XL Success: Drive-Up Self-Storage Garage Parks Are Becoming a New Investment Goldmine in Germany

Self-storage facilities were first built in Germany at the end of the 1990s, typically as indoor, multi-story structures in urban areas. It took another 10 years before the country saw its first drive-up facility in the standard row style frequently seen in the United States. By 2015, there were just 80 of these “garage parks.”

Most are built from trapezoidal sheet metal using post-frame construction. On average, these modular storage units have a floor area of about 300 square feet and are 15 feet high; but they can also be combined to create larger spaces of 600 to 1,200 square feet.

Today, there are more than 500 of these garage parks, with about 70 new ones opening every year, making this segment the driving force behind the explosion of self-storage in Germany. Extra-large garage units (XL garages) are popular because they provide convenient and affordable space for oversized items such as RVs, equipment and merchandise as well as workspace for small and mid-sized businesses. They’re usually in light-industrial-zones near the city and are easily accessible via freeway.

Market Opportunities Abound

The supply of drive-up garage parks in Germany is by no means comprehensive. With an average of just 0.14 square feet of space per capita, the industry has achieved only about 5% of the coverage seen in the U.S. Entire regions are undersupplied, and there are no facilities at all in many larger cities.

However, the reason for this isn’t a lack of demand because garage parks are usually fully leased during the construction period or shortly thereafter. It’s the lack of initiative by the real estate industry to take advantage of the market’s lucrative opportunities and create a nationwide supply.

This apprehension is difficult to understand, as the achievable rental rates are similar to those in the logistics sector. In contrast, the costs of acquiring land and building these garage parks are relatively low, making this a high-yield investment opportunity.

Additionally, these storage facilities don’t require permanent onsite staff, and income isn’t diminished by expenses like leasehold-improvement incentives, ongoing maintenance costs or brokerage commissions. Also, the carbon footprint is minimal, as garage parks generally have no building infrastructure or major utilities (other than electricity) and produce no water or waste. Many even have solar panels on their roofs, providing clean energy.

Extrapolating the U.S. coverage to Germany, the potential is hypothetically 250 million square feet of drive-up self-storage space, which is equivalent to about 11,000 average-sized garage parks.

Growing Investor Interest

Development of garage parks in Germany is largely fueled by private individuals who build one or two in their local area to diversify their personal investments. However, larger developers have begun to recognize this as a new asset class. The facilities have become popular with investors because they’re typically rented on a long-term basis due to consistently high demand. Individual units are sold as part ownership. Each year, 10 to 15 garage parks are developed, representing approximately 20 percent of the market, a figure that is clearly on the rise.

Among the top 10 operators, Storage24 has established itself as the national market leader, not only based on number of facilities but on the number of units per location. The rapidly expanding company holds nearly 25% of the market share in terms of storage space. It has also implemented the same concept in other European countries. According to recent press coverage in the United Kingdom, Storage24 is valued at $1.6 billion and is currently considering a sale or recapitalization of the business.

The garage-park segment has recently caught the eye of a foreign investor for the first time. Embracing a strategy of “build yield rather than buy yield,” U.K. investment company Intriva Capital has entered the German construction market. The company launched SpaceGenie in 2022, aiming to develop drive-up facilities for garages, storage and commercial space at approximately 50 locations within five years, with the first facility already operational.

European Expansion

The garage parks that began in Germany have spread to neighboring European countries including Austria, France and the Netherlands. However, development is still in its infancy by international standards. Given the enormous undersupply, now is an attractive entry point for investors who want to get involved. The lucrative cost-to-income ratio for construction and operation suggests favorable fundamentals for many years, if not decades, to come.

Daniel T. Borger has been an independent real estate management consultant in Germany and abroad for more than 25 years. He mainly advises international private-equity companies seeking support for their real estate transactions and holdings in Germany and Europe. For more information, email [email protected].