Housing crisis fuels £1bn UK self-storage market

Self-storage has emerged as a thriving industry in the UK, with revenues soaring to nearly £1bn per year. The convergence of the housing crisis, consumerism, and sentimental attachment to possessions has fuelled the exponential growth of this sector.

As an increasingly popular alternative to upsizing homes, self-storage units are sprouting up alongside new housing developments across the country. Projections indicate the addition of at least 280 more storage facilities by 2026, reflecting a substantial 10% increase.

In 2022, UK households and businesses utilised self-storage units to accommodate an astonishing amount of possessions, equivalent to over 2 million square feet (185,000 square meters). This surge in demand boosted revenues for operators like Big Yellow and Safestore by 6.5%, reaching a total of £990 million, according to a study conducted by property agency Cushman & Wakefield and the Self-Storage Association UK.

The convenience of self-storage has become an integral part of urban life for hundreds of thousands of individuals, with two-thirds of customers retaining their units for approximately two years and 16% utilising them for at least five years. The appeal of self-storage extends to both sides of the online retail boom. Online retailers lacking space to store inventory increasingly rely on self-storage facilities to dispatch products to customers.

The staggering cost of housing and the diminishing availability of residential floor space are key drivers of the growing demand for self-storage. This trend has captured the attention of global investors, not only in the UK but also in rent-scarce areas like New York and California, where individuals pay up to $25,000 annually for storage units.

Another contributing factor is people's acquisition of possessions in anticipation of upsizing their homes, only to be thwarted by the challenges of the housing market. Analysts have identified this phenomenon as a significant driver of demand for self-storage services.

A survey conducted among more than 1,800 UK customers revealed that lack of space in their homes was the most common reason for utilising self-storage. This was closely followed by house moves, major life events such as death, inheritance, or divorce, and home renovations. Furthermore, one in five renters are now utilising self-storage for business purposes, particularly e-commerce retailers.

The potential user base for self-storage is vast and varied. The Guardian reported instances of homeless individuals using storage units as temporary bases while couch-surfing or sleeping on buses. Others include a heroin addict who violated the rules by bringing in a mattress to sleep on, a family seeking a quiet space for their son to practice drums, and individuals opting for minimalist living by utilising storage units as annexes for half of their possessions.

Storage facility operators are going the extra mile to integrate storage spaces into urban environments. For instance, the Space Station chain in Shrewsbury has incorporated amenities such as hairdressers, florists, vape shops, tattoo parlours, and even dog groomers into their facilities. Other operators are adding office spaces to their storage complexes. In areas like London's Kings Cross, where numerous residential buildings have recently been erected, storage facilities like Big Yellow are designed with stylish brick facades that rival nearby apartment blocks in architectural merit.

The self-storage industry is often described as "sticky" because many customers initially intend to use the service for a short period, only to find themselves unable to part with their stored belongings. Sentimental attachment to possessions plays a significant role in this phenomenon, as people tend to be reluctant to dispose of inanimate objects.

This sentimentality works in favour of the self-storage sector, encouraging individuals to save and reuse items rather than discarding and replacing them. While the exact percentage of items ultimately discarded remains unclear, there have been instances where customers, after storing their possessions for an extended period, decide to dispose of them and request skip bins for proper disposal.

The profitability of the self-storage industry is on the rise. Big Yellow, the UK's largest operator in terms of floorspace, recorded a remarkable 30% increase in adjusted profits before tax in 2022, amounting to £96.8 million. Similarly, Safestore, the next largest operator, experienced a 14% revenue growth to reach £213 million in the same year. These positive financial indicators have attracted attention from investors, leading to significant transactions such as the sale of a self-storage depot in Camden, London, to Shurgard for £6 million, and the acquisition of properties in Banbury, Wednesbury, Frome, and Amesbury by Storage King for £59 million.

Managing a 500-unit self-storage facility requires only four staff members, making it a relatively efficient operation. According to a Cushman & Wakefield survey, more people cite the cost of living crisis as a reason to use self-storage than those who use it less. The most common age group among customers is between 55 and 64, while the majority falls within the income bracket of £21,000 to £31,000 per year. Demand for self-storage tends to decrease among individuals with higher incomes. Additionally, half of the customers are single, widowed, separated, or divorced. Among domestic customers, approximately 65% have maintained their units for around two years, with 43% using them for a year or less, and an additional 16% occupying their units for over five years.

The ascent of the self-storage industry reflects the evolving needs and challenges of modern living in the UK. As housing prices soar and available space dwindles, self-storage provides a practical and cost-effective solution for individuals to secure their possessions and navigate the constraints of limited living space.