Why Invest inSelf Storage?
The self storage industry has become very popular across the UK & Europe, proving to be a resilient and robust investment for many businesses and entrepreneurs. Whether it’s a new business venture or the expansion of an existing facility, there is a wide range of benefits that make this industry a particularly attractive choice for many individuals.
The evolution of self storage
According to the latest studies, there are now more than 60,000 self storage facilities around the world. In the UK alone, there is 52 million sq ft of rentable storage space, and it was reported in 2022 that the annual consolidated turnover reached a record-breaking £930 million.
Experts now consider self storage as an underrated real estate asset, but how did self storage evolve into the buoyant and rapidly growing industry it is today?
Timeline
1950-
1960
1958 – Lauderdale Storage in Florida became the first self storage business in the US to cater specifically to permanent residents.
1960-
1970
1958 – Lauderdale Storage in Florida became the first self storage business in the US to cater specifically to permanent residents.
The UK market has grown at an average rate of 10% per year and is now worth around £930 million.
The UK market has grown at an average rate of 10% per year and is now worth around £930 million.
The self storage market today
Consistently, the self storage sector has proven its resilience. The economic fallout from the pandemic has spurred a new demand from business owners taking their operations online and utilising self storage to reduce costs and increase flexibility. Demand has also risen from employees needing to clear space at home to create home offices as a result of new remote working practices.
The UK market has grown at an average rate of 10% per year and is now worth around £930 million and, the number of facilities across Europe have increased by 70% in the last 5 years. In the US, there are estimated to be around 51,200 facilities. This represents more than all the McDonalds, Subway and Starbucks operations combined. Experts believe that the industry remains strong and will continue to grow in the coming years.
Why do people use self storage?
The self storage industry is fuelled by consumer demand. Primary sources being individuals and small businesses.
Lack of space
Moving house
Downsizing
Seasonal possessions
Business storage
Travelling
Decluttering
Vehicle storage
Why invest in self storage?
Investing in self storage can be a lucrative and relatively low-risk option for those looking to diversify their investment portfolio.
1
Self storage facilities typically have a high occupancy rate, which translates into a steady income stream for investors.
2
Low maintenance costs compared to other types of real estate investments. There are no tenants to deal with, and the upkeep of the units are minimal.
3
Self storage facilities have proven to be resilient during volatile conditions. In fact, results have shown the demand for self storage often increases during economic downturns.
4
Self storage facilities cater to a wide variety of customers, including individuals, small businesses, and even larger corporations. This diversifies your customer base and reduces your reliance on a single customer source.
5
Self storage rental rates can be flexed easily in line with changing market conditions. This ensures you’re always achieve the maximum yield from your facility.
6
As with any real estate investment, self storage facilities have the potential to appreciate in value over time. This can provide long-term capital gains for investors.
7
In the UK, the average payback period for a self storage facility is around 3-5 years.
8
According to industry reports, the average ARR for self storage facilities in the United States is around 8-12%, while in Europe it is around 5-7%.
9
Self storage facilities can be relatively stable, predictable, and easy to manage, making them an attractive investment option for Investment Funds and Private Equity firms who look to generate long-term income with a moderate level of risk.
10
Investing in self storage can be an overall wealth building strategy and can also create generational wealth. It is estimated that in the UK alone, there will be around 6,000 new stores with a combined turnover of around £1.3 billion by 2025.
“It has put my family in really good stead for the next few generations.”
– Arden Self Storage
“We’re on target to recoup the money we invested in the business within two years.”
– Container Self Storage
“Investing in self storage has helped us capture the market.”
– Roy Jack’s Removals
“Our 16 facilities are generating such a high return and as a result we are looking to grow the company further with 14 more facilities planned.”
– Boxx Oplsag
“Because of the demand, we’re planning another big project next year.”
– Easistore Self Storage
Self Storage Success Story: Space Station acquired by global real estate investment management firm Heitman
Inspired by the innovative self-storage facilities across the US, the former McLaren Formula 1 team manager, Alastair Caldwell, decided in 1983 to bring the self storage business idea to the UK, making Space Station one of the earliest storage pioneers.
Today, Space Station has over 5,000 self-storage units across 12 stores, and its position in the sector is firm and last year the company reached a major milestone.
Following Alastair’s decision to step back, in 2020 the business was acquired by Heitman, a global real estate investment management firm, which owns 47 billion dollars’ worth of real estate around the world, with eight billion in self-storage. CEO Kevin Prince says that “Heitman was the best partner for us – the combination of their knowledge of the sector and the operational experience of myself and my team makes an excellent basis for further development.”
With financial backing from its owners, Space Station is now looking to grow through trade acquisitions, warehouse development and new development. “We have done the market research and we are actively searching sites,” says Kevin Prince. “In fact, we’ve already had a very good pipeline. We believe that Space Station will become a significant player in due course, certainly in the UK.”
Source: Business Focus
How to start a self storage business: Your personal guide
1. Decide on your investment amount
Determining how much money to invest in self storage depends on several factors, including your budget, customer type and long-term goals.
2. Find a self storage partner
Before you can decide if a self storage business is right for you there are several questions that you will want answers to. Speaking to industry experts in self storage will provide you with valuable insights and expertise that can help you make informed decisions, manage risk, and maximise the profitability of your investment.
3. Find your premises
When looking to buy or rent a building for your facility you’ll need to consider various factors such as; the building size and layout, the condition of the building, building visibility and accessibility and market analysis. Also, don’t forget to check out the local competition in the area.
4. Select an operational model
Will your business be staffed, semi-manned or unmanned? If you want to manage your business remotely, what do you need to achieve this? When selecting an operational model, it’s important to consider your expertise and available resources, as well as your long-term goals for the facility.
5. Site survey
Once you’ve purchased your ideal building, your self storage partner will conduct a site survey to evaluate the suitability of the site and the intended use. They will identify any potential issues that may impact the feasibility or profitability of your investment.
6. Project design
Following your site survey, the design team will produce a drawing of the proposed self storage layout, considering key elements such as stair/access positions, lift locations, and fire escape points. They’ll also look at the best solutions to help maximise your return on investment, as well as ensure all available space is utilised to achieve the highest Net Lettable Area.
7. Ensure your building is ready
Preparing your building site is a critical step in ensuring a smooth and successful construction process for your self storage facility. Some key steps to consider include; clearing the site, installing utilities such as electricity, installing security measures and preparing the foundation for the self storage building.
8. Manufacture and build
Once your building is ready, the manufacture of the materials will start and an installation team will be organised. You’ll be assigned a dedicated Project Manager who will conduct regular inspections and quality control checks which will ensure that the finished facility meets your expectations and is ready to start serving customers.
9. Marketing
Now is the time to leverage all your marketing channels and establish a bullet proof plan so you can build brand awareness and attract new customers.
10. Grand Opening
Congratulations on opening your self storage facility! Remember that your grand opening day is just the beginning. Continue to market your facility and provide excellent customer service to attract and retain customers and build a loyal recurring base.
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9. Marketing
Now is the time to leverage all your marketing channels and establish a bullet proof plan so you can build brand awareness and attract new customers.
10. Grand Opening
Congratulations on opening your self storage facility! Remember that your grand opening day is just the beginning. Continue to market your facility and provide excellent customer service to attract and retain customers and build a loyal recurring base.
Share