Self storage fund activity soars through 2023

Last month, Big Yellow announced that it raised £110m from investors to fund its existing development pipeline of self storage facilities across the UK.

Big Yellow, which is listed on the premium segment of the Main Market, is the largest self storage brand in the UK, with a particularly big presence in London and the South East. £108.4 million worth of stock was placed with professional investors, while £1.6 million came from private shareholders, and a final £2.85 million from management.

Nicholas Vetch Big Yellow’s Executive Chairman said: “The net proceeds will allow us to expand capacity in London, our strongest market, and monetise land that we already own.”

COVID-19 has acted as an accelerator of growth for the self storage industry

Additionally, Safestore Holdings PLC, self storage operator with locations in Europe and the United Kingdom, has recently released its interim financial statement for the fourth quarter of its 2023 fiscal year. The report indicates that the company has experienced growth in revenue and average rental rates for most of its operating portfolio.

Safestore opened four new facilities and completed one expansion project during the quarter, adding 150,100 rentable square feet to its portfolio. The company has 30 development projects in its pipeline, which are expected to comprise 1.5 million square feet.

“We believe that the COVID period has acted as an accelerator of growth for the self storage industry. Whilst demand stabilized during the year at a level that is below 2022, we are still seeing inquiry levels that are ahead of the pre-COVID period,” said CEO Frederic Vecchioli.

Self storage financing options has evolved to fund self storage growth

In recent years, the landscape of financing options within the UK’s self storage industry has undergone a remarkable evolution, paralleling the sector’s substantial growth. This surge in growth is reflected in the industry’s turnover, which soared to £990 million in 2022 and is anticipated to reach the £1 billion mark in 2023. With occupancy rates holding steady at an impressive 83.3%, lenders increasingly perceive the self storage industry as a secure and promising investment.

Approved Finance has become one of the fastest-growing finance brokerages in the UK. With over 30+ years of experience in the business finance arena, the team specialises in securing funding for numerous sectors, one of them being self storage.

“The self store industry has seen a significant shift in the quality of sites over the past few years (particularly container storage facilities) with significant investment required to compete in the market. A few lonely containers in a farmer’s yard are no longer appealing to customers so investment in infrastructure, access control, CCTV, new containers, roadways, etc are all vital.

“We have had to educate our lenders on the evolving industry and alter their outdated perception of it. We have now built a large panel of lenders with a deep understanding of the industry and willingness to lend into it, this has opened up a myriad of finance products available to the industry.” – Approved Finance

Comparatively, investors’ perceptions of risks and potential rewards within the self storage sector versus other real estate investments have been intriguing. In the aftermath of COVID-19, the commercial property market witnessed turbulence, particularly in retail and office spaces. However, the warehouse and logistics space has remained resilient and investors have been keen to support projects in this space.

“Investors forecast continued industry growth before market consolidation in 3 to 5 years.” – Approved Finance

Insights into the future of self storage financing

Looking ahead, forecasts suggest significant growth poised for 2024 in the self storage sector. Andrew Hubbard, Senior Finance Broker at Approved Finance said: “The alternative lending space is well capitalised and eager to assist with funding for self store businesses, both internal and containerised storage. We have done a lot of work with our lending panel to bespoke products such as low start repayment, development finance, mezzanine and equity slice products in addition to traditional term debt solutions, and the market is ready to deploy these in 2024.”

The evolution of financing options within the UK’s self storage industry isn’t just a sign of how robust the industry is but also a peek into what’s coming next – a future of innovation, adaptability, and collaborative financial partnerships tailored to the sector’s specific needs.

Find out more here on why now is the time to invest in self storage: https://kuboid.co.uk/why-invest-in-self-storage/

Keep up to date with Kuboid on social media here: https://www.linkedin.com/company/kuboid/

Find out more about financing self storage facilities here: https://www.approvedbusinessfinance.co.uk/