Safestore opening a new self storage facility almost every three months!

Safestore are set on a steady expansion policy and have almost 100 self storage facilities in the UK – a target they’ve said they plan to reach during 2011.

Their policy is to prefer large, purpose built stores which they own freehold and ensure are highly visible – as Steve Williams, their CEO, said in his last annual report, “we concentrate on … improving signage and exterior illumination wherever possible as signage remains a major contributor to new enquiries.”

Their store opening strategy is in some ways a “land grab operation” in that Safestore is anticipating future demand to fill up its stores, but is not limiting expansion to where this has already happened.  Indeed nationally Safestore’s average occupancy is only about 50% according to their annual report – though for recent months they have seen “unprecedented levels of occupancy growth” according to Property Week – and in the last quarter to July 2010 they let an extra 154,000 sq feet.

They are also reported to have taken on new bank facilities from the Royal Bank of Scotland in March 2010 to fuel this expansion.  Once stores have been open a while the occupancy increases with their more mature self storage facilities being about 67% occupied.

Creating new self storage space at a fast rate

At the date of their last annual report Safestore had about 95 UK self storage centres with 6 new ones in the pipeline. In the previous 12 months they had opened 5 stores of which 4 were in the UK (the other new one was in Paris where they have a strong presence of about 22 self storage centres, branded as “Une Piece en Plus”).

The 95 UK self storage centres represent a capacity of about 4.26 million square feet, so the average centre has roughly 45,000 square feet of lettable space with presumably about 400-600 storage rooms per facility. Looking ahead, Safestore are planning their rate of opening at between 4 and 7 stores each year and for this they need a pipeline of planned acquisitions, developments and openings.

Recently they have opened new self storage facilities in Clapham, Cardiff, Leicester, Ipswich and Crystal Palace (South London).

Finding a site for building a self storage centre

Storage.co.uk decided to have a closer look at the new store opened a couple of months ago at Anerley (near Crystal Palace) which is built on the site of an old Dairy Crest depot.  The South London site is on a street with a history of light industrial activity and is very near to an A-road (A214) and a train station (Anerley Station).

Safestore bought the site from Dairy Crest shortly after they obtained planning permission for a storage warehouse and the self storage company paid £1.8 million for the leasehold interest.  This site illustrates one of the issues for a company wanting to build a storage depot – they prefer a freehold if possible but sometimes the ideal site is only available on a long lease.

In this case the lease available was a 125 year lease written back in 1977 from Bromley Council (a London Borough) who are the freeholders. In March 2010 Safestore gave a mortgage charge over their interest to the Royal Bank of Scotland in a large refinancing, where they charged 80 of their titles around the UK to the bank.

According to Storage.co.uk’s mole, most of the storage facilities are owned by various subsidiaries and these “propcos”  in turn lease their properties to Safestore Limited (the “opco”, operating company).  These leases were mostly written in 2005, 2007 and 2009.  So the structure Safestore Limited uses is that they are the operating company and separately they own the companies which own the actual warehouses.

There are various advantages to this way of structuring the company but as far as the storage user is concerned they simply deal with Safestore Limited.

Planning approval for new self storage centres

The footprint of the site is 50 metres by about 33 metres at its widest point and it is built on 4 floors.  With the loss of space for corridors and other serviced areas this suggests a very approximate lettable area of about 55,000 square feet.

The immediate area has a feeling of being somewhat regenerated with a new development of flats next door but essentially Safestore have built a very emphatic stand-alone warehouse with some nice design features such as some windows giving a clear view of the doors to individual storage units.

When Safestore applied for permission for the self storage facility they submitted a study with their planning application showing how their other storage centres operate and showing the reception area they would need and the retail area for selling boxes and packaging materials.

Safestore also said they would provide 10% of their estimated onsite energy need through renewable resources, but the details of this were to be agreed later with the planners.  It could be that they are using photo voltaic cells as they do have these on at least 23 of their storage buildings. The local planners in Bromley were clearly reassured by their experience with the Big Yellow ‘Eco-Store’ in Farwig Lane and other storage centres at Cray Avenue in Orpington.

There were no objections from local residents and the planners recommended the application for approval for B8 (storage and warehousing) use. That was in February 2008 and it took well over two years before the recent opening of the facility which illustrates the lead time in such projects.

Some thoughts about the economics of a new self storage centre

The economics of this new storage facility are not public but it looks likely that, apart from management time, Safestore will have spent £1.8 million on acquiring the site plus a build cost of maybe £4 million.

Assuming there are 550 units with an average size of 100 square feet and these were 67% occupied there would then be a gross annual rental income of about £920,000, at £25 per square foot, before all costs.  However, this rental rate assumption may be a bit light as London storage charges appear to be nearer £30 per square foot per year so it is reasonable to assume over £1 million of revenue once the storage facility is mature, defined by Safestore as having been open for two full financial years.

The capital value of these storage centres seems to be roughly between £5 and £6 million, judging by the fact that Safestore gives the total value of its 115 stores at almost £650 million, so the yield looks good as long as costs can be managed and, critically, as long as the customers turn up as expected…  The manager is John Witney and the store is at Oakfield Road, SE20 8QA and we wish him well in his efforts to get self storage customers to sign up.  He may well be doing special offers to fill his storage rooms – if you need storage space in South London you could ring Safestore’s new facility on 020 8659 0700.