September 1, 2001

7 Min Read
Inside Self-Storage Magazine 09/2001: London Calling

London Calling

By RK Kliebenstein

Thefirst order in examining this market profile was to determine the properetiquette regarding the name of the country. Is it England, the United Kingdom,Great Britain, the U.K.? Foolish as that question may seem, I did not want tooffend my hosts.

London is a city of 5 million people. With that kind of population, in a landarea of just a few hundred square miles, you have the first and foremostingredient of a successful self-storage project: density! The second ingredientfor success is small living and business quarters. If London makes you think ofthose tiny cars, it is for good reason. The streets are narrow and the housestightly packed. Businesses are in very close proximity, and even when you getinto the "country," the area closely resembles New Jersey (even downto the weather).

The biggest challenge facing self-storage developers in London is productacceptance. There is a need to educate the general public on the uses ofself-storage. While he knows he needs more space, the average consumer does notknow there are firms that specialize in solving his space challenges. But it'sjust a matter of time. Estimates show that self-storage spaces per capita inLondon are less than 5 percent of what they are in the United States. If that'snot a market waiting to happen, I don't know what is.

There are some familiar faces in the London market: Shurgard (also making abig splash on the Continent) and a cousin company to Storage USA. The obviousabsence of Public Storage and U-Haul is a mystery. (I attempted to contactU-Haul to learn of its plans in England and Europe, but I did not receive ananswer. Maybe there is an answer to the mystery question they don't want toshare.) In London, there are other big names such as Safestore, Access, MentmoreAbbey and Big Yellow.

Developers face the problem of finding good sites. The race is on, andacquisition guys are combing the streets looking for the next self-storagelocation. Conversions are the most popular, given the density and maturity ofthe real-estate market. One of the challenges is there just are not that many100,000-square-foot buildings available for conversion. And three to five acresof available land? Fuhgetaboudit!

One of the fastest growing and leading firms in London is Safestore. ChairmanPhilip Lewis was kind enough to share some thoughts with me on the Londonmarket:

RK: Mr. Lewis, please describe the current state of affairs ofself-storage in London. Can you particularly address occupancy levels in maturestores?

Lewis: Although self-storage has been in London since the 1980s, itwas originally located in back-street industrial property, and it is only in thelast four to five years that the new operators have started to developself-storage in high-profile, main-road sites. Naturally, the potential customerbase is huge and quite sophisticated, so most operators are looking to expand inthe Southeast, within the M25 motorwary network, although others are lookingfurther afield.

Typically, sites are about 40,000 square feet or larger, and although one ortwo new developments are taking place, the majority of sites are in olderbuildings that have been refurbished. A number of well-branded operators are intown, including, of course, Shurgard. At Safestore, we have a number of maturesites that have been open for three or four years--particularly Notting HillGate, Fulham and Acton in western London, plus Alexandra Palace in northernLondon, where occupancy levels are comfortably over 90 percent and we have anopportunity to push up our rates significantly.

RK: What are rental rates like in London?

Lewis: Typically, in our good London stores, rentals are comfortablymore than 20 pounds per square foot on an annual basis. For example, a 50- or100-square-foot unit earns about 75 to 122 pounds per month. Elsewhere in theU.K. rates are not as high, but we are managing to achieve averages of about 17pounds per square foot across our portfolio of 21 stores. [As of June 15: 20pounds = $28.05; 75 pounds = $105.17; 122 pounds = $171.08; 17 pounds = $23.84.]

RK: Tell us about Safestore. How big a company is it? How did you getstarted? What are your future plans?

Lewis: Safestore is one of the fastest-growing self-storage companies.I joined the company about a year ago, having spent most of my working life inthe direct real-estate business. Location is one of the key criteria for growth,and finding the right real estate is a fundamental part of our expansionprogram. I would urge you to look at our website, www.safestore.co.uk,to find out more about the company.

We have 31 assets, 21 of which are currently trading, and the remainder aredue to open over the next 12 months. In general, we own most of our buildingsfreehold, but we have now started to look at a few leasehold opportunities, andanticipate the portfolio will comprise of two to three freehold and one to threeleasehold properties as we develop. Our minimum requirement now is for sites ofat least 35,000 square feet of net self-storage accommodation in central Londonareas, and up to 40,000-45,000 square feet a little further out of town.

As a publicly quoted company, we have a number of interesting shareholders.The largest is Soros Real Estate Fund, controlling 25 percent of the equity,followed by a range of blue-chip U.K. institutions and private investors. It isour intention to become one of the largest [self-storage companies] in Europe,with a current target of having 50 stores trading by the end of 2003. We havealready acquired our first building in continental Europe, in Paris, that wehope to open in the next few months. We'll then look closely at other countriesas the business grows.

RK: I understand you have announced a couple of strategic alliances togrow your company. Can you tell us about them?

Lewis: In addition to our organic expansion, we have also tied up anumber of alliances with quality operating partners. First, we concluded atransaction last year with National Car Parks, the United Kingdom's largestcar-park operator, to develop self-storage inside their car parks, primarily incentral London. Subsequently, we tied up a further joint operating partnershipwith Moves, an extremely well-branded removal business based in London. Throughthat company we do pickup and delivery, and removal business. We are just aboutto announce a free pickup service for Safestore customers as well as use of theMoves vehicles, which are now jointly branded Safestore/Moves.

Our most recent success on the joint-venture route was a tie-up withRailtrack's subsidiary, Spacia. Railtrack is the United Kingdom's principalrailway company and also one of the largest landowners in England. We havealready identified a number of sites to operate jointly in London and theSoutheast, and this should provide us with much quicker access to available landand buildings to speed up our expansion program.

RK: Can you give the American operators some advice about gettinginvolved in the London market? Should they get involved and, if so, how shouldthey approach the market?

Lewis: Self-storage is gathering pace in the United Kingdom, and twoAmerican operators are already here. Shurgard and Access (which is a subsidiaryof Security Capital) are developing alongside a number of domestic companies,and we expect there will be significant growth over the next three to fiveyears. We have consulted with a number of advisors in America and intend torecruit from the United States, particularly for sales, marketing and stafftraining to ensure we stay well ahead of our competitors.

I am convinced self-storage will grow in the same way as other concepts thathave traveled across the Atlantic: Health and fitness clubs, McDonald's, coffeeshops, and toy and pet retailing have all seen tremendous changes over the last10 to 15 years, and I see the same phenomenon happening in self-storage. We areexcited about the prospects of Safestore.

RK: One final question for you: Which use is more proper? The UnitedKingdom? England? Great Britain?

Lewis: (Shrugs).

It's still a mystery, I guess.

RK Kliebenstein is president of Coast-To-Coast Storage, which is preparingto announce a strategic alliance with an existing firm in the United Kingdomthat will bring feasibility-study services to the European market. The companyis forming several relationships that will allow U.S. firms to gain access toEuropean self-storage expansion. For more information, call 561.367.9241.

Subscribe to Our Weekly Newsletter
ISS is the most comprehensive source for self-storage news, feature stories, videos and more.

You May Also Like