Consumer prices, an inflation barometer, fell last month by 1.7 percent, the largest drop in 61 years. The overall slide in prices reflects a big drop in energy costs in recent months, according to a Labor Department report.

The drop puts pressure on the Federal Reserve to act. As it wraps up a two-day meeting today, the central bank is expected to cut the federal funds rate, which is arleady at a low of 1 percent, by another half-point to prevent the recession from worsening.

Source:  Yahoo News, Inflation Drops Bigger-Than-Expected 1.7 Percent

Leeds, England-based The Store Room has completed a trial contract of providing mobile storage to a retail business and deemed the project a success.

According to an article in the Yorkshire Evening Post, shopping-mall retailer River Island contracted with The Store Room to store excess stock offsite, in what was described as an innovative alternative to "unwieldy and unsightly freight-storage containers." Following the positive trial experience, River Island has signed a contract to continue service for the next six months.

The Store Room, based in Millshaw, Beeston, reportedly spent two years to design the mobile stock-room concept, which is fully alarmed and uses a patented hydraulic system for quick and easy deliveries and pick-ups of units. The facility is adding 50 more units to its inventory to keep up with increased demand from other retailers, including a locally based supermarket.

Since November 2007, Australian consumer confidence, housing starts and approvals along with commercial property have all shown a downward trend. Factors impacting the self-storage industry include declining REIT values, increasing steel and petrol prices and the tightening of financing coupled with 12-year-high interest rates.

The REIT Shakeout

The REIT market in Australia is worth A$83 billion. The ASX300 index stocks listed on Standard & Poor’s Australian Securities Exchange has suffered a 29 percent fall this year and 39 percent over the last 12 months.

A number of the largest A-REITs have suffered significant falls in value over the last six months, most notably General Property Trust, Valad Property Group and Centro Properties Group. With listed property trusts (LPTs) suffering declines in share values of upward of 45 percent recently, LPTs that have holdings in self-storage are selling.

At a recent meeting of APN Property Trust share holders, the decision was approved by 99 percent to conduct an “orderly” sale of its self-storage assets. APN cited the uncertain economic forecast, a desire to pay down debt and strengthen its balance sheet as reasons for selling. APN’s holdings include National Storage properties in most major Australian cities. National Storage purchased three sites in Hobart Tasmania from Scobies Storage in July.

Valad plans to sell 50 percent of its self-storage holdings to the Kennard Family for a reported $69 million. Valad purchased the Millers Group in 2004 for A$210 million, but now faces the same economic issues as APN. Valad needs to retire debt as part of its ongoing operations.

Local Operators

Australian self-storage saturation rate is about 25 percent of the United States, so it’s unclear how a downturn in the economy will affect local operators. Awareness of self-storage has increased with large sites in high-profile areas providing core exposure for the product.

Some larger operators have forged ahead with rent increases, which have helped their bottom lines. But a number of self-storage operators—large and small—have reported a decrease in general inquiry levels for storage spaces, although few have reported a loss in occupancy. While the move-ins might have slowed for some, so have the move-outs.

Money Crunch

Interest rates in Australia have been on the increase with nine rises over a seven-year period. In early September, the Reserve Bank of Australia loosened the reins with a 25-basis point, its first cut in nearly seven years.

Self-storage construction is still ogoing, but at a reduced pace. With interest rates increasing along with the credit crunch, a number of projects have been shelved, on hold or scaled back. Some builders have reported it is more difficult to establish a feasibility stage for projects. Uncertainty about future growth combined with an escalation of land and building costs has made the prospect of entry into self-storage questionable for some.

Ken Elliott of StorBuild Australia commented that the increase in steel prices and transport costs have certainly affected the economics of buildings. This trend is not likely to stop as price rises for steel are still forecast to outstrip inflation.  

Self-storage is being affected by the continuing increases in steel prices. Some building contracts have been impacted by the increases as suppliers initiate price clauses based on the rise and fall of steel prices. Australia’s two largest steel producers, BlueScope Steel and OneSteel, predict demand and prices for steel to remain high. One large steel supplier increased prices by 17 percent in July, and another 10 percent in August.

Impacts on Development

Self-storage rates in some markets, particularly in regional centers, have not kept up with the pace of development costs. Commercial land in Australia has escalated in cost far in excess of inflation.

This discourages large sites to be built in certain areas, which underpins the supply market. In some regional areas, land costs are close to city properties, but without rural facilities being able to charge the corresponding rental rates.  

