14 Great Reasons To Invest In Self Storage Units For Capital Growth
Storage unit investments offer incredible returns
While Australians have been renting self storage units since the 1970s, the idea of owning a self storage unit is a relatively new one, as is the notion of purchasing a self storage unit as a form of investment. And yet…
If you’re looking for a secure property investment with a strong track record that gives you great capital growth, it’s hard to beat the returns you’ll enjoy when you invest in self storage units.
So, without further ado, here are…
14 Great reasons to invest in self-storage units for capital growth
1. Excellent track record and investment potential
When it comes to evaluating the potential of any investment, nothing speaks louder than real-life results.
When you consider that investors and owner-occupiers at Silo Storage Berkley have enjoyed an average capital growth in excess of 40% on storage units over the past two years, it’s easy to see why so many savvy investors are buying self storage units.
This phenomenal growth has largely been driven by:
- The strong demand for storage space in the local area that significantly increased storage rental prices.
- Low market capitalisation rates that drove capital price increases.
- The increased demand for purchasing small investment properties such as storage units.
With future capital growth projections between 7–10% per year, self storage is set to continue providing an excellent investment for first time and seasoned investors looking to expand their property portfolios (including SMSF).
2. Steady income stream due to high demand
The high (and growing) demand for storage space across Australia means that investors can expect a relatively steady income stream from their self storage units. This demand is evidenced by:
- The increasing number of self-storage facilities: According to the Self Storage Association of Australasia (SSAA), there are more than 1,100 self-storage facilities across the country.
- Strong market performance: The self-storage industry in Australia has shown resilience, strong performance, consistent growth and profitability, with increasing revenue and occupancy rates.
- Population growth and urbanisation: Australia’s population continues to grow, with a significant focus on urban areas. As cities become more densely populated, the need for additional storage space increases. Limited living space in urban environments leads individuals and businesses to seek external storage solutions.
- Changing lifestyles and downsizing: Similar to global trends, Australians are embracing downsizing and minimalist lifestyles. This shift, coupled with the rising cost of housing, has prompted individuals and families to downsize their living spaces and use storage units to house their excess belongings.
- Growing e-commerce sector: The rapid growth of e-commerce in Australia has had a significant impact on the demand for storage units as online retailers and businesses turn to self storage facilities for warehousing, inventory management and order fulfilment.
- Transitional life events: Major life events, such as moving, renovations, travel or changes in family dynamics, also drive the strong need for storage solutions.
- Business storage needs: Businesses in Australia, ranging from small startups to larger enterprises use storage units to store excess inventory, equipment, documents, business archives and more.
As long as the facility is conveniently located, well-maintained and offers competitive features and amenities, it will attract and retain tenants effectively. For investors, this means a steady rental income from self storage units.
3. Variety of units to suit almost any investment budget
The price (and rental value) of a self storage unit generally depends on the location, size, style, amenities, and features of the unit.
Typically, a single facility may offer units ranging in size from the equivalent of a garden shed right up to warehouse-size. Facilities also offer a variety of unit styles including drive-up indoor, outdoor, and first-, second- and third-floor units. This means there’s a unit to suit almost any investment budget – from first timers through to large-scale investors.
4. Scalability and expansion opportunities
Self-storage investments allow for scalability and expansion. Investors can start with a smaller unit and gradually expand by adding more units or acquiring additional properties.
This flexibility allows investors to capitalise on market demand and grow their portfolio over time.
5. Recession resilience
Self-storage units have demonstrated resilience during economic downturns when individuals and businesses tend to downsize their homes or office spaces. The resultant lack of space in the home or workplace, further drive the demand for storage units, helping to mitigate the impact of economic fluctuations on investment performance.
6. Lower maintenance costs
Since storage units have fewer complex features and fixtures than residences or commercial properties, they are virtually ‘tenant proof’, which means lower maintenance costs and fewer headaches for investors.
These simpler structures require minimal repairs and renovations, and the absence of tenant improvements (i.e. the alterations a building owner makes to configure the space for a particular tenant, such as bathrooms, kitchens, plumbing and/or extensive electrical work) reduces overheads and ongoing expenses.
7. Diverse tenant base
Self-storage units cater to a diverse tenant base, including students, individuals, families, and business owners. This diversity helps reduce the risk associated with relying on a single tenant demographic.
8. Potential for value appreciation
As the demand for storage units increases, and land becomes scarce in certain areas, the value of the property and its income-generating potential can rise, resulting in solid capital growth.
Consequently, units in well-maintained and strategically located self-storage facilities have the potential for value appreciation over time.
9. Tax advantages
Self-storage investments can offer tax advantages, including depreciation deductions, property tax deductions. These tax benefits can help enhance the investment’s overall profitability and cash flow.
10. Lower strata levies
Investors in the residential property market pay higher statutory outgoings compared to those in the self storage sector, including lower strata levies.
11. Full service, ‘managed-for-you’ investment
When made through a reliable agent, the self storage investment includes a full property management service that takes care of everything, including collecting rent, chasing arrears, property maintenance, finding good tenants, conducting inspections, paying bills, administration and communication, and more. So, investors are free to focus on the many demands of their own busy lives.
12. Owner occupiers can grow their own wealth – not someone else’s – by buying instead of renting
Owner occupiers who choose to use their storage units rather than renting them out, are still able to enjoy capital growth on their investments, along with the extra space they’ll be able to create at home or in the workplace.
When the need for storage has passed, they are free to rent the storage unit out and enjoy a high-yielding investment asset.
13. Business owners can own an asset that increases in value over time
Investing in a self storage unit or warehouse gives business owners the freedom to run their businesses while benefiting from owning an asset that increases in value over time.
Modern self storage facilities are built in prime locations and provide a host of business services and amenities that make it incredibly easy and lucrative to run a business from a self storage unit or warehouse.
Business owners can store inventory, tools, business records, and more on-site and enjoy secure on-site parking for customers, delivery vans, trucks, utes, fleet vehicles, and more.
Plus, the ability to add extra space as the business grows means they will probably never have to move.
14. Higher rewards than most residential investments
As with all investments, it’s important to conduct thorough research, do your due diligence, and consult with professionals in the industry in order to maximise the potential of self-storage unit investments for capital growth.
But, if you get it right…
It is possible to earn twice the returns of most residential investments – for half the price!