Demand for self storage space in the UK remained robust in 2019 and the sector is well placed to deal with the impact of COVID-19, according to new research into the sector’s major operator and customer trends.
The 14th annual industry report from Cushman & Wakefield and the Self Storage Association UK (SSA UK) examines a range of data points and surveys on the growth prospects for the sector in 2020.
The findings reveal the self storage sector may be more resilient in comparison to other industries in dealing with the fallout of the COVID-19 pandemic, as previous economic downturns have presented opportunities for the sector.
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.
Self-storage businesses have been allowed to remain open during the government-imposed lockdown but restrictions to travel have meant far fewer customers are visiting sites and most operators are reporting that enquiries are down by 30-50%.
The findings of the report also revealed that although occupancy levels for the industry dipped marginally for the first time in eight years by 1% to 76.2% in 2019, this was largely due to significant growth in supply as many new stores are not at full occupancy yet. Annual turnover for the industry increased to £766 million in 2019.
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 49 million sq ft of space with an average store size of 25,700 sq ft. Of these stores, 563 are predominantly container-based storage, typically converted shipping containers.
Elsewhere the report revealed that the UK average net rental rate is £22.82 per sq ft per annum, down slightly from last year’s figure of £23.11. The survey showed that occupancy rates in mature stores dropped in London, the South East and East but increased in all other markets.
This could be attributed to Brexit uncertainty but also a significant decline in house sales in the South East in comparison to the rest of the country. However this decline in occupancy rates was offset by a 22% increase in rental rates in London, more than any other region in 2019.
“While the COVID-19 situation will create challenges for the industry, self storage is well placed to adapt to the changing conditions. Most stores remained open during lockdown with customers continuing to pay their storage rental fees. Past economic downturns have shown that while the mix of customers may change, demand for self storage is maintained,” said Rennie Schafer, Chief Executive of the Self Storage Association UK.
“Already we are seeing enquiry levels increase towards normal levels as people with a storage need created by the COVID-19 crisis contact self storage stores looking to take space once lockdown restrictions are eased.”
Philip Macauley, Partner, Valuation & Advisory at Cushman & Wakefield, said: “As we have witnessed in previous years, and particularly in these uncertain times, the underlying attributes and resilience of the sector are driving the investment market.
“Appetite continues to emanate from a wide range of sources, including private equity, institutions and private wealth. Demand continues to outstrip supply, resulting in investors willing to pay premium prices for individual assets as well as portfolios.
“Investor preference continues to be for prime assets, but given the restriction around supply, they are willing to consider secondary locations as well as development sites.”