The French self-storage (self-stockage) market is still in early development with only 200 facilities nationwide. The balance sheets of many main operators have often been in the negative, and bankers haven’t identified storage as a viable real estate investment or business. There are no international investors ready to put their funds in French self-storage operations such as in the United Kingdom, which has the advantage of its maturity.
The Credit Crunch
Self-storage operators here are struggling due to a number of unfavorable factors including soaring global oil and food prices, the impact of the U.S. subprime mortgage crisis and credit crunch. France hasn’t managed to avoid the credit crunch. It’s now very difficult for entrepreneurs to find financing.
In France, strict consumer laws require lenders to lend in such a way that a subprime market is not possible. Although there is no subprime crisis in France, French banks invested heavily in securities backed by U.S. subprime mortgages. These banks are now shaken by losses linked to the U.S. subprime loan crisis. France’s third- and fourth-largest banks have reported slumping results from the credit crunch; Natixis lost about $1.5 billion and Credit Agricole revealed a 94 percent profit drop.
A few months after U.K., Spanish and Irish financial institutions adopted conservative lending policies, the French banks changed their lending behavior. Banks and investors became wary of lending funds to corporations. There is a significant reduction in the general availability of loans, coupled with a continuous increase of interest rates. Entrepreneurs need a good performance record to obtain financing and usually banks will try to share the loan with other institutions.
Loans also take longer to obtain. This will prevent small operators from creating new business for a while. But operators with secured financing will be able to take advantage and buy prime real estate with reduced competition.