The Valuers' View - Self-storage Property

March, 2021

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The Valuers’ View

To assist lenders, investors and owners, the Valuers at m3property have contributed their opinions on the current performance of the property markets and where they expect those markets to head over the short to medium-term.

The survey examines nine property sectors, looking at the key measures of market yields, internal rates of return (IRRs), rents incentives and value. Occupancy rates and average daily room rates were added to the survey for the hotel sector. Indicators including zeros indicate stability was also selected by respondents.

The key themes that will drive the real estate markets in 2021 will be:

  • Economic recovery as restrictions ease and confidence returns

  • Low population growth, but likely to rise as the vaccine rollout continues and borders re-open

  • Record low interest rates

  • Continued focus on Environmental, Social and Governance (ESG) factors when investing and managing portfolios

  • Growth in inflation resulting in rent growth for landlords, where rent increases are linked to inflation

  • The gap between prime and secondary yields is likely to widen

  • Government spending to remain high, despite stimulus starting to reduce

  • ‘Flight to quality’, flexible terms and convenience expected to continue to drive tenant demand

  • Rebound in investor demand due to cashed-up investors, low cost of debt and global interest in strengthening countries with stable property returns

  • Continued investor focus on defensive assets, particularly in sectors with government backing and for properties with long WALEs and minimal need for capital expenditure

  • Despite strengthening residential markets, the official cash rate is likely to remain on hold in the short to medium-term due to continuing economic uncertainty, low wages growth and labour markets not being at full capacity. The appearance of an asset price bubble is more likely to be remedied with macro-prudential constraints on lending rather than rising interest rates, which could derail the economic recovery if used too early.

  • If the post-COVID-19 economic recovery does surprise on the upside resulting in asset price bubbles, full employment and rising wages, this would drive up inflation, bond yields and the cash rate. This scenario would represent a risk to the property markets as it could flow through to the cost of capital and yields. That said, the RBA is likely to continue to implement yield curve control to keep bond yields in line with the economic recovery and a strengthening economy would provide stronger cash flows and vacancy would reduce.


Ross Perkins


View Profile > QLD
Jeremy Hoffman

Associate Director

View Profile > QLD

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Self-storage Property

The Self-storage industry quickly adapted to meet the challenges of COVID-19.

The ability to adapt to social distancing and contactless interaction between operators and customers, combined with rising demand for storage as many people took on sea or tree change moves to regional areas or required more space at home for additional family members and/or working from home requirements, buoyed the sector.

Self-storage Results


  • The self-storage industry has been mostly unaffected by COVID-19. Yields have continued to tighten on the back of increasing awareness of the self-storage investment class, increased interest from international investors (particularly for multi-asset acquisitions), the low interest rate environment, and the strong occupancy performance during the current period of uncertainty.


  • Lower returns are likely on cash flows due to the forecast stable to low rental growth expected over the next six to 12 months.

Rents and Incentives

  • Face rents are expected to be stable or grow slightly in the next six to 12 months. Stability is expected in areas hardest hit by unemployment or the economy’s downturn, such as the strong tourism markets.
  • Any change in incentives is likely to be location and catchment specific. Incentives are likely to have been offered to any existing occupants struggling to make payments. Given the typical month to month contract structure, incentives can be provided on a short-term basis and re-applied as required. It appears that most occupants have not needed any incentives.


  • Growth in values is likely to occur if the market can return to a period of rental growth. General market sentiment is forecast to strengthen, which may see continuing downward pressure on capitalisation rates. Areas where a significant reduction in population and economic growth are forecast, are most likely to witness a decrease in property value, albeit expected to have a low impact and only short-term.
  • Overall, COVID-19 is expected to result in a more positive perception of the self-storage market as an investment class given the ability of the industry to remain largely unaffected by the pandemic. The industry was, by and large, readily able to adapt to contactless or minimal-contact operations and was typically viewed as an essential service.