Challenge Accepted! How South Africa Self-Storage Professionals Are Facing Down Obstacles to Drive Industry Growth

The South Africa self-storage sector is witnessing substantial growth, particularly in areas outside of major cities where operators have traditionally concentrated their facilities, many of them smaller and independent owned. However, new investors and owners are venturing into the market and facing formidable hurdles. For example, the country grappled with geopolitical instability, tough trading and operating conditions, rising inflation, and increasing interest rates in 2023. 

That said, the self-storage industry is also resilient, and savvy operators have found ways to overcome these hardships. Let’s see how and explore an outlook for the business in South Africa.  

Development Challenges 

The South Africa self-storage industry continues to see a combination of new developments and building conversions, a trend that’s reflected in my own company’s portfolio. In densely populated areas, particularly central-business districts, conversions are common; however, such opportunities are scarce, often presenting high barriers to entry or proving too costly to pursue. Interestingly, there’s also a trend of existing buildings being demolished in these dense areas to make way for new developments. 

A major challenge when it comes to self-storage development in South Africa is obtaining planning approvals in sought-after locations. Establishing an in-house team has helped my company overcome this. Our current pipeline includes six ground-up projects. During the past financial year (April 2023 to March 2024), we completed four new developments in South Africa, with two in Cape Town and the other two in Johannesburg. 

We also undertake property expansions to unlock value within our existing portfolio. This allows us to capitalize on our assets and maximize their potential.  

Operational Challenges 

The rise of online platforms and mobile applications has transformed the way self-storage operators connect with customers. There’s now a broad and growing base of digital channels from which to source new leads. It’s challenging to increase market share when you don’t have the ability to market to target audiences on platforms where consumers are most active. For our company, digital marketing is a key focus in our outreach. 

Creating a digital presence in a competitive online landscape is difficult, as is adopting digital platforms across the self-storage business. The increased trend in consumer behavior toward searching for and engaging with self-storage businesses through mobile devices means that South African operators have to ensure digital adoption throughout each part of their operation. 

Another key challenge is the lack of skilled staff within the sector. While a new investor may enter the market, even if they’re from a strong property-management background, there’s most often no specialization in self-storage. We train our staff through a bespoke e-learning platform, which complements our face-to-face programs. In the past year alone, we recorded more than 1,000 hours of online training so we can overcome this lack of experienced labor. 

Adding to the complex landscape, South Africa is grappling with an ongoing energy crisis, necessitating scheduled power outages known as “load shedding” to prevent a complete grid collapse. While the government has promised to resolve this issue, my company has taken proactive measures to mitigate its impact. We’ve installed hybrid solar-photovoltaic and battery systems at most our properties, with plans to equip all of them within the next two years. Additionally, each site is equipped with generators, ensuring uninterrupted operation and reducing our carbon footprint despite electric-grid instability. 

On the Horizon 

Despite all of this, significant growth is anticipated in the South Africa self-storage market, particularly in tier-two and -three cities as well as smaller towns, which are regularly witnessing the emergence of independent operators. 

We also expect to see some form of consolidation among regional players. We anticipate that some of them will join forces to create a second or third significant player in the market, thereby increasing scale and competitiveness. 

Furthermore, we expect to see more commercial self-storage users ahead, which may influence how such properties are designed and utilized. In South Africa, the tenant composition is currently a mix of 63% residential customers and 37% commercial. However, we’re seeing a lot of businesses using storage, from micro and mid-sized enterprises to e-commerce and home-based businesses to larger companies. Many in the delivery and e-tailing space are taking advantage of it.  

These users appreciate having a cost-effective, flexible storage and distribution solution. Many use our facilities as extensions of their operation, working from their unit in a new trends called “micro-warehousing.” It’s very popular for e-commerce businesses. 

Overall, there’s an increasing public awareness of self-storage in South Africa, a trend that’s expected to continue. As it grows, the cost of marketing per inquiry or move-in is expected to decline, making it more cost-effective for operators to acquire new customers. 

Chris Oosthuizen is the chief marketing officer of Stor-Age Property REIT Ltd., South Africa’s largest self-storage property fund. The company currently has 60 self-storage facilities in South Africa and 39 in the United Kingdom. Chris is also CEO of Digital First, a digital-marketing solution for independent facility operators in multiple markets.