The UK Self storage industry is booming and investors have noticed
In recent years, the UK self storage industry has experienced remarkable growth.
According to recent reports, the industry is now set to exceed a record-breaking £1 billion in turnover this year, and investors, encouraged by the growth potential, have set their sights firmly set on the sector.
Brand new facilities are emerging alongside new housing developments across the UK, with at least 280 more stores planned by 2026, and the market shows no signs of slowing down anytime soon.
What is driving the self storage industry?
There are numerous drivers for the demand for self storage. The industry has soared since the Pandemic which unleashed a wave of individuals and businesses needing more space amid the rise of hybrid work.
More recently, inflating property prices have forced renters to consider relocation, often to smaller homes, which has resulted in the need for somewhere to store their belongings. Self storage units are also proving cheaper than renting or buying a bigger home. In the past 12 months, there has been a huge surge in the residential rental market, which has fuelled an increase in the number of young people using self storage.
Self storage experts also talk of the ‘four D’s’ that drive the demand: death, divorce, dislocation and downsizing. These four drivers combine to make stable and reliable customer markets for self storage businesses. According to the latest self storage industry annual report, life-changing events act as a trigger for many self storage customers. Of these, death in the family (30%) is the most common, followed by a relationship ending (13%) and moving abroad (10%).
The sector is constantly adapting to the way we live, and the diversity of reasons that people have for using self storage is one of the industry’s greatest strengths.
Private equity investors are diversifying their portfolios
Philip Macauley, UK Head of Self Storage at Cushman & Wakefield and real estate expert states that self storage has emerged as one of the preferred sectors for private equity investors seeking portfolio diversification.
‘We are seeing new money coming in – institutional and private equity. Institution-wise, Legal & General has been making a sizeable play in the UK market in the past 12 months. It will buy, invest and develop a facility and drop in an operator on a management agreement who will run the business, and L&G will pay them a base fee and have their rates for achieving X-percentage profit.’ – Philip Macauley
Rennie Schafer, Chief Executive Officer at the Federation of European Self Storage Associations has over 10 years of experience and knowledge in the self storage industry and explains that he has noticed an increase in investor interest over the years.
‘There is an increasing level of interest from institutional investors for quality self storage stores along with existing operators of all sizes looking to expand their portfolios. Combine this with relatively low levels of supply and self storage stores that come on the market are highly sought after.’ – Rennie Schafer
Self storage operators have experienced huge revenue growth
Big Yellow, one of the biggest operators in the UK, reported a 30% increase in adjusted profits before tax in 2022, totalling £96.8 million. Similarly, Safestore, achieved a 14% growth in revenue, reaching £213 million in the same year.
These positive financial indicators have captured the attention of investors, resulting in significant transactions. For instance, Shurgard recently acquired a prominent development site in North London set to open by the end of 2023 which will offer over 1,200 self storage units to both a commercial and domestic customer base.
Additionally, Storage King acquired properties in Banbury, Wednesbury, Frome, and Amesbury for £59 million. Storage King Chief Executive, Robin Greenwood advised that the recent acquisitions form a part of its growth strategy to increase the footprint of the company’s portfolio across the UK.
The future of self storage looks bright
‘Self storage is a simple product so the basics will always remain the same’ Rennie Schafer explains. When asked about the future trends that could shape the industry, Schafer believes the industry will continue to rapidly grow. ‘There will be more technology in stores.
We will see more keyless entry systems, and also smaller remotely managed stores. Buildings will be constructed more sustainably, and this could lead to more retrofitting of existing buildings rather than new builds.’
Investing in self storage can be a lucrative and relatively low-risk option for those looking to diversify their investment portfolio. 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.
Find out more here on why now is the time to invest in self storage – https://kuboid.co.uk/why-invest-in-self-storage/
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