Petrol Woes

Recent actions by truck owners and drivers could also result in increases in commodity costs. As the price of petrol escalated, drivers claimed they are unable to pay their bills. In one week more than 2,500 commercial trucks were repossessed by finance companies. Drivers have been holding blockades of central business district politicians’ offices in an effort to get their grievances heard. They are demanding a rate-per-hour rather than the current load-based pay method. Although the price of petrol has dropped slightly since then, consumer confidence is slow to rise.

There will always be the need for self-storage in emerging Australian markets, but its success lies in how developers deals effectively with these challenges.

Dallas Dogger is CEO of Centreforce IT in Brisbane, Australia. Centreforce IT is the largest installer of access control, CCTV and individual door-alarm systems in Australasia. For more information, visit www.centreforceit.com.au.

Though the real estate investment trust (REIT) market is poised for big losses in 2008, the self-storage sector has performed the best, having dropped only 14.59 percent over last year. In comparison, the industrial sector is down 81.11 percent, lodging and resorts 66.57 percent, and regional shipping malls 66.34 percent.

As of last Thursday, the index of equity REITs, which own commercial property and constitute the bulk of the market, was down 49.16 percent in 2008, according to the National Association of Real Estate Investment Trusts. (Losses for mortgage REITs, which originate loans and invest in mortgage-backed securities, averaged 42.16 percent.) This has been a second consecutive year of losses for REITs—in 2007, they fell nearly 16 percent.

Some analysts say the reason for self-storage’s comparatively better performance is Public Storage Inc., which operates self-storage facilities nationwide has no debt.  

Source:The New York Times, A Year of Tumult for REITs

Eighty-two units were discovered broken into at Springfield (Mass.) Self Storage last Thursday. Padlocks had been cut and the doors forced open, said John M. Delaney, aide to Police Commissioner William J. Fitchet. Police are attempting to determine the extent of the theft, seeking assistance from the unit renters in figuring out what items are missing.
 
Source:MassLive.com, 82 Self-Storage Units Broken Into Overnight; Springfield Police Trying To Figure Out What Was Stolen

A woman set fire to her ex-boyfriend's clothing at Community Storage Lockers in Anderson, Ind., on Wednesday night, causing more than $100,000 in damages, not including the contents of the buildings, police said. Officers arrested Donna J. Duell, 26, on suspicion of arson.
 
Duell at first denied any involvement but then admitted she took her ex-boyfriend's clothing to an empty storage unit, set it ablaze and walked away, Anderson Police Detective Randy Tracy said. Duell told him the two were involved in a "bitter domestic dispute."
 
Security codes indicated Duell had been the last person to storage center at 8:02 p.m., and she left nine minutes later. Firefighters received the first report of the blaze at 8:24 p.m.
Duell was released from the Madison County Jail after posting $20,000 bond Thursday.
 
Source:Associated Press via Yahoo! News, Woman Burns Ex-Beau’s Clothes, Damages Top $100k

Firefighters were called to North Las Vegas Self Storage at Lake Mead Parkway and Lamb Boulevard just after 9 p.m. last night. Crews were able to contain the fire, but they do not know what caused the blaze. Six units were gutted, according to Clark County fire officials, and the department’s arson unit is investigating. The full extent of the damage has not yet been assessed.

Source:  Fox 5 News Las Vegas, Fire Destroys Self-Storage Facility

Harrison Street Real Estate Capital LLC purchased 19 self-storage facilities totaling more than 1.4 million square feet for $100 million. The properties, managed by Orlando-based Simply Self Storage, were acquired from a private lending institution. The sites are in Florida, Illinois, Ohio, Nevada, New York and Rhode Island.
The properties were purchased using Harrison Street Real Estate Partners II LP, a fund that has a gross buying power of about $2 billion.

With the acquisition, the fund will have purchased or commenced development on more than $700 million of real estate in 2008, consisting of more than 60 properties. Harrison’s self-storage portfolio now consists of more than 41,200 units in 65 properties across 17 states, valued at more than $600 million. For more information, visit www.harrisonst.com.

Two financial-planning experts are challenging conventional wisdom regarding retirement in a new book, Spend 'til the End: The Revolutionary Guide to Raising Your Living Standard (Today and When You Retire. Authors Laurence Kotlikoff, a Boston University economics professor, and Scott Burns, a financial columnist whose work appears on MSN Money, used retirement-planning software to systematically test and often debunk the collective wisdom of financial planners. They claim there are three retirement myths that demand scrutiny.

Source: MSN.com, 3 Big Retirement-Savings Myths