The self-storage sector is increasingly on the radar of both private and institutional investors due to its growth potential and increasing public awareness, according to a new report by JLL.
Yields on self-storage facilities are potentially attractive compared to other traditional asset classes. According to the report, landlords can expect yields of around two to four per cent in Hong Kong and Taiwan, five to seven per cent in Tokyo and Singapore, five to eight per cent for Australia, and up to eight per cent or above in China and India depending on location, access, quality, and building facilities.
Alternatives such as self-storage are also seen as an affordable investor option, compared to higher priced big-ticket core assets such as offices, and offers an avenue for investors to diversify their portfolio. Alternative assets include data centres, student housing, schools, carparks, healthcare facilities and others.
The self-storage industry has a younger history in Asia, compared with more mature markets in North America, Europe, and Australia. The notion of storing personal items outside the home is catching on due to the region's dense population, increasing residential prices, growing affluence, and changing lifestyles.
"Globally, demand for self-storage, just like any other real estate class, is driven by economic and demographic forces," says Bob Tan, Director of Alternatives, Asia Pacific Capital Markets at JLL. "Urbanisation is an important driver for self-storage. Growing urban populations mean smaller and increasingly expensive living spaces in cities, and creation of more renters who move around more frequently."
In Asia, the self-storage industry is most established in densely populated and more affluent regional cities. Hong Kong, Singapore and Tokyo have the smallest average home sizes in the region. The size of an average home is less than 800 square feet in these three cities, as compared to nearly 1,000 square feet in the United Kingdom, and over 2,000 square feet in the United States and Australia.
Along with the rise of e-commerce and growth of small medium businesses, there is likely to be greater demand for niche or value-add services, presenting various opportunities for operators in these growth markets. These services include document storage, climate-controlled environments, valet delivery and storage among many others.
Mr Tan adds: "Going forward, we will see greater interest from operators and investors seeking opportunities to participate in growth markets, and to invest in good quality platforms with scale, particularly if they already own their real estate."
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At the end of the first quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 78,000. As of March 31, 2017, LaSalle Investment Management had $58.0 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.