Given the current landscape commercial real estate investors are having to search harder for profitable investment opportunities. These are often found in smaller and non-traditional asset types, typically having counter-cyclical trends, such as the self-storage sector.

Data from RCA shows that European investment volumes for the subsector have grown significantly, up from €138 million in 2021 to approximately €400 million in 2022, an increase of 187 per cent. Furthermore, appetite for self-storage remains strong in 2023, with over €100 million of capital deployed this year to date already.

Demand for self-storage space will persist and most likely increase as the number of people living in smaller homes in urban areas is forecasted to grow further, resulting in more people most likely requiring additional storage.

Businesses have also started to use self-storage facilities more over the last few years. Smaller businesses have started to seek additional storage space for their goods and products in closer proximity to their customers to facilitate the increasing demand for same-day delivery.

The sector also benefits from a strong structural market. A lack of supply combined with growing demand can result in strong rental growth. This rental growth can be achieved faster than in other asset classes due to the business models of self-storage operators. Flexible lease terms allow operators with frequent rent reviews to capture rental growth opportunities. However, these flexible lease terms also lead to a fine balance between rental growth and vacancy rates, as steep and rapid rent increases can cause customers to suddenly cancel leases resulting in higher vacancy rates. However, self-storage operators experience ‘sticky’ customers as many people and businesses intend to use a unit for a short period of time but end up keeping the facilities for much longer as they experience the benefits of the additional space.

The self-storage sector also benefits from low operating costs and has the potential to reduce operating costs further by developing PV panels on their typically flat roofs and facilitating EV charging to develop additional income. More technological advancements to enhance efficiency, security, and customer experience can increase profit margins further, with many self-storage facilities now offering online reservation systems, digital access controls, and advanced security features.

Finally, the self-storage sector in Europe has significant room to grow. Comparing the European market to the more established US market, the average stock per capita in the US (9.44 sq ft / capita) is significantly higher than in the UK (0.73 sq ft / capita) or continental Europe (0.21 sq ft / capita). Research by Mordor Intelligence forecasts the European self-storage market to increase from $2.75 billion in 2023 to $3.67 billion in 2028 (5.95 per cent compound annual growth rate).  The self-storage sector has traditionally been dominated by operating companies developing sites that they have previously acquired. investors typically access the sector through corporate acquisition or portfolio purchase from existing players, which we expect to grow as the market in Europe expands.

Self-storage is, therefore, an option for investors seeking stable and potentially lucrative opportunities. Consistent and growing demand, the ability to adapt to changing market conditions, portfolio diversification plus ESG potential, and the potential of further technological developments and integration promotes the self-storage sector as a resilient and profitable asset type. 

Further information

Contact Bram de Rijk

Savills World Research