French Self-Stockage (Storage) Operators Cope With Fewer Finance Opportunities

While the need for self-storage in France is great, international financial woes are slowing down development.

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.

Financing Changes

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.

Property Value Concerns

The economic situation has had significant negative consequences to the property market. It is widely recognized that property markets in Spain and Ireland are tumbling and, in France, it has softened dramatically. But the French property market appears to be more stable, helped by factors like a prudent approach to credit and mortgages, less speculative buying and social and demographic factors.

Part of the reason for France’s seeming resilience is that the subprime crisis has left the French mortgage market less scathed, and the provision of credit has been tighter than in Britain or Ireland. Average French household debt was 47 percent of gross domestic product in the third quarter of 2007, compared with 59 percent for the Euro zone and 97 percent in Britain, according to Standard and Poor’s.

The other factor is that interest repayments are tightly regulated through instruments like the taux d’usure—an official ceiling set by the Bank of France for the rates that lenders can charge. Banks will generally not lend more than 33 percent of gross income. Mortgages of 100 percent do not exist and the majority of home loans—about 85 percent—are fixed rate. Variable rate loans come with caps, limiting repayment increases when rates rise.

The Housing Market

In France, the majority of people live in rented accommodations, and laws strictly control rent increases. Residential transaction volumes are down by 10 percent this year, and more houses are waiting for buyers. People have taken a wait-and-see position. People who need to move, don’t wait long to find a new house and thus don’t need storage. And there are now indications of people either downsizing or losing their homes in France. French homeowners worry about the value of their homes and that prices could fall.

Throughout Europe, soaring prices have had a dramatic impact on families’ purchasing power. In France, many in the middle class feel unfairly caught by this. Frustration with this is rising along with the prices as people try to reduce their expenses. Inflation is at a 17-year high.

The French self-storage industry experienced 20 percent less occupancy rates this year. Factors driving this include no household downsizing, an excess of available homes on the market, and the reduced purchasing power of the population.

So far, there is no evidence of facilities adjusting rates to the market, apart from some price reduction here and there. But there is a trend of small operators joining Homebox or Gess, the largest storage companies, to benefit from a national network. ISS

Philippe Peyrot is president of Annexx SAS, a French self-storage company, and founder of Self-Stockage.Info, an online publication about self-storage in Europe. For more information, visit and

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