Experts say that self storage is an underrated real estate asset

Self storage has experienced steady demand growth over the past two decades as consumers and businesses seek convenient and secure spaces to store their possessions. As urbanisation continues to grow and living spaces become more compact, the demand in the UK has skyrocketed.

Self storage properties perform well in both good and bad economies

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 five years. Since the Pandemic, the number of households that utilise self storage has grown, and reports suggest that the impact of the Pandemic has overall been positive, as 81% of self storage operators reported a minor or significant improvement in their business.

Self storage has an excellent return on investment and consistent demand among homeowners in the UK. Even in 2020, when the housing market declined, vacancy rates in self storage spaces remained consistent with previous years, and recently, industry reports have suggested that the sector is on the verge of a boom that could reshape the real estate landscape.

Self storage properties boast a remarkable combination of being both inexpensive to build and operate, making them an attractive proposition for investors seeking high margins and solid returns on their investments. Unlike other real estate ventures, self storage facilities have relatively low occupancy break-even rates, creating a buffer against economic fluctuations and ensuring a stable income stream.

Self storage has captured the attention of major players in the real estate investment industry

The industry’s strength and resilience has captured the attention of real estate investors, and as a result established industry players and startups are approaching self storage with greater intent as they look for ways to diversify their portfolios.

Heitman, investor in self storage since 1996, has more than £5 billion in self storage assets across the globe, including recently purchased self storage platforms in the UK (Space Station) and Germany (All Seasons), last year invested an undisclosed amount in an Irish self storage business.

Caleb Mercer, Heitman Managing Director of European Real Estate Investment, highlights this growing interest, stating, “We remain acquisitive and will continue to strategically add assets to the portfolio as we believe there is a significant opportunity to create value while benefiting from the growth of this still developing European sector.”

Gordon Black, Heitman senior managing director and portfolio manager, said: “As we execute our global investments, we continue to look to balance our portfolio across three themes: divergence or smart diversification among traditional property types; convergence or capitalisation of maturing property types; and delinked or defensive, which involves investing in assets with traits less tied to economic cycles such as self storage.”

Pithos Capital, CBRE, and Davidson Kempner Capital Management support the largest self storage purchase in the UK market

More recently, A £37 million loan from OakNorth Bank supported the acquisition of UK Storage Company, one of the UK’s largest independent self storage providers, representing one of the biggest self storage platform purchases in the UK market.

Callum Paddock, Director at CBRE UK, states: “The transaction affirms the strength of the sector, its operational resilience driving high demand from sophisticated institutional investors for opportunities of scale.”

Director of Debt Finance at OakNorth Martin Williams said: “The UK’s self storage market has experienced significant growth over recent times, driven by people who are reconfiguring their homes to accommodate hybrid working or unable to upsize and instead choosing to put their possessions elsewhere.”

Self storage REITS to outperform other real estate investments

Within the last decade we have seen self storage REITs significantly outperform other real estate investments, and recently Big Yellow Group was voted one of the best British stocks to buy in August 2023, and in its most recent quarter, the company grew revenues 6.7% year on year. It continues to expand its estate and opened a new flagship site in London’s King’s Cross in June.

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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