32 | MARKET UPDATE
How resilient is self storage? By Linda Sharkey, Director – Urbis.
A
t the end of the financial year, the property market takes a breath and the internet is flooded with annual performance reports of listed companies and REITs. This year, analysists went into overdrive reporting on the outcome of various portfolios. Unsurprisingly, investors with more exposure to shopping centres, pubs and hotels delivered weaker results than portfolios weighted higher in logistics and alternate investments such as self storage. Some traditional sectors reported less than 50% rental collection over Q4 2020 and portfolio valuation write downs were expected and accepted. Resilience is the COVID-19 buzz word when it comes to property, a word we are quite familiar with in self storage. So, just how resilient is self storage?
PRE-COVID-19 CONDITIONS COVID-19 hit us at an interesting time in the market – we were winding down from a busy residential selling season, the construction sector had been tapering off, household income
growth was slowing, population growth was faster than projected and new self storage supply was the highest it has ever been. And the health of the market in early 2020? Revenue growth was weak, particularly across East Coast Australia. Table 1 (below) is a summary of December 2019 Urbis Storage Index (USI) monthly revenue results.
LATEST USI RESULTS It is not surprising that the latest USI release (June 2020) has continued the trend of weakened performance given revenue growth was subdued prior. However, the real resilience test is the extent of which the market can sustain the impact of COVID-19. Whilst the results are predominantly negative, we have not fallen off a cliff. Pleasingly, we have observed some rebound in the months of June, July and August, and most markets are demonstrating continuing recovery as we learn to live with COVID-19. Table 2 (opposite page) is an overview of the USI annual revenue
growth trend, based on monthly revenue as at 30 June each year
A NEW WAVE OF DEMAND Operators are reporting a shift in demand and user profiles. We are seeing more small businesses use storage to see them through the current challenges. Retailers are innovating to reach their customers via online platforms and e-shopping is in force. Essential products are in strong demand with quick, local despatching a priority. More people are choosing to operate businesses out of their storage unit, particularly where on-site facilities are good. Young adults have moved back home and are storing their possessions. People are in limbo, waiting for a change in landscape to make their next move. The purpose of the home has evolved - an office, a school, a sanctuary – all of which need space. Discussions with major operators suggests notably higher move ins than move outs over July and August, along with increased new enquires. Necessity appears to be driving the new wave of demand.
TABLE 1 June 2019 to December 2019
December 2018 to December 2019
Sydney Inner
0.17%
-0.63%
Melbourne Inner
2.46%
1.64%
Brisbane Inner
1.15%
-1.53%
Sydney Outer
-0.44%
-0.61%
Melbourne Outer
1.13%
-0.84%
Brisbane Outer
3.87%
1.50%
-0.05%
-0.62%
Melbourne
1.71%
0.25%
Brisbane
2.18%
-0.38%
Perth
0.29%
3.97%
Auckland
0.69%
2.51%
ZONE
Sydney
INSIDER 115 OCTOBER / NOVEMBER 2020
(Six-month revenue performance)
(12-month revenue performance)
www.selfstorage.org.au
