JTC reviewing self-storage operators’ use of industrial space

JTC Corporation has started a review of the self-storage industry, which some players said could throw a spanner in the works for their expansion plans. 

Responding to queries from The Business Times (BT), JTC said: “In view of increasing demand from self-storage players to operate in industrial spaces, we are conducting a review to ascertain the impact on our industrial estates.”

Tricia Song, head of research in South-east Asia at CBRE, said JTC industrial land is primarily meant for manufacturing activities or business-to-business purposes, while self-storage runs on a business-to-consumer model, which “can or should be seen as a retail or commercial activity”.

Self-storage operators told BT that the statutory board had started looking into the industry in 2021, but that no action had been taken against them thus far. They added that they were verbally informed by JTC of the impending review.

Demand for self-storage services has surged in the last two years. This came as homeowners and rental tenants downsized in the face of higher property prices and residential rents, leaving them in need of space to stash furniture and belongings. Individuals and small businesses running e-commerce setups from home also needed space to store goods in inventory, while businesses cutting back on office space kept furniture and paperwork in storage units. 

Danny Wong, chief executive officer of operator Work+Store, said the rise in demand for self-storage space by different groups of customers could have prompted JTC to “review the categorisation of the industry”, which currently falls under the logistics sector.

He explained that the industry has evolved over the years, and its customer base has expanded from mainly residential users to now also include a significant number of small and online businesses. 

About 35 per cent of the operator’s customers are those storing personal belongings; the rest are businesses storing inventory and financial records, said Wong, who is also the executive officer at real-estate management services group LHN. He estimated that, in the last two years, Work+Store received 30 per cent more enquiries about self-storage services.

Self-storage operators now report occupancy rates of between 80 and 90 per cent at their facilities. Storage rents have inched up 5 to 10 per cent over the last two years, to a range of between S$3 and S$7 per square foot (psf).

Operators’ costs have also gone up. JTC data showed that industrial space rents rose 6.9 per cent year on year in 2022; prices were hiked 7.5 per cent.

Of the increase in demand by consumers for self-storage solutions, and the corresponding increase in demand by operators for industrial space, CBRE’s Song said: “JTC has recognised there is such demand, but perhaps there needs to be some recalibration of regulations.”

Operators that BT spoke to had not applied for industrial spaces since the review began. BT understands that any rental and acquisition transactions can only be finalised after the review is completed. 

An operator who declined to be named said that operators were discouraged from submitting applications for new industrial sites.

Luigi La Tona, group director of store operations at StorHub, said that with the ongoing review, the company has “put on hold further property acquisition”. StorHub operates 18 facilities, with a total gross floor area (GFA) of 2.1 million square feet. The facilities sit on JTC land.

General Storage Group’s chief executive officer Helen Ng, who is also the chairperson of Self Storage Association Asia, said some industrial property owners whose assets sit on JTC land were holding back on leasing their properties for self-storage use amid the uncertainty. General Storage Group operates Lock+Store facilities in Singapore and Malaysia, as well as The StoreHouse in Hong Kong. 

Another operator who also declined to be named said the review has “taken a toll on the industry”.

“With the waiting period being so long, we may miss opportunities. For the self-storage industry, it is around one year of missed opportunities,” he added. 

JTC said it conducts periodic reviews of its land-use policies in line with the evolving business and industrial landscapes. The statutory board manages more than 80 per cent of all industrial land in Singapore. 

Jes Johansen, chief executive officer of operator Storefriendly, said: “JTC doesn’t want to give (the space) to people who then give it to other people. They don’t want subletting. But self-storage is not a subletting activity, and we have invited JTC to the facilities to see that it is not.”

Under the Urban Redevelopment Authority’s guidelines, buildings approved for industrial use are meant primarily for activities such as manufacturing and warehousing; certain types of e-business and media activities may also be allowed. At least 60 per cent of a development’s total gross space has to be used for core industrial activities, with the remaining 40 per cent for supporting use. In strata projects, units also have to comply with this “60-40” rule. 

Storefriendly’s Johansen said JTC could be viewing self-storage as a “unique and standalone activity”.

He added: “It is not a typical logistics activity nor is it a normal warehouse operator as we just need a small loading bay to provide moving service for residential and business customers.”

Storefriendly has eight facilities with an occupancy rate of 80 to 90 per cent, and a total GFA of about 500,000 sq ft. Half of those facilities sit on land leased from JTC. The operator offers units of between 16 and 500 sq ft; rates range between S$3 and S$7 psf per month.

In the same vein, Work+Store’s Wong said: “(Self-storage) is very unlike traditional warehouse storage contracts, in which businesses have to rent a minimum size of 500 to 1,000 sq ft and commit to a lease term of three years.” He added that micro, small-and-medium enterprises “may not be able to stomach” such an arrangement.

Work+Store has eight facilities in Singapore with an average occupancy rate of 90 per cent and a GFA of 720,000 sq ft. A majority of this space – about 650,000 sq ft – is in three facilities which sit on JTC land. The operator offers storage units of sizes ranging from 35 to 627 sq ft, with rates ranging from S$4 to S$7 psf per month. 

JTC said it would engage self-storage players on the outcome of the review by the middle of this year.