Self-storage operators in the United Kingdom have effectively absorbed the impact of the 20 percent value-added tax (VAT) imposed by the government on the industry last October, according to a Self Storage Association of the United Kingdom (SSA-UK) survey. Results show that many operators chose to shield customers from full price increases by phasing in the VAT during the year, losing just 5 percent in average net rentals in 2012.
In addition, national average occupancy remained stable, declining 2 percent in 2012 to 68 percent for the year, with the average length of stay per customer actually increasing to 41 weeks, according to the survey.
"The VAT rise affected most of our operators and made self-storage a more expensive product for the customer. However, our members are confident that sales and profits can be maintained with 79 percent of surveyed firms expecting profits to be the same or improve this year,” said Rodney Walker, CEO of SSA-UK. “The effect of the VAT increase has yet to be fully measured, but with average occupancy only falling 2 percent over the year, members are confident of reversing this over the coming year."
Business use of storage units continues to be high, representing 42 percent of occupied space in the U.K., up from 36 percent in 2010. Operators may also benefit from emerging trends in the British housing market. A recent survey by the Royal Institute of British Architects indicated a majority of homeowners in newly built houses reported insufficient storage space.
Although the VAT forced operators across the U.K. to increase prices, the tax has not triggered a significant drop in occupancy, according to Ollie Sanders, partner and head of self-storage for Deloitte Real Estate, a U.K.-based full-service real estate firm that produced the survey on the association’s behalf. “It has been an interesting test of the price elasticity of the product and goes to show that the industry has remarkable resilience to the economic downturn and is well placed to capitalize on future economic growth,” Sanders said.
Survey respondents included 85 companies representing 468 U.K. self-storage facilities. The report estimates there are 830 self-storage facilities in the U.K., with 40 percent of the market (330 locations) controlled by the largest operators.