By Rob Stanley-Turner: I was so shocked I spilt my coffee.

This is huge news: Abacus has taken a stake in National Self Storage. This has the potential to fundamentally change the self-storage market in Australia.

Abacus Property Group and National Self Storage are two of the Big Four self-storage players. If this shareholding is a step towards Abacus attempting a takeover of or merger with National, there will be a huge reduction in market competition that will likely have profound effects on the future values of self-storage facilities.

This kind of step toward market consolidation is a well-trodden path here in Australia, where many industries are dominated by a few key players—usually two big companies. The benefits of a takeover or merger for these companies are clear: market domination, reduced competition and economies of scale. Potentially, in a few years time, why wouldn’t Self Storage look any different to other markets dominated by big companies such as Qantas and Virgin; Rio and BHP; Coles and Woolworths; and David Jones and Myer?

We’re fortunate right now to have four nationwide groups—Abacus (aka Storage King), National, Store Local and Kennard—all of whom are keen to acquire more self-storage facilities. When I conduct a marketing campaign to sell an independently-owned self-storage property, at least three of these four major players will usually express an interest. Usually it comes down to spirited bidding between two or three of the Big Four. I’ve seen this in our last few campaigns, Rhodes Sydney, Rockhampton, Marcoola and now our forthcoming sale in Ballarat. Buyers outside of these groups can rarely compete with the resources of these nationwide companies, two of whom are ASX-listed companies.

It’s logical to conclude that a reduction of competition, due to a future consolidation of the Big Four, would be detrimental to competition & selling prices achieved: fewer companies, yes, but also the combined group would have around 300 facilities. That’s double the size of the largest group currently, so it’s hard to see this huge combined group having the same zest for acquisitions. In other words, a merger could remove two buyers from our market.

Self-storage owners will look back on this time, I think, as the glory days. In all my years selling facilities, I’ve never seen prices so high. I sold my first self-storage facility 1996 in Southport—back then, yields were around 12%. Now, they’re half that.

How long will these glory days last? I don’t know, but things can move quickly.

If you’d like a copy of the AFR article, please let me know. And if you’re looking at selling, please call me as soon as possible for a confidential discussion.

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