Self-Storage Sector Set To Claim A Pandemic Premium
A sluggish post-pandemic UK housing market, the move to small-retailer online sales and the rise of working from home could combine to provide the boost the self-storage sector needs after its long run of success was brought to an abrupt halt this spring.
Data from Cushman & Wakefield and the Self Storage Association UK showed that the sector had a difficult 12 months. For the first time in eight years occupancy and rental rates fell, whilst 13% of operators increased their level of discounts.
The UK average net rental is £22.82/SF, down slightly from last year’s figure of £23.11/SF. Occupancy is down from 77.2% last year to 76.2% this year. The report blames a surge in new supply.
The shares price of the main UK operators had been strong until the lockdown in March with Safestore, the largest operator with 124 UK stores and 5.3M SF, and Big Yellow with 75 outlets and 4.7M SF, both taking a hit. They have recovered since but Big Yellow is still around 20% below its peak, with Safestore down around 15%.
But the pandemic that initially knocked faith in the sector could be about to deliver a bonus. Reports that up to 450,000 house purchases have been frozen by the lockdown, with the prospect of a much stickier housing market for the rest of the year, play to the self-storage sector’s advantages, Cushman & Wakefield partner Philip Macauley told Bisnow.
“It’s a huge potential benefit for self-storage," Macauley said. "If people cannot trade up easily to larger houses, or are waiting for transactions to complete, then they will store. The same is true for homeworking which, if it is a medium-term trend, means space will have to be cleared in people’s houses for homeworking. That means storage, too.
“Perhaps the cost of paying for self-storage is not high on anyone’s list in a recession, but they continue to pay because what else can they do? We’ve looked at data since the lockdown and there is no spike in bad debts, it still hovers [around] 1-2% and whilst that may go up as every part of the economy suffers, the fundamentals of self-storage are strong. We saw that in 2008-2012 when it was resilient to the crash because people still need to store things.”
Industry leaders agree.
“Past economic downturns have shown that while the mix of customers may change, demand for self-storage is maintained," Self Storage Association chief executive Rennie Schafer said. "Already we are seeing enquiry levels increase towards normal levels as people with a storage need created by the coronavirus crisis contact self-storage stores looking to take space once lockdown restrictions are eased.”
The report's authors said the self-storage sector may be more resilient than some property sectors to the fallout of the coronavirus outbreak. This includes demand from smaller retailers expanding their online presence and requiring space for additional stock, increased demand as house sales pick up once the lockdown ends, and more people engaging in home improvement projects and requiring additional storage space.
The UK makes up around 41% of the European self-storage market and has the most storage per person of any country in Europe. The report estimates there are now approximately 1,900 self storage sites in the UK, offering around 49M SF with an average store size of 25.7K SF. Of these stores, 563 are predominantly container-based storage, typically converted shipping containers.
