The Four “Ds” Behind the Surge in Demand for Self-Storage Space in Asia

PLAY OF THE LAND

Self-storage is a major industry in the United States, the U.K. and Australia, where relocation, among other factors, continues to drive demand for rental space to store belongings.

The reason is largely cultural, driven by the four “Ds” of death, divorce, density and dislocation.

But in Asia, the concept of self-storage is fairly new, and the sector is beginning to gain steam due to a range of cultural and demographic shifts, according to CBRE Research.

While the self-storage industry in Asia significantly lags in comparison with the U.S.—last year, the U.S. self-storage industry was valued at $24 billion, with a total of 2.3 billion square feet of space for lease—demand for self-storage in markets such as Hong Kong, Tokyo and Singapore is exceeding existing supply, leading to the sector’s expansion in the region.

Analysts are predicting other Asian cities—such as Shenzen and Shanghai in mainland China, as well as Taipei, Kuala Lumpur and Bangkok—will be key markets for self-storage.

The reason is largely cultural, driven by the four “Ds” of death, divorce, density and dislocation.

Death

Japan has an age problem on its hand. Its population is getting older and its birth rates are getting lower. The number of Japanese newborns dropped to a record low of 1 million in 2014 (compared with 1.3 million registered deaths in the same year), and the government fears that 40 percent of Japan’s population will be aged 65 or older by 2060.

Hong Kong’s population aged 65 and over grew from 11 percent to 15 percent of the total population between 2000 and 2014.

As people pass away, their belongings must be sorted and catalogued by their relatives, thus producing more demand for self-storage facilities.

Divorce

Divorce in Hong Kong has become so widespread that matrimonial lawyers have dubbed the city “The Graveyard of Marriages.” There were 6,295 divorces in the country in 1991. In 2013, there were 22,271 divorces.

When couples split, they often need space to store their belongings as they get back on their feet, stimulating demand for self-storage units in the process.

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Density

Space is scarce in many Asian cities. The average household space per person in Hong Kong is 167 square feet, and that tiny space isn’t cheap (the price for a 344-square-foot flat in the Kowloon area of Hong Kong doubled in price from 2007 to 2012).

Living spaces in Tokyo and Singapore are similarly cramped—the average household space in those markets is 329 square feet and 247 square feet, respectively.

In these tightly packed metropolises, self-storage is a simple way to expand one’s household, rotating seasonal items in and out of a storage unit as the weather changes.

Dislocation

Positive life events, such as marriage, a job change or graduation from university also create the need for self-storage space.

While divorces are common in Hong Kong, so are marriages, which often mean the merger of two households into one, creating demand for self-storage.

While divorces are common in Hong Kong, so are marriages, which often mean the merger of two households into one, creating demand for self-storage.

Students attending, and eventually graduating, from university will need extra space to store their stuff, as parents often convert the child’s room into additional space, necessitating the need for a place to store childhood keepsakes. Both Hong Kong and Singapore saw a surge in the number of students in post-secondary and vocational institutions from 2000 to 2013 (by 168 percent and 42 percent, respectively).

Employee turnover rates in Asia are also growing, especially in Hong Kong, where 63 percent of employees changed jobs after one to two years, according to Hays, a human resources consulting firm. Changing jobs and homes may translate into more self-storage requirements.

Despite all these trends, Asian markets are unlikely to reach the same level of penetration with self-storage as the U.S. The reasons: the low overall awareness of self-storage, the scarcity of suitably located and priced properties, and the short lease terms and land tenure in Asia.

“In order to rent space, people need to understand the idea and benefits of storage units,” says Marilyn Leslie, president of MiniCo Self-Storage in Hong Kong, in an interview with Forbes. “This can be a tough marketing test.”

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