Op­por­tu­ni­ties in store for in­vestors

Yorkshire Post - Property - - STRUTT & PARKER - An­gus Han­ton

THERE are al­most 1,200 stor­age fa­cil­i­ties in the UK, ac­cord­ing to re­search by www.stor­age.co.uk. That means there are about as many stor­age units as McDon­ald’s burger out­lets.

Self-stor­age is cer­tainly a rapidly grow­ing mar­ket and over 28 mil­lion square feet of selfs­tor­age space has been built in the UK so far. Over the past five years growth in ca­pac­ity has been be­tween 8 per cent and 15 per cent, so in­vestors may well won­der how they can gain ex­po­sure to this mar­ket.

Al­though some of the larger op­er­a­tors are pri­vately owned, such as Ac­cess Stor­age and Shur­gard, there are three UK quoted com­pa­nies which spe­cialise in sup­ply­ing small stor­age units to the pub­lic. These are Safe­store, Big Yel­low and Lok’nStore. Of these, Safe­store and Big Yel­low are the largest – Safe­store has 117 out­lets whileBig Yel­low has 65 with sev­eral more in the pipe­line. Lok’nStore is much smaller with only 23 stores of which 10 are lease­hold.

Like all prop­erty-based busi­nesses, stor­age fa­cil­i­ties are cap­i­tal-in­ten­sive but they do have some at­trac­tive eco­nom­ics – good re­turns on in­vested cap­i­tal, bad debts are very low, the in­come is pre­dictable and peo­ple gen­er­ally stay longer than they ini­tially plan. In ad­di­tion, the stor­age com­pa­nies of­ten have good part­ner­ships with re­moval com­pa­nies and have suc­cess­fully be­come sell­ers of in­surance and of pack­ag­ing ma­te­ri­als. The larger chains have good economies in buy­ing pack­ag­ing, have built na­tional brands and can get economies of scale in ad­ver­tis­ing.

In terms of what in­vestors get for their money, for ev­ery £100 in­vested at mar­ket prices in May 2010 here is the ap­prox­i­mate net as­set value you get: Safe­store £100, Big Yel­low £113 and Lok’nStore £142.

If de­mand for stor­age con­tin­ues to in­crease the com­pa­nies should be­come very profitable – as they fill their va­cant spa­ces the in­come will go straight through to their bot­tom lines. On the other hand, if de­mand fal­ters there could be some con­sol­i­da­tion.

Cer­tainly the sec­tor is an in­ter­est­ing one for in­vestors and will be­come a per­ma­nent fea­ture of the prop­erty in­vest­ment mar­ket.

An­gus Han­ton is founder of www.stor­age.co.uk, an in­de­pen­dent stor­age in­for­ma­tion site.

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