Storage Central Kenya: Gerardo Segura on Pioneering Self-Storage Solutions in East Africa

Interview with Gerardo Segura, CEO of Storage Central Kenya

Can you provide an overview of the self-storage sector sector, including the competitive landscape and the challenges it faces?

Our focus is on the self-storage sector, which was largely undeveloped in Nairobi and East Africa until our entry. Previously, storage solutions were primarily handled by moving companies, security firms, and a few international movers, none of which offered the scale, precision, and customer-centric service characteristic of established markets like Europe and the USA. Recognizing the opportunity, we pioneered the self-storage industry in Kenya with the goal of becoming the leading chain throughout East Africa.

Self-storage is a mature industry globally, originating in the US in the early 1970s and currently valued at approximately $60 billion in that market alone. Over time, it has expanded to encompass Europe, Latin America, Asia, and Australia, but until recently, it had yet to gain traction in East Africa. I firmly believe in the advantages of being a first mover in a burgeoning market. Previously, I founded Más Espacio, a successful self-storage company in Argentina that has grown to encompass multiple large facilities across the region. Seeing a similar opportunity in East Africa due to rapid urbanization, a burgeoning consumer base, and significant logistical challenges faced by SMEs, we launched our operations in Nairobi.

The market here comprises roughly 1.5 million households, approximately 7 million SMEs, 50,000 expatriates on short-term contracts, and 10 to 15,000 NGOs engaged in various activities, from humanitarian aid to infrastructure development. SMEs in particular struggle with high operational costs and inefficient logistics, which drive up the prices of goods compared to more developed markets. Our entry into the market has been met with success, even amidst challenges such as the COVID-19 pandemic, global economic uncertainty stemming from geopolitical events such as the Ukraine conflict, and local political transitions.

In comparison, other segments of commercial real estate in Nairobi, such as retail and office spaces, have experienced closures and oversupply, resulting in weakened demand and lower rental rates. When we initially sought local investment, there was skepticism regarding the demand for storage solutions in Nairobi’s market. International investors, while familiar with the concept of self-storage, often hesitate to enter frontier or emerging markets due to perceived risks and limited access to financing options beyond equity.

Regarding competition, we differentiate ourselves from traditional moving and security companies by offering transparent pricing, modern facilities, and strategically located sites that enhance accessibility for our clients. Document management firms, which charge based on storage volume, often prove less competitive for clients requiring larger-scale storage solutions compared to our flexible offerings. We cater to diverse sectors, ranging from healthcare logistics for NGOs to document storage for legal and accounting firms, delivering tailored solutions that address specific client requirements.

To illustrate our growth trajectory, we are currently adding an average of 60 new customers per month, We currently onboard an average of two new customers each day. Over the past three and a half years, we have served more than 1800 clients. However, we believe this is just the beginning for us. Our strategy involves expanding to four stores in Nairobi, two in Dar es Salaam, and potentially one or two in Kampala. Looking further ahead, considering ventures into larger markets like Nigeria, which holds significant potential for our business.

What is your key competitive advantage and how do you distinguish yourself in the market? Additionally, could you provide details on the share of different customer types in your business?

60% of our customers are residential, and 40% are businesses and NGOs. However, in terms of leased space, it is an even 50-50 split. Our primary competitive advantage lies in being pioneers. We are the first movers in this sector, scaling self-storage operations with a focus on quality and reliability. Previously, storage solutions often utilized inaccessible and unsafe locations like old warehouses deep within industrial areas. Our approach ensures that self-storage is executed correctly from the outset. While others may have had similar ideas, we are the ones who have taken definitive action. This initiative allows us to set the standards and lead the market. Essentially, we are building a brand synonymous with superior self-storage services.

What is your strategy for international development?

