Self-Storage - a unique usage for real estate in Japan

As a new attempt for the June issue, we have highlighted a field of the real estate industry which is still not well-known, and have looked into the realities of the field. Have you ever used “self-storage”? Many of you may have heard of it, but may have never used it before or may not know much about it. We have covered the self-storage business, a new and effective use of lands. This time we have visited Quraz, Ltd., the company with a proven record of having been ranked first in the “Customer Satisfaction Rankings” in the self-storage segment for three years in a row. The rankings are published by Oricon every year. We spoke with Mr. Stephen Spohn, president and representative director of Quraz. He talked about the inside of the self-storage business.

Quraz opened its first shop in Minato Ward in Tokyo in 2002. How did you differentiate yourself from other existing self-storage operators?
First, we focus on quality - specifically, security, cleanliness, comfort and convenience. Most of competitors don’t offer these basic services sufficiently to the customers.
For example, we think it important that the shop easily accessible. That’s why all of our shops have a parking space. I think many of our competitors don’t have a parking space. We also have onsite sales and service staff at all shops. This is not only for convenience but also for welcoming atmosphere. Again, I think few competitors can offer the service like this.
As for security, at least two layers of security system restrict property access. I believe our onsite staff also gives increased security. In addition, we control temperature and humidity of the whole building. In other words, we offer a safe environment to protect not only customers but also stored items. This is our notable feature which you don’t normally see anywhere else.

How was the evaluation by customers?
When we opened the first shop, I think it was highly praised by customers. As a result, our first shop was filled up in about six months. Over the past 12 months, we opened six new shops and three of them are now almost full. Over the past five weeks, we opened three new shops and their occupancy rate is already more than 20%. These facts make me feel that Quraz has been highly valued by customers since its establishment.

Your business model is basically to own and develop whole properties as self-storage. Why do you choose “owning” model, not “leasing” model?
We would like to tightly control our product quality and service. To do so, it is easier if we own properties. Park a car in the parking lot, go to the sign-up room, and then see the unit (self-storage) – this is the Quraz customer experience which is difficult for other competitors to imitate because they typically lease single or multiple floors in office buildings. By owning and controlling the whole building, we can ensure high quality customer service.
However, owning is not the only option – we do lease space for our business to grow. In principle, we lease the whole building to ensure that we can offer the same experience as our owned properties. We intend to grow the business by taking a balance of “owning” and “leasing”.

What do you think is most important in self-storage business operation?
From customers’ and consumers’ viewpoint, I think it is trust. We have a product to meet different needs of customers, but what is more important is to create an environment where customers can feel safe and secure when they use Quraz. I believe trust underlies this environment, our company and the brand. For some people, when they think of self-storage, the image of facilities like container which are left out in the open and exposed to the weather may come to their mind. We would like to wipe out such negative images - that is why we have to supply high-quality self-storage.

The purchase of real estate requires large amount of capital. How do you finance it?
We have a corporate finance relationship with a Japanese megabank. Acquisition of buildings is financed by the bank loan as well as investment from the sponsor.