Commercial Property Sector Update: Self- Storage

Vanessa Rader, Head of Research for the Ray White Group, recently provided a commercial property update focused on the Self-storage sector. Read on for the highlights and for what CapStack can do for you.

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Recent Self-Storage Market Trends:

Over the last 18 months, the national self-storage market has experienced a decline in transactions, totaling just over $95 million compared to a peak of over $1 billion in late 2021 and early 2022. This decrease reflects a broader decline in commercial investment activity, especially in industrial sectors, due to a reduction in quality assets available for investment rather than a decrease in demand.

The Changing Self-Storage Investment Landscape

While historically dominated by NSW and Victoria, investment activity in the self-storage market has diversified, with markets in Queensland, Western Australia, ACT, and South Australia gaining appeal. Offshore buyers, particularly from the USA, were prominent in the market, representing over 40% of investment activity. However, recent years have seen a shift in asset size and quality, leading to a decrease in offshore buyer interest.

Private Investor Dominance:

Private investors have been the most active buyers and sellers in the self-storage market over the last 18 months, especially in Sydney and Melbourne. Transactions in the sub $10 million price range have been common, with yields achieving tight capitalization rates ranging up to 6.5%.

Self-Storage Occupancy and Rental Growth:

Self-storage units remain highly appealing, with occupancy estimated at close to 90% nationwide and strong growth in average monthly rents over the past five years. Factors driving rent growth include increased demand, rising insurance and security costs, technological advancements, and high land costs for new developments.

Self-Storage Future Outlook and Development:

Despite challenges such as high land costs and limited available land for development, the demand for new self-storage establishments remains high, driven by population growth and housing supply issues. Queensland dominates the supply pipeline, with expectations of continued development across the country, particularly in east coast regions. This sustained demand is expected to keep rents elevated and capitalization levels tight, attracting both end-users and investors, including increased offshore buyer activity in the short to medium term.

How can CapStack help?

CapStack works with investors to secure finance for land acquisitions, development projects, and subdivision initiatives. We have access to a wide network of lenders, including banks, private lenders, and alternative financing sources, and can help clients navigate the complex process of obtaining funding.

CapStack sources funding solutions for a range of projects and sizes, from a single residential property into two separate titles subdivision to the rezoning of extensive tracts of land into numerous individual lots for residential or commercial use.

CapStack provides comprehensive assistance to developers throughout the entire process. This includes sourcing land acquisition finance, financing engineering and infrastructure works (roadworks, sewage, and electricity), development construction finance, and ultimately refinancing once the project is completed.

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