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Self-storage; more in store

Self-storage; more in store

Self-storage in the UK is a relatively minor affair when compared with the US, but it's growing, and there's plenty of room for this. At the moment, there are around 880 self-storage facilities providing around 38m sq ft of storage space in the UK. That works out at just 0.6 sq ft per person compared with 7.7 sq ft in the US. The three main listed players are Big Yellow (BYG), Safestore (SAFE) and Lok'nStore (LOK), which have around 200 outlets between them. The sector is pretty healthy, with new sites coming on stream and rents rising steadily.

It may sound strange, but many people are unaware that there are storage facilities readily available at points scattered across the country. Some are less attractive than others, but the main players take time and effort to make their outlets bright and airy. In doing so, they become their own advertisement, with gaily painted buildings in prominent locations.

Why do you want to use self-storage? Moving abroad on a temporary basis and giving up your rented home is one obvious reason, but there are plenty of others. It is becoming increasingly popular for people moving home to declutter their property before inviting people around to view it. First impressions are all important, and it makes sense to ensure that a bedroom contains little more than a bed, which means saying goodbye to the airing rack, bookshelves and everything else that makes a relatively large room look small.

For the three quoted operators, there are other useful revenue streams to develop as well. When someone walks through the door making enquiries about storage space, they're probably already fairly clued up after sifting through the internet, but most will not have access to the various ancillaries needed to effect movement of what could turn out to be a considerable amount of possessions. So there is always an opportunity to sell boxes and packaging materials, and most customers also take advantage of the insurance on offer and buy their cover through the storage company.

For the three quoted operators, there are other useful revenue streams to develop”

At first glance, the three quoted operators look expensive, with the shares trading at between a 20 per cent and 40 per cent premium to net asset value, but the sector is growing fast and foreign investors are starting to take an interest. In the biggest ever acquisition in the sector, US-based StorageMart, the world's largest privately owned self-storage operator, with 189 storage facilities covering 14.3m sq ft, recently acquired 15 sites in the UK trading under the Big Box brand for over £100m, adding a further 675,000 sq ft of space situated primarily in the south-east of England. This implies a valuation premium of between 20 per cent and 30 per cent in excess of the three quoted UK operators. And StorageMart has indicated that the acquisition will mark its launching pad for future growth within the UK.

The price paid may seem high, but US companies trade on far higher multiples. PublicStorage, the largest US quoted storage firm, with a market capitalisation of around $33bn (£27bn), trades on a forward PE ratio of 34 times; that's significantly higher than the three UK operators on a minimum 20 times. The good news for the UK companies is that the price of the acquisition could lead to an uplift in net asset value if valuers take this into account. The bad news is that with just 19 per cent of the UK market between them, StorageMart's entrance and plans for further expansion are likely to increase the competition. More recently, Big Yellow said it would not be surprised if activity levels slowed over the next two years.

The acquisition has to be taken in context: on share price performance on the three UK quoted companies. In the past two months, Safestore (market capitalisation £750m) has seen its shares slip by 10 per cent, and Big Yellow (market capitalisation £1.1bn) by 16 per cent. However, Lok'nStore, with a bite-sized market cap of £121m, has seen its shares jump by 15 per cent.

 

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Read more articles by Jonas Crosland in Property Matters.

Read more on property including buy-to-let, commercial property and overseas property.

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By Jonas Crosland,
24 November 2016

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Jonas Crosland

Jonas Crosland is a companies writer, and covers the life insurance sector, asset managers, general financial as well as construction and house building.

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