Picking out key trends from the annual Self Storage Association of the UK industry survey (the latest results of which will be released imminently, watch this space!), the article highlights how the industry has coped well with the recession, in part through being able to rely on small business customers.
Self storage offers an affordable and flexible solution to the space needs of small businesses, obviating the need to sign up to long, onerous lease terms or to find large rental deposits in what is an increasingly uncertain world. Allied to the simple costing model (there are no overheads to worry about) the flexibility offered in terms of space makes self storage a sound business choice for the small business that does not know if its space requirements will increase, stay the same or decrease over the short to medium term.
Moving home remains the primary motivation to rent a self storage unit however, and with housing transaction volumes finally on the rise again in the UK, the expectation is that the proportion of business customers in self storage will start to reverse. This will not imply a decline in the number of business customers, but simply a return of the domestic client.
The self storage industry has grown at a rapid pace over the past ten years, with Safestore alone (currently the UKs largest self storage operator) seeing the number of stores rise from 74 to 135 since 2005, in spite of the length, breadth and depth of the recession. Increasingly, the general public is beginning to notice the increasing number of often brightly-coloured self storage buildings popping up in various places. A demand study, also to be released imminently in the 2014 Deloitte – SSA UK industry survey, is expected to show that while there is growth in awareness of self storage, the potential for growth is substantial, with the significant majority of people in the UK still remaining largely unaware of the industry, what it offers or how much it costs.
Self storage has been the fastest growing sector of the US commercial real estate market over the past 40 years, where some 48,500 self storage facilities now generate a quite astonishing $24bn in annual revenues. While the US and the UK differ hugely in a variety of ways including culturally, the lack of storage space in the UK is another key factor suggesting that the UK market retains excellent growth potential and is still very early in its growth phase. Since 2002, the average size of a new home in the UK has fallen from 85m2 to 76m2, with 76% of new home owners complaining that their home does not offer sufficient storage space. This trend is particularly evident, but not exclusive to, cities.
The self storage industry did not escape Omnishambles, the much-derided budget of March 2012 in which the Chancellor imposed 20% VAT on self storage. However, the vast majority of operators appear to have absorbed this challenge successfully, with the increase in prices now having been fully absorbed in to the business. In some ways, the Chancellor may have done the industry a favour; although appreciating the needs-based nature of a self-storage purchase, many operators were wary of the price increase VAT represented, right in the middle of a recession. They needn’t have been: self storage appears firmly price inelastic (within certain parameters), and that itself speaks volumes about the potential in the sector.
Frederic de Ryckman de Betz.
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