Self-storage might be on fire in the US, but in the UK, it's still a relatively small niche that's just getting started. We talked with Oliver Close, partner in Cushman & Wakefield’s London valuation & advisory team, about demand and opportunity in London self-storage.
According to a new study by Cushman & Wakefield and the Self-Storage Association, the industry experienced healthy growth in 2015, adding about 1.9M SF on top of the 1.3M delivered in 2014, indicating that demand for self-storage is definitely there. The new space was comprised mostly of big companies expanding, though there were a few new entrants.
The price of land in London is exorbitant, and it is difficult to get planning permission, Oliver says. That tends to keep smaller players out. Big companies then have an easier time expanding their portfolio by adding new sites, resulting in a small number of vendors. But the proliferation is slow, and there have even been a few closures, Oliver says.
Despite the shallow market, there are some bright spots. Occupancy rates have increased from 70% to 73% and self-storage achieved 5.5% growth in rental rates in the past year. That’s a bit better than multifamily saw overall for the year.
Two other factors reveal the room for growth: lack of awareness that the product even exists and the fact that society is changing. Oliver says 82% of people in Britain live in cities, and there is a lot of turnover in general: people in London are more mobile, go through more houses and change partners more often. All those changes mean the potential for self-storage to capitalize on that churn.
Finally, the understanding of the product remains low. The study published with the Self-Storage Association reveals that only 30% of people realized that only they have access to their unit, one of the fundamental principles of the business. 48% of people don’t believe they have anything to put into self-storage. 66% could not name a storage brand. Bridging that gap in education could be what pushes self-storage from the fringe of commercial real estate to the mainstream, Oliver says.
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