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Challenges in the Maturing European Self-Storage Market

By Rennie Schafer Comments
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The limited number of disused warehouses and industrial buildings suitable for conversion into self-storage were largely taken up in the early years of the industry. Operators looking to acquire properties for larger storage developments often compete against other retailers, supermarkets and residential-development speculators. These days, they quote the lack of suitable property as the main limiting factor to the growth of their portfolios; whereas three to five years ago, they likely would’ve said limited access to funding was their greatest inhibitor.

For the last three years in the U.K., demand for the product has grown faster than supply. While this is good for existing operators who can push occupancy and revenue, it shows developers are struggling to find suitable sites. That’s not to say the industry isn’t expanding; it certainly is growing through the expansion of existing sites and new development. Even in markets like London and Paris, we’ve seen significant new sites open or begin construction in the past 12 months.

However, more new developments are being pushed into secondary cities or outer metropolitan areas where suitable property is readily available. We’re also seeing a growth in container-based operators who use this as a low capital means of entering the industry. They can offer drive-up solutions that often suit tradespeople and other commercial operators.

Lack of Standard Regulations

Across Europe, the industry is self-regulated, which means there are no storage-specific laws or other legislation. Broad consumer-protection and contract laws provide the only legislative framework. This reduces administrative costs and allows more flexibility in terms of dealing with operational issues such as delinquent units. However, it also means the rental contract needs to be watertight, as this is often the sole document to defend against legal challenges. The industry associations provide standard templates for customer contracts and work to maintain a best-practice standard for the industry.

Pelican Self Storage in Copenhagen, DenmarkAnother downside of being self-regulated is there are limited guidelines regarding planning and construction. This essentially means operators often must contest the same planning issues in different jurisdictions, as there’s no overriding document of rule.

The Future Is Bright

Industry challenges remain in terms of increasing awareness in the marketplace and bureaucracy. However, on balance, the European market appears to be heading into a period of prosperity. The financial crisis of 2009 is a distant memory, and the industry showed its resilience during this time. Building constraints are helping to control supply while demand continues to grow. Ongoing political and economic uncertainty is becoming the new normal, and businesses are moving forward regardless. Publicly listed companies are performing well, offering solid dividends and experiencing growth in value.

Rennie Schafer is CEO of the Federation of European Self Storage Associations (FEDESSA) and the Self Storage Association of the United Kingdom. For more information, visit www.ssauk.com.
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