Self Storage

Self Storage continues to demonstrate its operational resilience and attractiveness as a growth sector. This looks set to continue in 2024, underpinned by robust trading performance and heightened investor appetite, seeking to gain access to high-quality management teams and freehold backed businesses.

Key Takeaways

1. Operators will continue to demonstrate strong bottom-line operational performance. Some softening is expected in occupancy, but this will be largely contained, with operators increasing rental rates close to or ahead of inflation.
2. Investor interest will remain at record highs, driven by the opportunity to invest into an undersupplied nascent sector, underpinned by strong structural and sociodemographic change.
3. A lack of opportunities will continue to hamper investors’ ability to access the sector at scale, resulting in a more flexible approach to partnerships and joint ventures.
4. Alternative store concepts including drive-up offers and new technology will continue to diversify the UK Self Storage market, as it is built into new supply coming online.

Self Storage continues to mature as an asset class 

The UK Self Storage sector is expected to remain one of the most sought-after OPRE asset classes, underpinned by a defensive income stream, efficient cost base, and a widening customer appeal from consumers, businesses and students. Consumer and business demand continues to grow, but a low level of customer awareness still prevails alongside a slow but expanding store development pipeline able to cater for the existing demand.  

Investment market 

The UK investment market outlook remains positive. The sector remains a strong conviction play for major investors, with operators remaining committed to scaling their existing businesses via organic or inorganic acquisitions. In 2024, we expect to see a number of high-profile deals announced, both in regional and core London markets. Debt remains a key underwriting consideration. 

Operational market  

Operators remain cautiously optimistic despite a softening residential home market and the cost of living crisis. Operators continue to cite a strong non-discretionary demand from consumers going through periods of change from death, divorce, and renovation. Business demand has remained robust at a time of a lack of suitable, good quality alternatives. 2024 is therefore likely to show strong operational performance with operators looking to optimise SEO and maximise conversion rates.

Figure 30: UK Self Storage investment volume

Source: CBRE Research

Sector growth 

UK Self Storage has positioned itself as a valuable income producing asset. Yields have compressed as the asset class has grown in notoriety for both customers and investors. Heading into 2024, and the sector is expected to continue to receive interest from investors who look to benefit from the long-term profitability of the sector. 

Customer demand 

The key driver of customer demand for storage is moving homes. If mortgage rates are expected to remain high in 2024, this will impact households whose mortgages come to renewal. This could have the double effect of restricting house sales and reducing the number of available homes to rent. The result could see far less households moving homes. Conversely, a growing demand driver for storage is student storage, where students use storage during their summer break. This demand offers a consistent source of revenue compared to other cyclical demand drivers.

2024 trend 

The rise in container-based storage has offered new types of supply in the sector. Indeed, in 2024 more operators are expected to utilise the operational advantages that arise from container-based storage. Container storage offers operators a solution to regulatory and planning barriers that may have limited access to certain markets.