Self Storage Sector Grows
The 2013, 7th annual survey of the self storage industry has been released by Deloitte and the Self Storage Association of the United Kingdom. The survey covers 85 self storage companies in the UK, covering between them 468 self storage facilities, which represents around half the estimated “True” self storage industry in the UK, according to the SSA. This is a fantastic achievement by the surveying team, and represents a stronger data sample than either the Australasian or American equivalent surveys.
The period covered by the survey remains a challenging one for a number of reasons, including both the imposition of VAT on self storage by HMG and the continuing macro economic weakness of the UK, and in particular the housing market. The results of the survey were therefore hotly anticipated by all those involved in the industry and make interesting reading.
In total, the report estimates that there are an estimated 830 self storage facilities in the UK, offering around 30 million square feet of storage space. Given a population of around 60 million in the UK (give or take a few), it doesn’t take a mathemetician to deduce that we currently have 0.5 square feet of self storage space per head of population. This is largely unchanged over the past five years as a result of the challenging economy which has drastically slowed the rate of development of the industry, but remains significanly less than both Australia and America, where they have 1.1 and 7.4 square feet per head respectively. Of course, this does also hide regional variations with London self storage offering significantly more and the regions quite a bit less.
The industry remains fairly fragmented, but the large operators still account for about 330 self storage facilities. Beyond the top ten or so larger operators, the market drops very rapidly to small operators offering up to three sites, so the potential for consolidation and further growth remains significant. Corporate activity and acquisitions were up in 2012 over prior years through the recession, and this offers hope for investors that the market may return to asset growth in the near term.
Other findings by the survey included a view that average store sizes continued to increase, while prominence of stores remains key – both in terms of attracting new clients and for the viability of the site and ultimately, it’s value. Secondary and even tertiary sites remain undesirable and difficult to finance, and will experience much lower yield rates than prime sites in hot locations overlooking busy roads. The quality of self storage facilities is increasing, with ever greater emphasis on client service as customers demand more, 24hr access and 7 days a week staffing levels. Across the board, the average room rate achieved by operators without individual unit alarms, 24hr access and computerised access control systems was significantly less than those offering all of the above – hardly surprising, as the general public become aware of the difference between storage in an unmanned warehouse at the back of some trading estate where you have to make an appointment to attend, and professional self storage facilities offering easy access 24/7 and professional security systems.
Cabot Square Capital has a clear view on this, stating that “the future of the industry is high quality, built-for-purpose sites with a focus on a service-led, retail experience for the residential and business customer.” And while operators, commentators and analysts alike all share optimism about the future for self storage, in the near term it’s clear that this will simply represent growth in existing stores and on existing sites, rather than the acquisition of new sites.