Asia’s Small Homes, Decluttering Drive Self-Storage Investments

EXPENSIVE rents for small homes, increasing affluence and work-from-home practices in Asia have fuelled demand for self-storage and piqued investor interest in the nascent sector, attracting capital from global private equity firms to pension funds.

These urbanisation mega trends are giving institutional investors hope that Asia can achieve the success seen in established markets, such as the US self-storage sector.

“Operators and investors started to have a really strong belief that Asia will follow a track that’s probably very similar to, not the US market today, but the US market maybe 15 to 20 years ago, when they first started to develop,” Fan Li, managing director of global private equity firm Warburg Pincus and board director of StorHub, said.

The rising popularity of self-storage in Asia comes as investors increasingly turn to alternative real estate due to macroeconomic concerns and property downturns in some cities. Returns from self-storage businesses can be meaningfully higher than other real estate investments as it is counter-cyclical, resilient to inflation and incur fixed costs, experts said.

Warburg Pincus started to have “very strong conviction” in Asia’s self-storage sector about five years ago, Fan said. Then, when the pandemic hit, industry interest accelerated as investors assessed the ‘five Ds’ driving the market – density, disposable income, divorce, death and after Covid – decluttering.

Warburg Pincus, through its unit StorHub, bought Storage Plus for an undisclosed amount last month. It was one of the country’s largest self-storage acquisitions recorded, the firm said. The company continues to look for similar deals, said Fan.