Posted: 03 July 2018
One of the United Kingdom’s largest self storage companies is geared for growth, aiming to develop more than 14 stores in the next five years following their acquisition by a foreign holding company and the predicted expansion of the industry.
It has been eight months since leading South African self storage company Stor-Age purchased a controlling interest in UK-based Storage King. Stor-Age has a management team with considerable operations expertise, and it is this which interested Storage King CEO Robin Greenwood.
“I have had a business relationship with the directors of Stor-Age for the past decade, so when our private equity partners were looking to exit the investment, it was a natural decision to contact Stor-Age to see if the portfolio would be of interest,” Greenwood said. Stor-Age was the country’s first (and currently only) self storage fund to list on the Johannesburg Stock Exchange back in 2015, when it was mooted for ushering in a new era of specialist listings.
Stor-Age has replaced the existing investors as new owners, but Storage King’s structure has remained the same. Despite the geographical distance, Stor-Age insisted they come on board as an involved management team - already the company has seen a reinvigoration of momentum and a pipeline for growth.
Gavin Lucas, CEO of Stor-Age, said the company’s entry into the UK was a “scalable platform opportunity and a strategic play” that allowed for “focused attention from our experienced and dedicated management team which will deliver superior returns”.
Greenwood was confident Storage King would benefit from the larger team that Stor-Age had in terms of digital marketing, design, finance and property acquisition teams.
“Following the acquisition, both companies have been working on a strategic expansion and development plan which involves increasing the portfolio from the current 26 stores (14 owned, one under full management and 11 franchises) to more than 40 stores over the next five years,” Greenwood said.
This includes acquisitions of current competitors, new developments and the launch of a fully managed operational service to manage and run stores for third parties under the Storage King banner.
“The 2018 Self Storage Association UK (SSAUK) Annual Industry Report shows that the UK holds 48% market share of the European self storage market – particularly interesting when one considers the size of the UK relative to the rest of the Europe,” Greenwood said. The UK sits at 0.674 sq ft per head of population and Europe at 0.192 sq ft per head of population, and with demand outstripping supply the outlook is extremely positive.
The same report revealed that demand for self storage space in the UK was growing faster than supply, with occupancy levels rising 3% in 2017. Greenwood said all regions of the UK were experiencing growth, with the main focus around the more established areas of London and the South East.
Lucas said the self storage sector had remained resilient post Brexit and the imposition of VAT on rentals in 2012. “It is therefore an attractive investment given the defensive nature of the asset class. The UK has a largely undersupplied market relative to first world peers such as the United States and Australia and thus we expect to see this growth continue in the near future. Self storage is relatively new to Europe and the asset class is still in the education phase - even in the UK only 46% of people have a good or reasonable understanding of the product, according to the SSAUK report.”
Despite excellent growth in a slow economy, the industry is not without its challenges. These include that the industry is still in its educational phase and many customers do not understand how self storage operates. Many believe this to be a key driver of anticipated growth in the industry, as more and more consumers become aware of the benefits of self storage.The lack of suitable locations and availability and cost of land are another operational barrier, but one which can be overcome by an experienced development team which Stor-Age clearly has.
“Increasingly customers are looking for a paperless operation and so technology that allows customers to do most of the paperwork online has become popular,” Greenwood said. Storage King employ up-to-date technology of CCTV, pin code entry and repeat customer recognition as standard across all stores.
The market appears to be responding well to Storage King’s offering of convenient and accessible business, personal and student self storage, and the company promises to be one to watch over the coming months.