Self-storage has many attributes that make it recession-resistant.
The German self-storage market has long been a minnow compared with the UK, but the sector has been moving rapidly from its status as an alternative asset class to becoming a core asset in its own right. While self-storage is not recession-proof, it has many attributes that make it recession-resistant. Many operators are now expanding their German presence, or entering the market for the first time.
The latest company to make a big move is Shurgard Self Storage Ltd, the European affiliate of US REIT Public Storage Inc., which has just paid out €69.2m to buy Top Box Self Storage. The deal includes five existing facilities and two development projects.
The sites comprise 17,200 freehold sqm in Cologne, Duisburg, Essen, Mannheim and Wiesbaden, and are currently 70% occupied. Plans for next year include an expansion of a further 6,600 sqm. The two developments, in Cologne and Frankfurt, total 9,000 sqm and should open in 2025.
This brings to 30 the number of self-storage facilities Shurgard now operates across Germany, including 21 in the country's Big 7 cities. The goal is to reach 40 properties by 2026, the company said. Across Europe it operates 273 properties with 130,000 sqm - in Belgium, France, Germany, The Netherlands, Denmark, Sweden and the UK, with a further 10 projects under development.
Marc Oursin, Shurgard's CEO, described the acquisition as "a perfect fit, adding to the existing network, and a steppingstone for our German expansion."
Another company which recently entered the German market was private equity group Carlyle on behalf of its European real estate platform Carlyle Europe Realty (CER), which teamed up with UK-listed Safestore to buy a 30,000 sqm portfolio of German self-storage assets.
Safestore invested €2.2m initially for a 10% stake in the joint venture, which sees it taking over seven properties under the myStorage brand name, located in cities including Berlin, Stuttgart, Ulm, Nürnberg, and Mannheim.
Safestore and Carlyle had previously set up a joint venture in 2019 to invest in self-storage in the Benelux region. Carlyle subsequently sold its 80% stake in 2022 to Safestore. Carlyle's managing director Erik Orbach said of the latest German joint venture, “This acquisition re-establishes our presence in the European self-storage market, entering into the fragmented German market where the supply-demand gap is particularly pronounced.
Most European self-storage operators have reported growth in their businesses since the pandemic. The UK market has been growing at an average rate of 10% annually, and is now valued at about Stg 930 million pounds. In continental Europe, the number of facilities have increased by 70%.
If operators can secure the right location, the key attraction is their inexpensiveness to both build and operate, which can provide investors with high margins and solid returns. They have relatively low occupancy break-even rates, which should offer protection against economic volatility and promote stable income streams. Finding the right locations is the real challenge.
Particularly the German, Dutch and Spanish market are viewed by many large investors as still being in their infancy, with plenty of scope for growth. In particular, with high rents and purchase prices, demand for more appropriate housing with facilities to work from home mean that those moving house are often in need of self-storage facilities as they consolidate their living arrangements.
The German market still significantly lags behind the UK. According to the German Self-Storage Association, there were only 320 self-storage facilities in the country compared with 2,060 in the UK in 2022. Last year that translated into just 3.5 storage facilities per million population in Germany versus 29 per million population in the UK. Given the economic, demographic and population density similarities between the UK and Germany, this underlines the clear growth potential for the asset class.
Businesses are also looking at self-storage facilities as they look to determine their own space needs while assessing their mid-term futures. Last year London-based Intriva Capital launched its German drive-up SpaceGenie in a bid to create one of the largest institutional-quality self-storage platforms in Germany. The company plans to build and operate more than 50 self-storage facilities with more than 250,000 lettable sqm across Germany by 2027, and has already bought its first sites, via funds managed by Intriva Capital. It has just broken ground on its first facility in Hassloch, near Bad Dürkheim in Rhineland-Palatinate, of which the majority of units have already been reserved.
According to Jürgen Hobrecker, head of business development at SpaceGenie, “The continued growth of e-commerce and flexible working have meant that self-storage is becoming a routine part of urban life for hundreds of thousands of people resulting in an ever-growing demand for storage."
Another classical self-storage company, The Box Self-Storage based in Dubai, is also eyeing an entry into the German market, and has tied up with Belgian real estate consultant Koen Verboven of APSB-Consultancy to scope out the German market.
The market is also becoming more sophisticated in catering for different business needs. French electrical engineering group Socomec is looking to enter the German market with its range of modular commercial storage units designed for outdoor use. These can cover outputs of several megawatts, and can be extended by cascading several storage cabinets together, depending on customer specifications, with liquid cooling of the temperature through installed lithium iron phosphate batteries. A different form of storage, but one for which there is obviously demand.
