cities and more than a few regional centres. The push to increase population densities close to city centres relies on blocks of apartments that can be individually quite small and
lacking in permanent storage space. This also happens to feed the lifestyle choices of increasing numbers of people, and caters to a younger generation more concerned with the ready availability of social network centres like cafes and theatres than quarter-acre blocks that need the constant attention of a lawnmower. 

As urban renewal changes land use, often from old industrial areas to apartment complexes and residential zones dotted with retail and entertainment plazas, the self-storage industry needs to be at the heart of it. The key challenges in most markets in New Zealand and Australia are the costs of land, its location and the planning controls that are applied to it. But self-storage is an occasional or periodic necessity for most people, so facilities have to be situated nearby or on common commuter routes to build visibility and brand recognition. Most potential customers won’t go out of their way for this kind of service if there is a local facility.

So self-storage could be considered a neighbourhood-specific business asset that depends quite specifically on local market conditions, even in city zones, so local market research is a critical factor in the success or otherwise of a self-storage facility. The ability to adjust and adapt to changing demographics in a particular area as it is rezoned or developed is a vital management skill.

A business focus 

The disruptive influence of the internet has played into selfstorage hands, with online product providers avoiding permanent bricks and mortar offices and warehouses in favour of a storage unit that can be hired and discarded at reasonably short notice. In fact, many small businesses have cottoned on to selfstorage units as a convenient way to house excess inventory, and usually at much lower costs than buying or leasing and maintaining a warehouse.

The New Zealand market

New Zealand’s self-storage market is not heavily controlled by market dominating major companies, but is experiencing some influx from Australian self-storage companies finding opportunities. Australia’s largest operator, Kennards Self Storage, has crossed the ditch to set up six facilities on the North Island in Wellington, Auckland and Hawke’s Bay, with more on the way. Managing director Sam Kennard commented in New Zealand’s Total Property magazine late last year that with property prices climbing quickly it is a challenge to obtain quality land sites for self-storage facilities in the country’s major centres, which can turn potential acquisition into an unviable proposition. With the time lag of building self-storage occupancy rates to a viable level, land prices must be keenly researched.

Abacus is an Australian property investment fund that has acquired New Zealand property for self-storage facilities under its Storage King brand, and National Storage Australia has acquired properties in Hamilton and Christchurch. It is reportedly looking for more opportunities. New Zealand local National Mini Storage set up in Penrose in 1991, and has opened its ninth Auckland facility in Newmarket.

Managing director Paul McFadzien claims that New Zealand is a market leader in the industry, especially in multi-level facilities, which have been copied in other markets. As in other markets, until the GFC in 2007-08 self-storage was seen as an attractive investment in New Zealand, but the downturn and its effect on property changed the focus of investors away from self-storage operations to other areas, and many eventually sold out.

A tighter market 

With new players comes greater competition, and the inevitable market imperatives of keener prices, higher service levels and tighter control on operating costs. While the New Zealand industry has never enjoyed a boom, it nevertheless has grown at a sustainable and reasonably consistent rate. As in many other retail sectors, storers are now more focused on finding a “good deal”, and can shop around online or on the phone to drive prices down. This has the potential to create a price war, which helps no one but customers, but can focus the attention of facility operators to carefully consider their product offerings, marketing and advertising programs to maximise sales and customer retention. Nevertheless, competition leads to better service, better management skills, and ultimately a more professional industry, which benefits everyone. 


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