Why hasn’t self storage caught on in the North?

Last year, a remarkable 71% of Big Yellow’s entire revenue was generated by its self storage centres located within the M25 – and the figure rises to a whopping 89% if you broaden the net to include all their stores in London and the South East, according to the company’s 2011 annual report.

This strongly suggests the self storage industry doesn’t make very much money outside the South East. Why should this be the case?

Most self storage companies ignore the North

Big Yellow has a total of 70 self storage centres, but just 19 of them are north of Milton Keynes. Interestingly, most of these aren’t managed exclusively by Big Yellow either – the company’s Northern and Midlands self storage centres are a mixture of sites they’ve acquired ready-built from Armadillo Self Storage, and the eleven they run within the Big Yellow Limited Partnership, a joint venture part-owned by Pramerica Real Estate Investors.

This suggests that, in contrast to the aggressive independence with which they’ve grown the business in the South East, Big Yellow hasn’t wanted to the take the risk of constructing and running purpose-built self storage centres all on its own in the North, implying they thought profits would be harder to come by up there.

Access Self Storage seems to have made Northern expansion a low priority as well, as it has just eight sites in the North and Midlands area as a whole, three of which are in Birmingham. So far, the brand only extends as far north as its single store in Manchester, leaving great swathes of the country untouched.

Indeed, it’s worth noting that most of the UK’s other multi-site self storage companies, including Shurgard, Lok’nStore and Big Box, don’t have any sites at all outside the South East of England.

However, Safestore bucks the trend, having expanded northwards with much greater confidence than any of its southern rivals. They’ve built more stores in the North than anyone else and been prepared to run them independently. This is partly a consequence of its strategy of clustering multiple self storage centres in a small geographical area, which is why it has two stores in Newcastle and plans to eventually have four in Leeds, not to mention 14 sites spread across the Liverpool/Greater Manchester area in the North West.

Could self storage develop further in the North?

There are a clearly a number of obstacles to developing a market for self storage in the North, especially when compared to the South East. For a start, there are simply fewer people; while the South East has a total population of around 16 million, the total combined number of people in the North West, North East and Yorkshire taken together is only around 14.5 million, dispersed over a much larger area.

More importantly, there are fewer of the type of people who are likely to need self storage. The region is less of an international hub, so fewer people – international students and businesspeople particularly- go in and out for brief periods, creating less need for short-term storage options. Land is also cheaper than in the South East, meaning dwellings tend to be larger, putting less of a premium on additional storage space.

People in the North, on average, also tend to earn less than those living in the South. According to the Office of National Statistics, in 2008 the average person living in London earned £19,038, while in the North East it was much lower at just £12,543. As even 100 sq ft, a relatively small self storage unit, can cost nearly £2,000 to rent from one of the major companies in the South East, the cost of self storage may well be beyond a large swathe of the North’s inhabitants.

Then there is the fact that much of the self storage business in the South East comes from people moving house, but the fact that homes in the North are generally worth less and tend to fall more dramatically in value means fewer people want to sell them. This year alone, house prices have fallen by 6.9% in the North East, showing how the region has struggled to shake off the after-effects of the recession.

Business customers may also be thinner on the ground, as the private sector is smaller in the North. In many areas, the government serves as the main employer, and government offices generally tend to prefer finding extra storage space in-house as it saves money.

Future growth for self storage in the North?

Much of the evidence gives the impression that self storage simply won’t ever take off in the North. Having arrived in the UK to address the needs of the wealthy, cosmopolitan South East, self storage seems resolutely set to stay there, unless something changes dramatically.

Yet this may be a pessimistic outlook. In that same annual report that Big Yellow admitted how much of its revenue came from the South East, it also explained that several of its competitors in the region had gone into receivership, forced out by oversupply.

This is the problem with growth concentrated so heavily in one geographical region; it must, eventually, have too many self storage centres, enough even to sate the acquisitive appetite of wealthy Southerners.

Soon, no doubt, the North will seem a very attractive growth area for the self storage industry – as they will have nowhere else to go.

One Response to “Why hasn’t self storage caught on in the North?”

1. Tommy Anderson says:

   October 25, 2012 at 4:31 pm

   Hi David – a pleasure to read such a balanced blog, thanks! You are right that population and wealth is generally in the south of the country, however, with that come higher prices too, to the point where I use self storage in the Midlands as it’s very accessible with the M6 and many airports, little traffic on the roads, and far cheaper!