Self-Storage Industry Enjoying Strong Growth in Asia
According to CBRE Asia's new industry report titled: Asia Self-Storage: Demographic Changes Drive Demand for Self-Storage Space in Asia
, despite an uncertain economic environment in Asia, market demand and robust business activity mean self-storage activity is growing. CBRE terms these key demand drivers as the four Ds: Death, Divorce, Dislocation, and Density.
Dennis Yeo, Managing Director, Asia Industrial and Logistics at CBRE, commented, "The self-storage market remains fundamentally solid, and in 2016 represents an early-stage opportunity for market players, for both investors and operators. The market is driven by favorable demographic and economic trends, such as robust e-commerce expansion in the region, which is paired with low saturation in terms of self-storage per household relative to other markets globally. In particular, we see the four Ds--death, divorce, dislocation, and density--contributing to a long term trend for increasing demand for self-storage, particularly in developed markets such as Hong Kong and Singapore."
Yeo further stated, "The ongoing challenges in sourcing investible stock in traditional asset classes that meet required returns in the low yield environment mean that institutional investors are continuing to look for higher-yielding opportunities in alternative sectors. As a result, we've seen increasing interest from investors in self-storage in particular. This was highlighted by our recent CBRE Asia Pacific Investor Intentions Survey, which showed investors who have already invested in self-storage up from 7.3% to 7.9% from 2015 to 2016, and those interested in the sector increasing greatly from 9.2% to 14%."Key self-storage market highlights in Asia:
- There was an estimated 3.4 million sq. ft. and 1.6 million sq. ft. of self-storage demand in 2015 in Hong Kong and Singapore, respectively.
- In response to the demand, self-storage stock has increased greatly in Hong Kong (+20%) and Singapore (+11%) to 3.1 million sq. ft. and 1.6 million sq. ft. of rentable space, respectively.
- However, this implies a shortfall of 200,000 sq. ft. of stock in Hong Kong in 2015 despite the strong increase in supply.
- Singapore's demand and supply dynamics are roughly in equilibrium but the demographic drivers are still favorable for self-storage demand in the long run.
- Out of the four Ds, density was by far the biggest driver, both in Hong Kong and Singapore, responsible for 2.3 million sq. ft. of demand and 918,000 sq. ft. of demand, respectively. This was followed by dislocation, death and divorce.
Dr. Henry Chin, Head of Research, Asia Pacific at CBRE also commented, "The fundamental demand drivers for self-storage and business activity are increasing, despite the uncertain economic environment. The manufacturing sector is under pressure, dampening demand for industrial factories--the underlying property for self-storage. This represents a potential market entry and expansion opportunity for self-storage players. However, while we see significant opportunities for growth there are also areas of caution around this sector. There is a lack of awareness of self-storage in the region and the shorter lease terms and land tenure in Asia, compared to other regions, also present a challenge."
Chin concluded, "Moreover, there is a shortage of suitably located and priced properties but this is beginning to ease. As a result, we may see players consolidating in order to create scale in multiple markets."