Like all real estate-centric business markets, the U.K. self-storage sector has felt the impact of the global recession and the significant retrenchment of the housing market. However, the industry has shown positive signs and exhibits strong economic fundamentals. Indeed, it’s possible that self-storage in the United Kingdom will emerge stronger from the slump, with most operators seeking to expand.
Comparing U.K. self-storage to the larger U.S. and Australia markets, the United Kingdom has the lowest supply of storage space per capita, yet the highest population density by far. The United States has 7.4 square feet of self-storage space per capita, Australia has 1.37, and the United Kingdom only 0.44. Even still, the country’s supply and demand profile offers sound, long-term growth prospects for the industry.
U.K. Self-Storage Today
The U.K. self-storage sector has experienced rapid growth over the last decade. In 1996, there were an estimated 81 stores in the United Kingdom; by 2008, this number had grown to more than 750. There are more than 300 self-storage operators in the country, and while the sector remains fragmented, a handful of large multi-facility companies—such as Safestore and Big Yellow—account for approximately 45 percent of rentable space. The majority of operations are independent enterprises running five or fewer sites.
Despite the depressed economic climate, the market has proved to be highly resilient over the past 18 months. Operators and investors have been faced with the dilemma of establishing optimum balance between occupancy rates and rental growth, the key variables to ensuring strong revenue. However, the evidence to date hasn’t demonstrated the anticipated drop in these metrics.
Revenue has been healthy, with Big Yellow reporting a modest 4 percent decline in like-for-like sales in its most recent annual report. Space Maker, a mid-size operator, ended 2008 with revenue down only 3 percent from 2007. Lok’nStore, which has been the subject of much bid speculation, recently reported month-on-month increases in occupancy for the first six months of 2009, with revenue beginning to increase.
Operators see the economic downturn as an opportunity to expand and increase market share. Big Yellow and Safestore plan to open 18 stores between them in the next two years. The majority of operators intend to expand existing stores where they can, with more than 40 percent planning to open new stores in the next year, according to a recent survey. Many of these are small to medium-size operators, who recognize that land and property at historically low prices offer a powerful expansion opportunity.