In a recent discussion with industry experts Izeldi Loots, Head of EMEA Self Storage – Value & Risk Advisory at JLL and our customer Gareth Morris, CEO of UK Storage Company, we delved into the current state, challenges, and outlook for the self-storage market. Hosted by Marc Busbridge Simo, Associate Director of Debt Finance at OakNorth, the webinar provided numerous insights for storage facility owners, operators, property developers, and investors. Here’s a recap…
The current landscape
The past six months have been particularly eventful for the self-storage sector, particularly on the investment side. Key transactions, such as Shurgard’s acquisition of Lok’nStore, have underscored the sector’s potential. As Izeldi highlighted, this surge in activity is primarily driven by market resilience to inflation.
However, operational performance has been mixed. Location remains very important -some areas are experiencing rental growth, while others have seen softer occupancy rates. Despite these challenges, the debt markets remain liquid, painting a generally positive past 6 months for the sector.
Challenges facing the sector
Both Gareth and Izeldi identified several key challenges that the self-storage market is facing currently:
1. Inflation, finance costs and construction costs
Operational costs, including finance costs and rising construction expenses, are significant concerns. Gareth noted that these rising costs necessitate careful scrutiny of potential deals, as what was viable a few years ago may no longer be feasible today. It seems our audience – which was made up of storage facility operators, owners, property developers, and investors – agreed, with the majority (76%) saying that rising costs have impacted their growth plans over the last six months.
2. Customer awareness and engagement
Despite the growing popularity of self-storage, less than half of the UK population is fully aware of its benefits. Increasing awareness through digital marketing, community engagement, and educational content is crucial. Gareth emphasised the role of social media and digital platforms in highlighting the diverse uses of self-storage, beyond just moving house.
3. Market saturation
An additional challenge is potential market saturation in certain areas, making it trickier to achieve occupancy and rental growth. While in the long term the market tends to be underserved, operators should focus on strategic new site acquisitions and expansions right now.
Opportunities and outlook
Despite the challenges, the future of the self-storage sector appears promising, with several growth opportunities on the horizon:
1. Expansion and market consolidation
Looking ahead, Gareth mentioned that identifying and developing new sites in underserved and less saturated areas could drive growth. Additionally, the trend of market consolidation is expected to continue, with larger operators acquiring smaller ones, which is generally seen to improve the overall standard of competition.
2. Increased demand from diverse customer segments
The sector is witnessing increased demand from both lifestyle and commercial customers. This trend, as Gareth observed, is partly driven by economic shifts and the evolving needs of consumers and businesses alike.
3. Technological integration
The integration of technology in self-storage operations is transforming customer experiences and operational efficiencies. Izeldi pointed out the increasing use of digital locks, app-based access, and dynamic pricing models. Gareth added that these technologies not only enhance customer satisfaction but also reduce administrative burdens and improve security.
4. Long-term growth potential
The long-term potential for growth in the UK self-storage market remains strong. While the market is not expected to reach the scale of the US, the gap in square footage per capita indicates significant room for expansion. Izeldi and Gareth both highlighted the potential for continued growth, driven by increasing awareness and strategic site development.
At OakNorth, we’re committed to supporting businesses in the self-storage sector to reach their growth ambitions through bespoke financing. As we continue to navigate the evolving landscape, the insights from industry leaders like Izeldi and Gareth are invaluable.
Thank you again to Izeldi and Gareth for joining the session and sharing your expert predictions and experiences.
If you’d like to watch the full webinar, you’ll find the recording here. Or, if you’re interested in learning more, reach out to our team of experts.
