L&G Break Into NW Self-Store

Legal & General have plunged into the self-storage market as the hunt for alternatives to the retail sector steps up.

LGIM Real Assets has acquired the North West-focused 140K SF Iron self-storage portfolio.

The portfolio includes three brand new facilities located in Cannock, Northwich and Bolton, to be managed by SureStore Management Services.

The acquisition has been made on behalf of its £3B UK Property Fund which has been diversifying its holdings into more operational and alternative assets such as its recent investments into build-to-rent, hotels, healthcare, student accommodation and now self-storage.   

“It’s fantastic to see the continued trend of institutional funds investing in the self-storage sector,” JLL Associate Director for Alternative Investment Tom Caines said. “Investor demand has grown strongly in the past 18 months, especially for new-build stock of this grade. The key to this transaction was ensuring the deal was structured to include a ready-made management team.”

There is believed to be around 46M SF of self-store space in the UK, of which one-third is operated by the larger brands. Their market share is expected to grow.

“From an investment perspective, the growth and underlying fundamentals of the sector mean there remains significant interest," Cushman & Wakefield partner Oliver Close said, unveiling research into the sector in May. "This is coming from a variety of sources including institutions and private equity as well as family offices.

“There is also definite evidence of consolidation in the market with only a limited number of mid-tier size operators. We are also seeing significant competition for development sites in the best locations as affordable opportunities are limited due to competition from a range of other land uses. Prominent locations are also highly sought-after as the physical presence of a store is a great permanent advert when overall public awareness is still limited.”

Combining the increase in occupancy rates and space available, there was an additional 1.3M SF of self-storage space used by customers in 2018 which is a 3.9% increase. Occupancy rates are rising, up 1.4% this year to 77.2%. The UK average net rental rate has remained stable at £23.11/SF compared to £23.08 for the previous 12 months. Operators in the East Midlands and the North experienced the largest gains in rental rates.