The Valuers' View - Self Storage

July, 2020

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A survey of m3property Valuers

The Valuer’s View

In times of uncertainty where transactions are limited and new trends establishing, industry participants place even more reliance on Valuers to provide market guidance.

To assist lenders, investors and owners, the Valuers at m3property have contributed their opinions on the current state of the property markets and where they expect those markets to head over the next 12 months.

This is the sixth report in a series of papers on the major sectors of the Australian property market and focuses on Self Storage property.

Key Self Storage Sector Insights

  • Yields are now expected to stabilise in the Self Storage market rather than firm as was expected pre-COVID-19.
  • Rents are likely to be stable and incentives rise slightly over the next 6-12 months. The impact is expected to be location-specific.
  • The outlook on values is largely based on the cash flow profile. As there is likely to be reduced cash flow growth this may result in slightly reduced values.

Value Comparison by Sector

Authors

Ross Perkins

Managing Director

View Profile > QLD
Jeremy Hoffman

Associate Director

View Profile > QLD
Jennifer Williams

National Director - Research

View Profile > NSW
Amita Mehra

National Director - Research, Marketing & Strategy

View Profile > VIC
Casey Robinson

Director

View Profile > QLD
Zoe Haskett

Research Manager

View Profile > SA

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Survey Results

 

“There is likely to be reduced cash flow growth in the short- to medium-term this may result in slightly reduced values.”

Jeremy Hoffman
Associate Director

YIELDS

  • There has been no evidence of any change in yield to date. Vendors may have been willing to push for an extra 25-50 basis points in value at the end of 2019/start 2020, however, this is no longer occurring, so any perceived tightening in yields pre-COVID-19 has now disappeared.
  • Bigger operators have been buying instead of selling in recent years and this is expected to continue.
  • Smaller operators generally have low levels of debt and strong cash flows and are, therefore, not expected to require urgent sales.

IRRs

  • Slightly lower market rental growth forecasts over the next 18 to 36 months to reduce returns marginally.

RENTS

  • No real evidence of significant impact on rental levels to date.
  • Level of impact on rental levels is expected to be largely location-specific, with some recent evidence of stronger rentals in some areas.

INCENTIVES

  • Evidence of some additional incentives being offered, however, this is largely limited in time frame to the first few months from occupation (which is typical).

VALUES

  • The outlook on values is largely based on the cash flow profile. As there is likely to be reduced cash flow growth in the short- to medium-term this may result in slightly reduced values.
  • Overall, the low-interest rate environment and continued appetite for acquisition in the industry is expected to largely hold yields at the current level and to continue to tighten in the longer term.