The UK’s £1bn self-storage business boosted by the shortage of rentals

Running a storage rentals business, supplying and letting space for inanimate objects, as opposed to people, is potentially far more lucrative and a lot less troublesome than operating as a residential landlord.

The UK self-storage industry has grown steadily over the last twenty years or so, with enough stuff stashed away in steel boxes, with locked roller shutter doors, to fill 100 Wembley seized stadia.

Drive to the edge of most towns and you will nearly always find a bunch of brightly coloured self-storage units where domestic and business renters can store their items, out of sight and often out of mind. Yes, one of the great drivers of the trend to self-storing is inertia. People fill up their units with long forgotten paraphernalia, pay their rent painlessly month-by-month by automatic transfer (standing orders), and then forget about it.

There are many drivers of why both consumers and businesses are using self-storage more than before. Domestic needs such as house moves, downsizing, temporary flat dwelling, marriage, divorce, bereavements and inheritance and retirement. Bicycles, motorcycles, small vehicles, classic cars and all manner of domestic and sports items are fair game here. In the case of businesses, self storage often proves useful for storing archived data, old invoices (HMRC demands 7 years of accounting records), stock, office equipment and machinery.  

Self-storage unit’s high visibility, brightly coloured and with centres located on key arterial roads around most towns in the country, helps bring this service to the attention of the business owners and the general public.

Britain’s homes too small

So long as developers build new houses that are too small for their occupants to live with their items stored comfortably, there’s going to be demand for self-storage units. According to the Royal Institute of British Architects over 50 per cent of new family houses in the UK are, in their words, “rabbit hutch” homes, too small for most buyers.

The way that developers pack-in as many homes as possible into a development site, the average new three-bedroom home in the UK is lacking around four metres squared of necessary floor space – that’s equivalent 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 family homes are failing so far below recommended space standards, they are essentially squeezing in three bedrooms into a two-bedroom house.

Cheaper than renting a bigger home 

Self-storage units are a lot cheaper than renting, buying a bigger home or extending an existing one, that’s why the regular shuttle between home and storage unit is becoming a family routine in many  households.

Amid increasing signs that shuttling to and from a self-storage facility is becoming a routine part of urban life for hundreds of thousands of people, nearly 70 per cent of customers continue renting these storage units for two years, while nearly 20 per cent stay for at least five years.

Modern consumerism creates endless possessions

Couple the space problem with the way Britons pack away superfluous possessions, and the rate they do this 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 forecast to grow by another 10 per cent over the next 3 years.

Retail as well as business usage

The self-storage business has gained from both sides of the online boom. While consumers buy more goods that need storing, there’s a host of new online businesses, the new small-scale retailers. They are online retailers who dispatch products to consumers but don’t have storage capacity at home, don’t have a high street shop, and they find self-storage is much cheaper than renting a commercial building.

Self-storage offers businesses storage space with a minimum of hassle and commitment. Small and even medium companies are now finding these storage facilities give them the flexible storage space they need without having to sign a long-lease. What’s more they can quickly take more or less space easily and quickly. 

There are no utility bills or business rates to pay, space is flexible from as little as one week’s hire, and some facilities offer free fork lifting and delivery acceptance.

Businesses can expand their stock levels as required which is particularly desirable for a business with big variations in seasonal demand. Their costs can be kept down 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 this all start?

According to the Self Storage Association UK, self storage units first appeared in the United States in the 1960’s 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 only in London, but now there are more than 2,00 facilities and growing across the UK, this equates to around 52 million square feet of rentable storage space.

The industry includes some large operators as well as some small-scale and local niche operations developed by local land owners. Farmers in particular have found niche self-storage a profitable business, one in which to diversify their agricultural earnings.

A housing crisis

The high cost of buying and renting a home in today’s housing market, coupled with the shrinking size of  floor space, particularly on new estates and in towns and city centres, underpin the increasing demand for these units.

People living in flats and small properties may acquire items in anticipation of moving into a larger home but have been thwarted by the rising costs of moving, higher house prices as well as increased mortgage costs. 

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

According to The Guardian newspaper, a 90 sq ft (just short of 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, far cheaper than renting a 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 room for the items at home, followed by a house move, major life event such as a death, inheritance or divorce, and renovations. One in five renters are now business customers, often e-commerce retailers.

Security

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

An Investment opportunity for landlords

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

According to The Guardian, Big Yellow, the biggest UK operator, with 108 centres, has recorded a 30% increase in adjusted profits before tax in 2022, or £96.8m, while Safestore, the next biggest, increased its revenue by 14% to £213m.

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

Occupancy maintained at 83.3%.

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

Churn rate has risen slightly but remains below pre pandemic levels at 81%.

Discounts have increased again in 2022 after being lowered in 2021

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

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

16% of customers have changed how they use self storage as a result of increasing inflation but 68% of them are now using self storage more frequently as a result

41.2% of self storage customers have used self storage previously

33% of operators think 2013 will see a drop in profits

People moving house are 3 times more likely to use self storage

People under 45 are more likely to be short term users while older people keep their unit for much longer.

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

19% of customers do not think their storage unit is good value

51% of the public have a good awareness of self storage

39% of customers could have bought more packing materials from their self storage store

32.2% of customers have used self storage before.

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