In 1999, studies revealed that for the European self-storage market to reach a facility-saturation rate equal to just 50 percent of that in the United States, 18,865 self-storage facilities needed to be built in Europe within 20 years. This means building 2.6 facilities a day!
There are now 500 self-storage facilities in Europe, with approximately 350 of them in the United Kingdom. Can the Europen self-storage market grow to accommodate potential demand? What is the demand? Will operators ever be able to create such an increase in the product? These are some of the questions interested parties often ask. There may not be definitive answers, but they deserve to be discussed. Let's analyze the self-storage industry in Europe under the following three aspects: demand, operators and environmental context.
In Europe, 99 percent of potential self-storage clients are not aware of the existence of the product. According to estimates, about 5,000 potential clients contacted the two self-storage facilities in Milan, Italy, in 2002. This corresponds to about 0.1 percent of the active population of the city and surrounding suburbs. Even in those European countries where there are already several facilities—Belgium, Holland, Scandinavia and the United Kingdom—the public's awareness of self-storage is decidedly scarce.
On the other hand, those who discover self-storage are enthusiastic. The lack of space in large European cities is more acute than in the United States. The chances of finding extra space for one's short-term needs are practically impossible and create a high demand. However, what's missing is the awareness of the product. The European public needs to be educated. It's not enough to open an efficient new facility in a perfect location. Every European operator knows the first challenge is to explain to prospects what self- storage is, who it is for, how it works and how to use it.
Establishing a self-storage business in a new country is like starting from scratch each time. There are fewer than 10 operators with the competency to operate in several European countries, and probably no more than three or four who truly work in more than three. Even the largest European operators are strongly concentrated in their own countries or those in which they are naturalized.
Working in more than one country is complicated, as it is necessary to install an independent organizing structure in each country, and coordinating with company headquarters is a challenge. There are 15 countries in the European Union (EU) with nine different languages, creating linguistic difficulties for outside companies.
Another challenge comes from jurisdictional rules and conditions, which vary from one country to another. Building rights, along with municipal and local authorizations for running a business, are often governed by completely differing logic and whims. Rules and conditions concerning personnel vary from country to country. And the conditions stipulated by contract with the clientele whose national differences reflect the historical and social evolution of each country are monumental. Finally, the high potential of growth of each country is such that local operators do not feel they need to venture out of their own boundaries.
The European operators' limited globalization is undoubtedly reason enough for the lack of increase in the number of self-storage facilities built each year. The experience already acquired in one EU-member country rarely gets transferred to others. A more multinational market would enhance the speed of growth of self-storage facilities in Europe; however, European cities with a large concentration of facilities have a higher occupancy rate that increases significantly as the number of facilities grows.
It is clear the basic paradigm representing the growth of the market is the following: The more operators there are in the market, the greater the understanding of the self-storage service and more clients for presently operating facilities. The number of facilities on the market increases the overall level of success for everyone.
The Environmental Context
The difficulty of finding suitable spaces to build self-storage, the lack of getting capital risk on the European market, and the bureaucratic and administrative difficulties that need to be dealt with in most countries are all part of the environmental context. Site selection is one of the more blatant differences between the European and U.S. markets.
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Most European countries have very little available land. Often, the only choice to build a facility is to convert a pre-existing building, which means dealing with several zoning and jurisdictional problems. There are some cities, such as Barcelona and Milan, where it is extremely complicated to find suitable space.
Finding the necessary capital risk to direct toward self-storage companies is also a major challenge. The industry is new to European investors. Self-storage owners seeking funding cannot use examples of successful self-storage companies in other countries because of cultural differences. This further slows the growth of the European industry.
The structural and organizational differences among the public administrations in various European countries create difficulties. In some countries, it is more difficult to talk with the public administration about obtaining remodeling grants or building rights for new facilities than it is to convince clients to rent space. But European operators have already demonstrated how well and confidently they can handle all these situations related to their environment. Those who understand the characteristics of their territory know what needs to be done and how to do it easily and quickly. They are equipped to launch new ideas where their self-storage structures are experiencing an extraordinary rate of growth.
The industry can only grow as it distinguishes itself as an important and socially useful sector of the economy. That's right—the market and public administrations need to learn self-storage is a highly useful social service. Cities, municipalities and neighborhoods need schools, streets and parking lots, but the people who inhabit these places also need space, freedom and independence. And self-storage can help provide this.
Let's go back to our original questions: Will the European self-storage market be able to grow at the necessary pace? Is demand for self-storage limited in the European market? Will operators be able to sustain such an increase?
The European self-storage industry will be a major success. There is a demand, which is becoming strong—maybe even stronger than that in the United States. But we need to develop marketing and communications plans to educate the public of the benefits of self-storage. We need to understand the administrative and environmental logic of each European country and adjust the structures of our facilities to allow for the particular characteristics of each national market. Finally, we need to be able to present self-storage as a strong, independent and socially useful industry.
Even if Europe alone had to be satisfied with 10,000 new self-storage facilities in the next 20 years, the industry can be proud if it opens 500 facilities a year. The time has come to climb on the bandwagon. The self-storage market in Europe is destined to evolve significantly and grow rapidly. And this growth will probably be more significant than we can imagine.
Cesare Carcano is the CEO of Casaforte Self-Storage S.p.A. and a board member for Varese, Italy-based Carcano Transport and Logistics Group (Carcano Logistica e Trasporti), which operates Casaforte Self Storage. The group has seven logistics platforms operating in Italian cities: Asti, Genoa, Lucca, Milan, Modena, Rome and Vicenza. For more information, visit www.selfstorage.it.