Entry-level foothold in self-storage industry

A chance to get a small foothold in New Zealand's growing self-storage industry is on offer at Hamilton’s Te Rapa precinct through a small industrial property on the market for sale.

The specifically designed and consented mini storage property within the new 19-unit development known as Trade Base on Bristol is going to auction next month and offers an owner-occupier the opportunity to either use the space for their own business or for an investor to tenant the five individual storage spaces.

It is the only unit of its kind in the development at 23 Bristol Place in Te Rapa. The 120 square metre floorplate has storage spaces ranging from 18 square metres to 33 square metres, providing an opportunity for a multi-tenanted investment.

Construction is underway and is expected to be finished in February/March next year. As the development has proved to be popular with trade-based businesses and most of the units are sold, the owners decided to market the storage property for sale by auction on December 12 through Bayleys Hamilton salespeople Jordan Metcalfe and Rebecca Bruce.

Mr Metcalfe said with 19 trade units on-site, there could be an opportunity to take advantage of an existing on-site market of businesses looking for additional storage space.

“There are other storage facilities in the area, but demand remains high from businesses, families or individuals,” he said.

“Storage is a continually growing industry worldwide and is perfect for an investor looking for their first step into storage or a split risk investment. This is a good introduction to the storage industry or as an entry level diversified investment,” he said.

Mr Metcalfe said the property would also suit those with collections of “big boys toys” taking up space in the family garage, driveway or front lawn.

“With Te Rapa industrial vacancy rates hovering at 1.2 percent and the majority of new development catering to the bigger end of the market, there was obvious demand for smaller units in Hamilton. Because of this demand, the developers chose unit sizes that could be targeted specifically at trade-based businesses,” Mr Metcalfe said.

“They provide an entry level price which is appealing to many different businesses and investors. They could also appeal to residential property investors looking for entry-level real estate assets in the commercial and industrial property sector.

Self-storage is a rapidly growing industry. In September AA 2018 Insurance found that five percent of the 1100 Kiwis they surveyed paid for off-site storage as storage in new homes is becoming increasingly smaller and inadequate.

The demand for self-storage in Hamilton was boosted by a housing boom that began in 2014 when Auckland's house price growth flowed into neighbouring regions. Between 2015 and the end of 2016 Hamilton experienced an all-time high in both the volume of new houses and average sale prices, which shot up 13 percent in the second half of 2015 and then grew 10 percent every six months for another 18 months.  

Demand for new and existing housing is continuing, although at a more modest rate along with self-storage because people own more stuff than ever before and they also often need extra space when they are moving house or downsizing.

From an industrial aspect, Mr Metcalfe said an interesting point of the self-storage business is the growing number of tradesmen who use the units as small scale workshops, which are far more economical than leasing bigger premises. They are also used by businesses as space to store stock, records and documents.

Although the self-storage industry is relatively new in New Zealand, in America it's worth $38 billion, with one in 11 people paying for extra space to keep their possessions. The first self-storage facility was established in Texas in the mid-1960s and rented space was charged at 15 cents a square foot per month. It was so successful the concept quickly spread across the US, Canada and further afield and the rest is history.

Te Rapa's Bristol Place self-storage property’s location benefits from easy access to main arterial routes and Hamilton's CBD. Ms Bruce said Te Rapa commercial and industrial area as a whole has strong growth, high demand and rising rents.

“This demand is expected to continue over the next couple of years with further population growth and improved freight flows. This will only add to the attraction of Hamilton’s industrial property sector and further boosting capital growth,” Mr Metcalfe said.