More SMEs switch to self-storage units

More SMEs switch to self-storage units

When British expatriate Lyle de Groot set up an online gourmet food store in January, he thought outside the box when it came to storage.

Instead of opting for a traditional warehouse to pack his goods, Mr de Groot, 38, leased a 496 sq ft unit at a self-storage facility in Chai Chee.

He is among a growing number of bosses of small and medium- sized enterprises (SME) who have embraced the "do-it-yourself" attitude in the face of soaring industrial rents and a slowing economy.

The facility that Mr de Groot uses is run by Lock+Store, which has another one in Tanjong Pagar.

Mr de Groot, who lives in Tanjong Katong, said he chose the unit for its proximity to his home and the flexibility it offers his firm,

He is among Lock+Store's roughly 2,000 customers.

Lock+Store was sold by Temasek Holdings' property arm Mapletree Investments in 2010 for around $50 million to a consortium led by private equity firm Southern Capital Group.

Lock+Store chief executive Helen Ng said she thought the Singapore economy was now mature and stable enough to accept self-storage, although she noted that self-storage is a million- dollar industry compared with the billion-dollar business dominated by industrial landlords.

Ms Ng expects the number of SME clients to grow by up to 10 per cent a year. Last year, they accounted for 26 per cent of the firm's clients.

Price is part of the appeal. Ms Ng said that traditional warehouse leases tend to be for at least three years, but customers at Lock+Store need to give only two weeks' notice to switch to a new unit. They can rent units ranging from 24 sq ft to 300 sq ft for between $88 and $850 a month.

Mr Mike Hagbeck, chief executive of self-storage firm Extra Space, said one of the largest storage units at its Eunos Link facility costs $1,436 per month for 450 sq ft, or $3.19 per sq ft (psf).

A warehouse, by comparison, would cost at least $2,500 per month for 1,000 sq ft at the very least, or $2.50 psf on average.

He added that Extra Space requires a security deposit of one month's rent but warehouses normally ask for at least three months' rent.

Warehouses also lack the 24-hour access that many self-storage facilities offer.

The decision to pick self-storage also depends on the firm's size. Self-storage units appeal more to smaller outfits, such as consumer goods firms that have offices elsewhere and need a separate storeroom.

Mr Hagbeck said customers in the past used his units mainly for temporary storage of furniture and documents, but more retailers are now leasing them to house inventory as retail space gets more expensive.

Competition among the major players is stiff as more firms enter the fray, lured by stable cash flows and healthy margins.

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