April 25, 2017

Urbanisation, population growth and rising property prices look set to drive continued growth in the European self storage market as more and more investors speculate on the fledgling sector.

The strong performance seen at self storage real estate investment trusts (REITs), together with the fact that traditional real estate sectors are becoming too crowded, is fueling demand for self storage among investors. U.S. self storage REITs generated an impressive annual return of 18 percent between 1994 and 2015.

“The argument for investing in alternative asset classes remains compelling due to a combination of record low interest rates, improving user demand and a favourable supply and demand equation,” says Ollie Saunders, Lead Director – Alternatives at JLL.

“The uncertainty following the UK’s vote to leave the EU means that the market is now anticipating that policy rates in Europe are likely to remain in negative territory for at least three more years. This is providing an extra cushion for the sector relative to other asset classes,” adds Saunders.

A report by JLL estimated that there are 2,746 self storage facilities in Europe – an increase of 6 percent on 2015. The continent’s most mature market is the UK, which has 39 percent of the total number of facilities, followed by France, Spain, the Netherlands, Germany and Sweden.

Poland and Italy as having the greatest growth potential, according to the report. In Poland, for example, fewer than one in 10 people know what self storage is.

The report highlights how transaction volumes across the alternatives sector as a whole rose from 10 percent of the overall commercial property market in 2010 to 29 percent in 2016, which marked the sector’s most successful year to date.

City-living fuelling growth

The United Nations estimates that 16 million people in Europe will move to cities in the next 10 years, increasing demand for both residential and commercial buildings. This influx is driving up property prices and pushing people towards smaller properties, making them more likely to put their possessions into storage.

“The collation between urbanisation and self storage provision is clearly not absolute but it does show a link,”says Saunders. “Iceland has one of the highest urbanisation rates in Europe at 94 percent and also has the highest number of self storage facilities per million population. This highlights the market potential for self storage in some highly urbanised, but under provided for markets.”

Operator deals

The sector’s relative liquidity also appeals to investors. JLL estimates there were more than €500 million worth of transactions in 2016 – up 25 percent on the previous 12 months.

This included the largest ever UK self storage transaction – the acquisition of Big Box Self Storage by US operator StorageMart for over £100 million. The deal saw StorageMart snapping up 15 stores totalling nearly 700,000 square feet across the south east of England.

Operators are also developing new stores to meet strong customer demand, with portfolios growing in size by 8.7 percent a year on average.

“The European self storage market can offer robust and predictable income with a good risk adjusted return from established assets, or the opportunity for development returns from modern facilities as portfolios grow,” says Saunders.

The key trends for self storage are an increasing awareness of the sector as an alternative asset and a maturing of the European markets where there are yield gaps with other asset classes.


Ollie Saunders

Lead Director – Alternatives at JLL, EMEA

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