Growing, Growing, Gone too far?

How the UK self storage industry may have overreached itself

The first word anyone who relies on the self storage industry for their daily bread usually attempts to associate it with is ‘growth’; pain is taken to call it a ‘growth industry’; a ‘growth sector’; a ‘growth market’.

This is based on what seems, and may prove to be, a perfectly reasonable interpretation of the past, specifically the development of the American market in the last 40 years.

As documented elsewhere, the American self storage industry has gone from being a set of metal containers in the Texas desert where it began to become a behemoth of modern entrepreneurship.

There is enough space behind its steel doors now for every American to have seven square feet of their own, and each year the firms who own them generate $20 billion in revenue altogether, an amount equal to the entire economy of Jordan.

The perfectly obvious conclusion to draw from this is that if it could happen in America then why should people in the other Anglo-Saxon, wealthy, consumerist society across the Atlantic not feel the same desire for extra space?

After all, Britain is a more cramped and overcrowded country, suffering from such uniformly awful weather that almost nothing can reliably be stored outdoors during much the year, and where a distrust of strangers means people are reluctant to do so even on the rare warm days.

Few potential markets could have seemed so promising to begin with.

Growth springs eternal

This optimism was borne out in spades by the subsequent results. Self storage made it to Britain in the early 1980s, beginning in a London that was just waking up to the Thatcherite consumer boom, when many people suddenly had far more possessions they needed room for.

Just from 1995-2001 the industry apparently expanded by as much as 35% a year, creating some impressively large companies like Big Yellow and Access, whilst also leaving room for the Americans of Shurgard and hundreds of small-scale operations run by individual men under railway bridges.

Even in the last five years, with the recession closing in, the Self-Storage Association (an industry body) still claims growth was between 8-15% per annum.

Yet this masks some underlying flaws in the industry. Chief among them is the problem of companies having far more capacity than their customers seem willing to fill: Big Yellow’s occupancy rate is 55%, and Safestore (the company with the most space in the UK) has 2.3 million square feet of it standing empty, out of the 5 million that they own.

Between them these two companies are planning to add another 18 stores over the next two years, and 40% of operators are apparently planning to expand their number of sites this year, driven by the volume of cheap land this recession has left in its wake.

If consumer demand is already sated by the space that’s available now, then this will only make the problem worse.

Recession blip, or was self storage growth always growth climate-controlled hot air?

The economic tornado of the last two years has not left self storage untouched: Big Yellow’s profits declined by 6% in 2008, and the occupancy figures given above show a decline from what they were previously as consumers look to reduce their monthly outgoings.

However, the companies themselves still have a rosy view of the future, as the new store openings and a steady increase in rent prices per sq ft would suggest.

What seems more questionable is the notion that the UK can catch up with the rest of the Anglosphere in its fondness for self storage. The two most developed markets in the world are America and Australia, both places with large land areas compared to their populations.

By contrast, Britain is Europe’s most over-crowded country, meaning any large retail development has to compete with possible housing space for planning permission, and land prices are comparatively high.

Overall, there is probably too little space for us to follow the transatlantic trend: building enough storage facilities for every Briton to have 7 sq ft of their own would take the same amount of land as 4800 football pitches, and even if it could be done disposable incomes would probably never become high enough over here to fill it all.

Ultimately, the market may recover from its present blip, but the scope for building more and more self storage space is not as infinite as it seems.

2 Responses to “Growing, Growing, Gone too far?”

1. Charles Stanbury says:

   May 29, 2010 at 7:41 am

   would agree 100% Supply is already too high for what is now a very weak demand.It will recover slowly but not to an equilibrium that we had 5 years ago in my opinion.

2. Antony says:

   June 1, 2010 at 1:49 pm

   The industry might recover faster if it lowers its prices – and not just through special offers. With figures like 55% occupancy, storage companies are just paying business costs to store a lot of air, are they not? I’ve heard of smaller self storage companies that aim to reach 80% occupancy before adjusting their prices upwards. Self storage in the US is 3.5 times cheaper than it is in the UK – which may help to explain why it has grown to a much greater scale (per head of population) than it has in the UK.