In the highly dense cities of Asia, where homes are getting smaller, self-storage facilities are becoming more and more popular. Vastly urbanised cities such as Hong Kong, Singapore and Tokyo have an average home size of less than 800 square feet, and people are turning to self-storage as overspill for their possessions.
That’s according to a new report by JLL revealing self-storage facilities as a fast emerging asset class for investors in Asia. Yields in the sector surpass those in more traditional sections of the rea estate market; according to the report, self-storage assets can fetch yields of around two to four percent in Hong Kong and Taiwan, five to seven percent in Tokyo and Singapore, and up to eight percent or more in China and India depending on location, access and building facilities. Yields on self-storage facilities in Australia – a more mature market for self-storage – range between five and eight percent.
The figures look particularly favourable in Asia, a region that is feeling the pinch of yield compression across commercial real estate in cities from Beijing to Tokyo.
“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 the sector as larger urban populations mean smaller living spaces in cities and more renters, who move house more frequently than homeowners.”
The rise in consumer spending in Asia is set to further fuel demand and signal more good news for the self-storage sector. Chinese and Indian cities such as Mumbai, New Delhi and Beijing are expected to experience cumulative aggregate growth of about eight percent till 2020 and, as consumers spend more they accumulate possessions and require additional storage.
Along with data centres, student housing, seniors housing and laboratories, self-storage is classed as an ‘alternative’ real estate asset class, into which investment has been rising steadily, reaching a record high of US$52.1 billion in 2016 and making up an unprecedented 6.2 percent of the total commercial real estate market. As Investors seek to diversify their portfolios and continue to hunt for yield, alternative asset classes will become increasingly popular given their relative affordability.
More than US$10 billion has been invested in alternatives in Asia in 2017 to date, with sales in self-storage facilities exceeding US$30 million
“Going forward, we expect greater demand for niche services that will further expand opportunities in the self-storage sector,” says Tan. “These include document storage, climate-controlled environments, for example for wine; specialised space, such as for sports equipment, as well as space related to e-commerce pick-up and delivery.”