Our focus is on expanding into key East African cities with strong purchasing power and active trading sectors. This includes Dar es Salaam in Tanzania, Kampala in Uganda, Kigali in Rwanda, and eventually Abuja and Lagos in Nigeria. Additionally, we are considering markets like Mauritius, which has a sizable expatriate community. These are the primary target markets where we see significant growth opportunities.

How do you envision your overall development strategy?

Well, there are several paths to pursue. One option is forming a strategic partnership, such as with a prominent East African pension and insurance group, given their significant investments in self-storage and commercial real estate. We have explored conversations with Kenyan groups in this regard, but encountered challenges internally within those organizations. Some have faced issues in property acquisitions, leading regulators to intervene due to mismanagement or fraudulent activities.

Another approach could involve securing project-specific investors for each country, potentially partnering with local entities in Tanzania or similar arrangements. While this method offers steady growth, it may be slower. Alternatively, seeking venture capital or private equity investors capable of leveraging competitive bank financing could expedite our strategic development plans significantly.

Lastly, as we have done thus far, we continue to engage high-net-worth individuals and family office groups to raise capital incrementally and proceed step by step with our expansion efforts.

Could you share a success story that illustrates your work?

We have a group of female engineers who formed an NGO dedicated to installing solar panels in rural Kenyan schools. They utilize our facilities for training local engineers and managing their operations. We are proud to support their initiative by providing them with free space that is safe and convenient. This setup is inspired by our experience in Argentina, where we learned the importance of creating clean, woman-friendly environments that are secure and accessible.

Another success story involves a medical supply chain that initially faced operational challenges but now handles over 200 orders daily, significantly expanding their business. They have expressed interest in expanding with us into Nigeria, where similar dedicated support for NGOs and SMEs is lacking.

We also work with impactful clients like Doctors Without Borders and journalists who store equipment while traveling the region. Recently, we partnered with one of the largest electric vehicle manufacturers, storing 160 electric motorcycles and battery packs conveniently located near Kenya’s inland container depot, facilitating efficient import operations.

What internal projects are you currently focusing on within your business?

Internally, we are engaged in a couple of exciting initiatives. Firstly, we are collaborating with a digital marketing agency to enhance our online presence. Approximately 90% of our advertising efforts are now digital, which is a significant focus for us. Secondly, we have implemented a call center solution to streamline client inquiries, ensuring calls are efficiently directed to our sales team. Additionally, we are developing our own CRM system to replace our previous US-based provider. This new system will enable online payments and bookings directly within Kenya, resulting in substantial cost savings of approximately $500 per month per facility in Nairobi alone.

In terms of corporate social responsibility (CSR), we have initiated a project with an NGO called The Teddy Bear Project. We are funding 30 women to knit teddy bears, which we distribute to youth hostels and foster homes in challenging areas. Alongside the teddy bears, we provide food to the children, aiming to bring comfort and joy to their lives. These initiatives represent our diverse efforts to make a positive impact in our community.

How do you envision the company’s growth over the next two to three years? What is your medium-term plan and ultimate dream for Storage Central Kenya?

My dream is to expand our operations to include between 10 and 15 stores within the next five years, ultimately creating a $200 million business. Beyond that milestone, I envision transitioning leadership to others and pursuing new ventures. Ideally, we aim to list the company on the Alternative Investments Market in London, providing it with a sustainable corporate framework beyond the founders. The founders of Storage Central are myself and Nicholas Sadron, who is a French-American based here in Nairobi. We believe that achieving annual revenues of $10 to $15 million will position us well for this next phase, potentially leading to a successful listing.

What inspires and motivates you in your professional endeavors?

I have been involved in self-storage since 2008, transitioning from a 17-year career as an investment banker in the tech and telecom industries. I found the self-storage business intriguing due to its potential for stable and predictable returns. My passion lies in pioneering something new in a fresh environment, aiming to build wealth that can benefit my children and those around me in the long term. Self-storage offers passive income opportunities that endure over time. This motivation led me to Kenya and drives my commitment to developing the industry in East Africa.

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