What can we learn about the self storage market from studying Public Storage?

Public storage of the US is the mammoth storage company whose managers are well positioned to gauge the state of the self storage market with its 2,000 plus facilities, including 190 in Europe.

Storage lessons to be learned

Being a publicly quoted company means that its accounts are more public than those of some other storage companies. It is actually structured as a REIT, a Real estate Investment Trust. Here are seven observations from reading Public Storage’s accounts (132 pages!) for the year ended December 2009, which should be of interest to those in the UK self storage sector:

1. The sheer size of Public Storage puts the efforts of other companies operating in self storage into perspective. It has over a million storage tenants; it is valued by the market at about $15 billion; it makes an operating profit of almost a billion dollars a year; and it has about twice the amount of storage space as the whole of the UK self store industry combined. The next biggest US self storage operator, with about half as many stores, is U-Haul international. But despite this, the American self storage market is not at all concentrated – together the top ten operators only own about 10% of the US’s 55,000 facilities.

2. Public Storage has found the last two years challenging and it has seen its revenues plateau or decline somewhat, and the company has put almost all new self storage developments on hold. It has responded operationally by increasing its marketing effort and cutting its charges until occupancy picks up. It is, however, also reacting to the downturn by looking to buy up smaller competitors and indeed has over $750 million available for such acquisitions.

3. Its Chairman, B. Wayne Hughes, whose family owns about 17% of Public Storage, describes self storage as “a wonderful business with excellent economies” and points out that self storage has “achieved results far above the real estate industry”.

4. Public Storage is aware of the attractions of its size and summarises the economies of scale it can achieve. Offering self storage in 38 of the US States and 7 European countries (through Shurgard Europe) identifies these main advantages:
–     centralized information networks and a national telephone reservation system;
–      centralisation of many functions and economies in purchasing adverts;
–      brand name recognition.

5. Public storage concentrates on where the best business is to be had. For example, in the US it concentrates on wealthier areas known to have strong demand – it has 374 self storage centres in wealthy California and none in North or South Dakota. Similarly in Europe, the centres are concentrated around the capitals of the countries where it operates – such as Copenhagen, Paris, Brussels and London.

6. It sticks to its storage knitting! It doesn’t get too distracted by other related businesses, and where it has small other non-storage operations it has been selling these off or closing them down (such as truck and container rentals) so that it can concentrate on self storage.

7. It reveals figures for Shurgard Europe which are worth examining. The European experience for Public Storage/Shurgard has been of slight declines in both revenue and profitability over the last two years. Public Storage also measures what it calls REVPAF (revenue per square foot of available space, so this includes vacant space). This comes out at about $23 per square foot for Europe and the occupancy rate for established stores is fairly consistent at around 86%. This means they are getting rents of about $26 per square foot of occupied space in Europe. Looking at Public Storage’s figures for 2008 and 2009 The European business seems to make an operating income (in effect, the profit before depreciation and tax) of between $34 million and $47 million on the stores it operates (about 186 outlets). By contrast, its 2,000 or so US storage centres generate an operating profit of about $900 million. The figures show that, whilst Shurgard is a profitable operation, each European store generates about half as much profit as a typical US storage centre (very roughly $225,000 per year rather than $450,000 pa).

One Response to “What can we learn about the self storage market from studying Public Storage?”

1. Ricardo says:

   September 14, 2010 at 2:11 pm

   Very interesting article! I’m curious if there’s a standard of number of facilities per city (number of facilities/habitants per city)?

   Thanks in advance.

   Ricardo