Landlords' yields on self storage facilities to hit 7%

Small living spaces in Singapore drive demand for self storage.

Across Asia, self storage facilities are attracting investor interest due to its growth potential.

According to a report by real estate consultancy firm JLL, 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.

The self-storage sector is expected to take off as 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.

In Singapore, rising income and small living space drive demand for self storage. Average home sizes are at 77sqm whilst GDP is at US$51,718 per capita.

“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."

For businesses, self storage also provides a flexible alternative with its relatively manageable leases and appropriately-sized space from a self storage provider instead of a large warehouse where much of the space may go unused.

Businesses that use self storage space include large companies (for archival and document storage) as well as SMEs and start-ups that use them to store and sometimes even display merchandise.

Here’s more from the JLL report:

The self-storage industry has a younger history in Asia, compared with more mature markets in North America, Europe, and Australia. 

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."