UK’s £1bn self-storage business fueled by rental shortage – LandlordZONE

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Running a storage rental business, supplying and renting space for inanimate objects, as opposed to people, is potentially much more lucrative and much less hassle than operating as a residential landlord.

The UK self-storage industry has grown steadily over the last twenty years, with enough things stored in steel boxes, with roller shutter doors closed, to fill 100 impounded stadiums at Wembley.

Drive to the edge of most cities and you’ll almost always find plenty of brightly colored self-storage units where home and business tenants can keep their items, out of sight and often out of mind. Yes, one of the big drivers of the self-storage trend is inertia. People fill their units with long-forgotten paraphernalia, seamlessly pay rent month-to-month via automatic transfer (standing orders), and then forget about it.

There are many factors that explain why both consumers and businesses are using self storage more than ever before. Domestic needs such as moving, downsizing, temporary apartment living, marriage, divorce, bereavement, inheritance, and retirement. Bicycles, motorbikes, small vehicles, classic cars and all kinds of household and sporting goods are easy prey here. For businesses, self-storage is often useful for storing archived data, old invoices (HMRC requires 7 years of accounting records), inventory, office equipment and machinery.

The high visibility of self-storage units, brightly colored, and with centers located on key arterial thoroughfares around most cities across the country, help draw the attention of business owners and the general public to this service.

Britain’s houses are too small

Whenever developers build new homes that are too small for their occupants to live with their stored items comfortably, self-storage units will be in demand. According to the Royal Institute of British Architects, more than 50 per cent of new single-family homes in the UK are, in their words, ‘hutch-houses’ – too small for most buyers.

The way developers pack as many houses as possible onto a development site, the average three-bedroom new house in the UK is missing around four square meters of necessary space, which equates to an extra room. That’s according to a 2015 RIBA report and nothing has changed since then.

A Space Standards for Homes report also found that some single-family homes are falling far short of recommended space standards, essentially cramming three bedrooms into a two-bedroom home.

Cheaper than renting a bigger house

Self-storage units are so much cheaper than renting, buying a bigger house or adding to an existing one, so regular transportation between the house and the storage unit is becoming a familiar routine in many homes.

Amid growing signs that going to and from a self-storage facility is becoming a routine part of urban life for hundreds of thousands of people, nearly 70% of customers continue to rent these self-storage units for two years. , while almost 20% stay for at least five years.

Modern consumerism creates infinite possessions

Combine the problem of space with the way the British stow away superfluous possessions, and the speed at which they do so is bolstered by modern consumerism and a sentimental attachment to objects of all descriptions. This includes the paraphernalia surrounding the sport and exercise trend, and it all means that self-storage is projected to grow another 10 percent over the next 3 years.

Commercial and retail use

The self storage business has benefited from both sides of the online boom. While consumers are buying more goods that need storage, there are a lot of new businesses coming online, the new small-scale retailers. They are online retailers that ship products to consumers, but don’t have home storage capacity, don’t have a flagship store, and find self-storage much cheaper than renting a commercial building.

Self-storage offers businesses storage space with a minimum of hassle and commitment. Small and even medium-sized businesses now find that these storage facilities give them the flexible storage space they need without having to sign a long-term lease. In addition, they can quickly take up more or less space easily and quickly.

There are no utility bills or business fees to pay, space is flexible from as little as a week’s rental, and some facilities offer free delivery acceptance and forklift.

Companies can expand their inventory levels as needed, which is particularly desirable for a company with large variations in seasonal demand. Your costs can be kept low by only using self-storage space when needed, as opposed to the inflexibility and cost of renting a warehouse on a long-term lease.

Where did all this start?

According to the Self Storage Association UK, self-storage units first appeared in the US in the 1960s, and since then the US industry has grown to over 5,000 such facilities across the country.

In the UK, the industry started in the early 1980s, initially just in London, but there are now over 200 facilities and growing across the UK, equating to around 52 million square feet of warehouse space. cost effective storage

The industry includes some large operators, as well as some small-scale and local niche operations developed by local landowners. Farmers, in particular, have found niche self-storage to be a profitable business, into which to diversify their farm profits.

A housing crisis

The high cost of buying and renting a home in today’s real estate market, together with the reduction in the size of usable space, especially in new developments and in towns and urban centers, support the growing demand for these units.

People who live in condos and small properties can purchase items before moving to a larger home, but have been frustrated by rising moving costs, higher home prices, and rising mortgage costs.

More people than ever are renting rather than taking their first step up the housing ladder, but rental costs and a severe shortage of suitable rental housing are forcing more young people to return to their family homes or live with in-laws. This creates a storage problem for this so-called “boomerang generation”, and this is where self-storage saves the day.

According The Guardian newspaper, a 90 square foot (just under 10ft by 10ft) self-storage unit will typically set you back around £270 per month in London or around £130 in the north of England – much cheaper than renting residential property .

An industry survey of more than 1,800 UK customers found that the most common reason for using self-storage was a lack of space for items in the home, followed by a house move, a major life event such as a death, inheritance or divorce, and renewals One in five tenants are now business customers, often e-commerce retailers.

Security

Security is often an issue in domestic housing. Having a padlocked and bolted self-storage container in a self-storage center, with its own security systems, means that items are not only away from cluttering the home, but also more secure.

An investment opportunity for owners

As an investment opportunity, self storage offers small-scale, niche operators with a small amount of strategically located land with planning permission. This could quickly become a profitable cash flow operation by renting out small storage units.

According The GuardianBig Yellow, the UK’s largest operator with 108 centres, posted a 30% increase in adjusted profit before tax in 2022, or £96.8m, while Safestore, the next largest, rose its revenue by 14% to £213m.

Below is a summary of the findings from The Self Storage Association UK’s 2023 Annual Industry Report. These include data collected from industry operators, commercial customers currently using self storage, and the general public:

Occupancy remains at 83.3%.

The UK average net rental rate is £27.19 per square foot per year, up 4% from last year.

The churn rate has increased slightly, but remains below pre-pandemic levels at 81%.

Discounts have increased again in 2022 after having decreased in 2021

People renovating their home are 3 times more likely to consider self-storage.

75% of stores allow you to reserve and pay for the unit online

16% of customers have changed how they use self-storage as a result of rising inflation, but 68% of them now use self-storage more frequently as a result

41.2% of self storage customers have used self storage before

33% of traders believe that 2013 will see a drop in profits

People who move house are 3 times more likely to use self storage

People under the age of 45 are more likely to be short-term users, while older people keep their drive much longer.

A death in the family is the most common life event for which people use storage.

19% of customers don’t think their storage unit is a good value

51% of the public knows self-storage well

39% of customers could have bought more packaging materials at their self-storage store

32.2% of customers have used self storage before.