Real estate has long since been a popular choice for investors, yet self storage is one area in real estate that is often overlooked. While the rest of the real estate market can be challenging and crowded at times, the self storage industry is growing, presenting investors with a promising investment alternative across Europe.
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Self storage gives entrepreneurs, real estate owners and investors the opportunity to diversify their investments. It has proven to garner a growing interest over the past few years, and as a result it has become a flourishing industry which appears to be resilient to various economic cycles.
The UK represents over 48% of the European self storage market, with an estimated 1,505 self storage facilities across the country providing a total of 44.6 million square feet of rentable space.
It is an evolving asset class in comparison to other real estate asset classes, such as office, commercial and industrial.
Self storage is an alternative investment for both active and passive investors, and is considered to be a safe real estate asset type as it holds many robust characteristics. Self storage companies can typically expect consistent cash flows and often double digit annual returns.
UK represents over 48% of the European self storage market
The self storage sector contains strong attributes to the extent that it often performs better during a recession, with some referring to the industry as ‘recession-proof’. During the 2008 financial crisis, self storage was the only real estate equity trust that recorded positive returns.
Most self storage facilities only require 40-45% occupancy rate in order to break-even. Therefore, it’s a lot lower than other asset classes. Self storage also recovers faster in comparison to the other asset classes. As a result, profit is often yielded a lot easier.
Self storage facilities have undergone tremendous changes since they first began to operate, with many being given a modern, attractive and bold appearance. Security has also evolved over the years, with most facilities offering world-class security.
The key factors which set one self storage facility apart from the other are usually convenience, location and price. Facilities which tick these boxes are usually the best performers.
The Future For Self Storage
Self storage units are no longer only for households to store extra belongings, but they have expanded into new markets where businesses are utilising self storage units to help them grow. This reduces overhead costs, especially for smaller businesses. Businesses also find that they have more freedom using self storage units opposed to leasing out bigger office spaces which usually come at a much higher cost.
Most self storage companies offer flexible month-to-month lease options at competitive rates, which is especially appealing to students. A quick visit to the likes of Cambridge or Oxford will show how popular this service is to students, with multiple self storage facilities dotted around each area.
It will be interesting to watch how this sector continues to develop, and continues to bring positive returns to entrepreneurs, real estate owners and investors.
Would you invest in the self storage sector?
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