How self-storage is packing in the investors

At its heart, the UK self-storage sector is all about the race for space.

However, the demand and need for more space is not limited to consumers or businesses looking to expand their homes or premises – the sector is also becoming increasingly competitive from a commercial real estate investor perspective. 

The growing public awareness and popularity of the product, as well as increasing store revenues, is driving significant interest.

As an island nation, with land naturally at a premium and a growing demand for new housing, it is perhaps not surprising that the UK is a market leader when it comes to self-storage. Figures show that just under half of all self-storage space in Europe is located on our shores. 

Increasing supply targeting unmet demand makes for an attractive real estate asset class.

The recent 2019 Annual Industry Report on the UK’s self-storage sector, produced by the Self Storage Association UK and Cushman & Wakefield, looks at the trends and opportunities across the industry and is based on data collected from surveys of 62 operators and 1,372 storage customers, as well as the views of the general public. The report estimates there are now 1,582 self-storage sites in the UK, offering around 45.6m sq ft of space with an average store size of 28,800 sq ft. 

The annual sector turnover has now reached £720m. These are significant and growing numbers, and contribute to the investor interest, which is broadening in variety to include institutions, private equity and family offices.

Raising awareness

Despite the impressive growth in recent years, broad public awareness of self-storage is still relatively low, meaning there is plenty of room for future growth. For the operators, this means there is a lot of opportunity to target, which will drive further uptake, success and need for expansion. 

It is also why marketing, and particularly localised outreach, is a critical element of spend for operators which need to attract new customers. This becomes more important when you consider that it is a sector which suffers from consumer brand blindness. It is difficult to hugely differentiate the offer at its core from one provider to the next, so ensuring your business is properly search optimised for example is a critical element to ensuring a flow of new users.

Occupancy levels across the industry have continued to grow based on the amount of space currently available to customers, with an increase of 1.1 percentage points or 1.4% over the past year. 

This is despite the industry expanding by 1.7m sq ft – a further demonstration of that pipeline of unmet demand. By region, the East, South East and London show higher levels of occupancy than other areas.

Average rental rates have remained stable, but occupancy has risen in real terms, meaning that an additional 1.3m sq ft was taken up over the last 12 months. 

Going forward, operators point to a positive outlook, and the growth and underlying fundamentals of the sector support this sentiment. There is also evidence of consolidation in the market, with only a limited number of mid-tier size operators – those looking to grow at scale will need to consider acquisition. 

There is also already significant competition for development sites in the best locations, as affordable opportunities are limited due to competition from a range of other land uses. Prominent locations are also highly sought-after as the physical presence of a store is a great permanent advert when overall public awareness is still limited.

Source: www.egi.co.uk
Photo by JOSHUA COLEMAN on Unsplash