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News Release


European Self Storage: Performing for investors in a changing world

By Ollie Saunders & Kathryn Pitts, JLL


The impact of major demographic change, increasing mobility, rapid urbanisation and changing technology has radically altered how people want to live, work and play.

The Urban Land Institute ( and PWC highlighted in January 2016 that there are some important fundamental changes at the business end of the real estate industry. Investors are now focused on cities rather than countries, and as the property market evolves, they favour alternative, more operational assets.

Properties such as health care, hotels, student housing, self storage and data centres are all expected to become more attractive to real estate investors as Europe sees increasing levels of urbanisation and long term demographic change. Investors who are frustrated with low yields achieved in traditional asset types (such as bonds and traditional commercial property), can find strong risk adjusted returns in alternatives.

The arrival of alternatives

The property industry is now referring to these types of assets as an asset class in their own right called “alternatives”, which sit alongside the more traditional sectors of office, industrial, retail and residential.

This is an important change in the way investors look at real estate; 2015 was a record breaking year in the UK with 25% of all commercial property transactions taking place in alternatives with volumes at £15bn – a staggering figure given it was only at 10% in 2010. The prediction for 2016 is that alternatives will form 21% of total transactions – restrained by the lack of suitable product and the difficulty of finding operational partners.

Alternative investment volumes

“Alternatives in 2016: Predictions in a changing world” was published by JLL ( in January and includes a survey from key European institutional investors. With 10% of the increased allocation to alternatives being allocated to self storage, the sector is receiving considerable interest. This allocation is the same as health care, more than twice as much as data centres, and only slightly less than allocations to hotel investments.
North America first: then Europe

One of the trends in alternatives is that they often find favour in North American markets first, before becoming more established and institutionally investment grade. More than a third of international investment into alternatives in 2015 in European markets was from the USA alone.

Self storage has similarities with another important alternative asset; student housing. It has seen unprecedented levels of institutional equity teaming up with local developers and operational partners in recent years in Europe.

Multi-family living (including student housing) is big business in the US, and the weight of money coming into European markets from these sophisticated investors has resulted in dramatic yield compression. The graph below shows the impact on the London market for Purpose Built Student Accommodation (PBSA).

London PBSA prime yields

Financial Performance

Self storage is an asset type that has been well established in the North American market for a number of years and there is the well-publicised statistic that the US market has 7 sq ft of self storage per head of population.

The strong financial performance by the US self storage REITs – as well as the European ones - has attracted the attention of investors who are impressed by the sector’s performance, and who want to directly invest.

The JLL Self Storage team in the United States publishes a quarterly Self Storage REIT report – this shows that in Q3 2015, total revenues across the major portfolios increased by 7.3% to over $850m, with average occupancy increasing from 91.1% to 92.5%.

Total Revenue ($k)

Total Occupancy

This compares with Big Yellow in the UK which has seen consistent growth in average occupancy rise to over 75% and Safestore which has risen to over 70% (see graphs below):

Big Yellow Capacity/Occupancy

Safestore Capacity/Occupancy

Both Safestore and Big Yellow are achieving rental values of in excess of £25 psf (which is over $35 psf) – compared to typical rents in the US around the $15 psf range.

Yield Gap

The US self storage market is much more advanced than the UK and European markets. There remains a significant “yield gap” between US and European assets which we expect to see narrow as markets mature. This term refers to the difference between capitalisation rates or investment yields (being the inverse of multipliers) in different markets. This yield gap attracts US capital who view the European markets as being more opportunistic than their domestic market (as they have higher yields than the US) and builds an important investment thesis for European investors that the sector will see yield compression during the next real estate cycle.

The key transaction in the US in 2015 was the $1.31bn acquisition of Smart Stop by Extra Space. The 122 properties totalled 8.7m sq ft and traded at a capitalisation rate of 5%. There have also been four US portfolio sales recently of over $100m with capitalisation rates of between 3.4% and 4.9%.

It could also be argued that there is a yield gap between self storage and other alternative assets in European markets.

The key trends for self storage are increasing awareness amongst investors of the sector as an alternative asset, coupled with a maturing of the European markets where we are experiencing yield gaps with other asset classes and foreign markets. These trends bode well for self storage, however, 77% of investors feel that the main challenge to investing in alternatives is the lack of suitable product. This also includes the lack of a scalable product, so JLL is predicting that the challenge for 2016 will not be the lack of investors, but a frustration at being able to find portfolios to meet their appetite.