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Self-Storage Goes 'Back to the Future' in Europe

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By Robert James Oliver

When comparing the self-storage industry in Europe to that of the United States, it’s kind of like the movie “Back to the Future”—their industry now is like ours was back in the 1980s. That said, many may be wondering if there’s opportunity there for the U.S. investor. Is Europe the next frontier?

Storage Units Per Million of Population***The accompanying table shows statistics from a 2015 industry report by the Federation of European Self Storage Associations (FEDESSA). Post the British exit (Brexit), there were 422 million people in the European Union (EU) vs. 321 million in the U.S. Now look at the more telling number of storage units per million of population and the answer is clear. I've left out several EU countries for the sake of brevity, but the average in post-Brexit Europe is 3.7 vs. 163 in the U.S.

Is there enough demand for self-storage in Europe? I asked Ron Gerow, a native of Upstate New York and a partner in Easy Stockage in Nantes, France. “I‘ve been an owner of Easy Stockage for 10-plus years and see expansion possibilities everywhere on the continent,” he says. “Interest rates are attractive, lease-up and sales curves are slower; but the up and down swings are less and the risk is lower. As well, the economy in Europe isn’t as bad as they say. There are lots of real estate projects out there, and self-storage works."

With low interest rates and a strong dollar relative to the Euro, the storage investment climate is good. “You may pay less than 1 percent if you’re on a variable rate, and less than 2 percent if you have a 20-year loan,” says Gerow’s partner, Jean-Michel Bouché, who’s based in France. “Basically, money has become almost free. Why wouldn't American investors feel very welcome? Plus the Euro/dollar is at an attractive rate, so for the U.S. investor, it’s like getting in at the bottom.”

From a demographics perspective, there are the common demand drivers:

  • Amazon, eBay and other large online retailers are expanding their presence in Europe, and the populace consumes more and more.
  • College students are the same everywhere, looking for places to put their stuff between semesters.
  • European cities and villages house old buildings with cramped retail space, sending small businesses scrambling to find storage for their wares.
  • As anywhere else, divorce is as big a driver of storage rentals in Europe. One gentleman I spoke said he rented a storage space in Germany following his divorce and hasn't been to see it in more than 10 years. He just keeps paying the monthly rent!

Advice for Investors

Investors interested in self-storage in Europe should seek to work with a company that has a good track record and U.S. partners or senior managers, if possible, Gerow says. He also suggests they hire a competent international real estate adviser to guide them through the legal, language, tax and bureaucratic issues.

Taxes are a common concern when it comes to investing abroad. For insight to this, I went to Alexis Martin, attorney, partner and head of the tax department at international accounting firm Grant Thornton in Paris. He says the three main forms of tax in Europe are the value-added tax, which is similar to U.S. sales tax; corporate income tax; and local business taxes that would be paid by the company or subsidiary company if an investor decided to open an official corporate presence in Europe. But what about the individual investor who buys a share of an existing company?

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