Advice and Opinion News

Stor-Age REIT experiments with micro-warehousing to meet e-commerce surge

Stor-Age, Claremont, Cape Town.
Stor-Age, Claremont, Cape Town.

The global self-storage market, which is expected to experience a compound growth rate of 5.65% between 2022 and 2027, is seeing a fundamental shift in how businesses are using the product. Data shows that the e-commerce boom is changing the way in which businesses use self-storage, with this trend set to continue as online sales resume growing, according to Stor-Age Property REIT Limited, SA’s only specialist self-storage REIT on the JSE which has 86 self-storage properties across the country and the UK.

Prior to the COVID-19 pandemic, businesses traditionally used the product to safely store excess stock, office items during a renovation or expansion, or during the transition from one business address to another but data from Stor-Age now indicates that businesses are using the product far more frequently and staying longer, with self-storage essentially becoming an expansion of their operations.

In line with e-commerce sales passing the R50 billion mark in 2022, there is a significant demand for last mile delivery across SA which is the driving force behind much of this trend. Small and medium-sized businesses are increasingly using self-storage as opposed to warehousing as an extension of their logistics network. Stor-Age believes this is the case due to the prime location of their self-storage facilities (generally located in easily accessible prime suburban locations), high security and the flexibility that self-storage offers. Business owners can upsize or downsize their units based on supply and demand and are on a monthly contract which means no long-term leases and commitments.

These low-risk factors have enabled small businesses, especially those in the e-commerce space, to launch and grow with minimal capital outlay.

Our properties act as business incubators, often assisting local businesses transition from home-based operations to larger scale entities that can employ more staff. Having analysed our data, we have identified a trend that shows that our commercial tenants are now accessing their units more frequently, which indicates that the units have become a key component of their operations. This could be a small e-commerce operator who is using their unit to store and sell products from, or a larger business which is using our stores as a last mile delivery location,” comments Stor-Age Chief Marketing Officer Chris Oosthuizen.

Further data shows that out of Stor-Age’s total customer base, tenants storing for two years or more has risen by 4% since 2019 (34% versus 30%), with this figure expected to rise as there is further adoption of long-term use.

One such example of the mutually beneficial relationship between self-storage and the logistics sector is last mile delivery and technology company Picup, which uses Stor-Age properties as part of their last mile delivery network. “As online sales continue to thrive in South Africa, so we are seeing the logistics sector having to change gears and seek mutually beneficial relationships with third parties. Through our last mile delivery technology and prime-located Stor-Age properties, we are able to better serve our customer base and quickly adapt to the e-commerce surge that we are seeing across the country,” comments Antonio Bruni CEO of Picup.

Many of Stor-Age’s commercial customers are SMMEs, which are critically important for SA’s economy as they promote sustainable job creation and economic development. Adds Oosthuizen, “In a recent customer survey, data showed that our business customers have on average created more than six jobs since starting to store with us. Considering that we had approximately 11 100 commercial tenants at year-end across both markets, the positive contribution that Stor-Age is indirectly making towards sustainable job creation is significant.”

According to Oosthuizen, gone are the days of businesses simply locking away their goods in self-storage to only access them again months down the line. “We are seeing a surge in businesses looking for a very different form of self-storage, where they are able to access their units daily and in many cases work out of them. This is very different to what we experienced only a few years ago. Today, we are seeing significant demand from tenants requiring plug points, lights, Wi-Fi and even security cameras in their commercial units. In the past, businesses would simply rent an empty unit – this is not the case today. Where many businesses would use warehousing or office space to operate their businesses, now they are turning to the low risk offering of self-storage.”

To meet this demand, Stor-Age is currently experimenting with an enhanced product called ‘micro-warehousing’. The product is designed to offer commercial tenants a space in which to work and operate their business, while at the same time being able to safely store their goods in a lock-up-and-go environment. “These micro-warehousing units are acting as business hubs for SMEs across the country,” says Oosthuizen. “We have many businesses, especially those in the e-commerce space, who are taking advantage of month-to-month rentals in enhanced units that are able to complement their existing operations. For many, it’s a no-brainer as they have an incredibly low risk means of either starting or growing a business.”

The reality is that the self-storage sector is seeing a drastic shift in how businesses use the product, with units now providing commercial tenants with the opportunity to operate and scale in a low risk environment.