Self Storage Snuggles up to Resi and Retail
9th July 2015
Big Yellow is hoping to build a site in Battersea, south London, with residential and possibly retail space in a move that would mark a major shift in strategy for the self storage operator as it seeks to fulfil ambitious growth plans.
The company is in discussions with Wandsworth council about the design of the mixed-use development, having acquired the freehold for its existing store and for two retail units next door, presently occupied by Halfords and Pets at Home.
As well as trebling the size of its existing store to between 90,000 and 100,000 sq ft, the move is a chance for Big Yellow to trial a new development model. "One of the reasons we are doing the site at Battersea is to learn more about the process,” says Big Yellow chief executive James Gibson. "And the other is to put our hat in the ring. As a consequence of us doing that, it has brought us to the notice of some of the other bigger developers of other uses.”
Big Yellow is not alone in its willingness to be more creative. Other operators such as Safestore and Lok’nStore have also shown that they are prepared to deviate from the big-box-by-the-roadside model, as they fight for sites against residential developers, hotel operators, trade parks and others.
"I think we will see more co-sharing of sites,” says Rennie Shafer, chief executive of the Self Storage Association UK. "It’s an opportunity to access land that’s not currently available.
"In the UK we haven’t seen the level of co-sharing of sites that there is in the more developed markets of the US and Australia. For small-scale operators, sharing uses on a site is not uncommon. Among the big operators, it is less common.”
So just how big could co-sharing become for the major operators? Of the 72 sites that Big Yellow has developed, 18 have seen the firm buying more land than it required and in every case the model was to gain planning permission for a neighbouring development and then to sell off that parcel of land. Battersea will be different. "That was lateral. This is vertical,” says Gibson.
As well as being vertical - a high-rise residential scheme above the self-storage facility - Battersea will also be far more complex. Big Yellow has to find a residential developer that it wants to get into bed with. But its location means it will be worth the hassle. "In Zone 2 London we are confident we can fill it,” says Gibson.
London is the UK’s most densely populated city, with a population that is growing continuously, which is why all the big operators want more self-storage space there - and why they’re competing with residential developers, hotel operators, trade parks and others.
Lok’nStore developed its Maidenhead site, which opened 18 months ago, with a Lidl store. "We sold half the ground floor to Lidl, which is a great way of helping to finance the development,” says Lok’nStore chief executive Andrew Jacobs. "And there’s also some benefit from the footfall into the supermarket.”
Lok’nStore is building a replacement store in Southampton, developing a new site in Bristol that will open early next year, and refurbishing an acquired building in Chichester, which is due to open at the end of the year, bringing its total number of stores to 27. "We are always looking,” says Jacobs. "We are looking at quite a lot of sites at the moment.”
Big Yellow has also carried out mixed-use schemes - albeit on a more modest scale than its aspirations at Battersea - with its Kingston store including nine apartments and its Eltham store sharing the building with two retail units.
Safestore chief executive Frederic Vecchioli perhaps has more experience than any other major player in how to deliver self-storage space in shared buildings. From 1998 he built up a portfolio of stores in Paris, which were acquired by Safestore in 2004 as part of Mentmore.
"The density of population in Paris is almost three or four times the density of London. It’s the second-highest in the western world, after Manhattan,” says Vecchioli. "We have been adventurous and gone to places our competitors would not go to. That means we have central sites and we also have the monopoly inside Paris.”
Safestore operates 97 stores in the UK, 43 of which are within the M25, and a further 24 stores in Paris. "Within the M25, we have the densest network of stores in the self-storage industry,” says Vecchioli.
In London, Vecchioli says that around 10 sites are shared, including Camden and Notting Hill which have residential above. "We have always been creative and probably much more flexible than the other operators. That is why we have so many sites that are so close to where our customers live.”
Outside London, co-sharing of sites is perhaps driven more from the desire to increase revenue rather than secure sites. Apex Self Storage, which operates seven facilities around the UK’s third most-populated city, Manchester, has added trade-counter units to its Cheadle store.
General manager Steve Dawber explains that as customers running businesses through eBay or Amazon took progressively larger units - with some now occupying 4,000 sq ft - the business saw an opportunity. "We realised that maybe some of the people would like to sell from there so we opened up the side of the building into a retail unit,” says Dawber. And Apex benefits from more visitors to the site: "The more businesses we get in there, the more footfall we create.”
Off the beaten track? If self-storage firms are willing to snuggle up to resi and retail, would they also be willing to look at pitches that may be considered less than prime?
For Safestore, it’s always been a resounding ‘yes’, perhaps in contrast with most of its peers. "I prefer a store that is right in the centre, right where my customer needs it, even if it is a little bit hidden and tucked away,” says Vecchioli.
For Big Yellow’s Gibson, such a proposition would only be attractive in central London. "In Zone 2, where our brand is strong, yes we could go slightly around the corner from the main road, 100m or so with good directional signage, and rely on the fact that the internet will get people in. But we can only do that because we have 38 prominent centres that are driving demand.”
Colin Steele, a partner at Rapleys, says operators are looking further afield in certain situations. "In prime markets such as Oxford, Cambridge, Kensington, Chelsea and other prime locations inside the M25 it may be possible to move towards something that’s off pitch,” he says. Big Yellow’s Cambridge store, a former Royal Mail building on Henley Road, which will open at the end of this year, might lack the prominence they usually require, but with the simple lack of opportunities on the likes of Newmarket Road which would be the first choice for most operators – they are prepared to relax their usual acquisition criteria to get into a key market like this.
Under-used basements in existing buildings are also being reinvented in central London as self-storage spaces. Niche operators such as 3D Space and Metro Storage, both operated by Angus and Simon Burnett, and relative newcomer Urban Locker, which has one facility in Old Street, are able to make use of relatively small spaces. Larger operators have looked at car parks in the past, says Steele, but there are constraints to using such spaces. "There’s an opportunity there but there are issues with the security of what you create,” he says. "Building inside a basement and accommodating the structure that is there is more complicated than building a standard-issue facility, and more expensive.”
As the internet becomes ever more important in driving enquiries for self storage facilities, perhaps the need for buildings by main roads will decrease. A survey of consumers for the Self Storage Association UK shows that 67% of respondents used the internet to find a self-storage facility, the most popular means by far.
However, there is general agreement among operators that there is no substitute for a prominent pitch. "People are likely to research on the internet, but then visit the site before they make a decision,” says Schafer. "If they have to drive past two other self-storage facilities on the way, they might go into those first.”
Gibson adds: "About 75% of our customers have never used self-storage before. Driving past our buildings and seeing ‘Big Yellow’ means when they search on the internet they already know the name. Our buildings are driving market awareness.”
As well as sharing sites with other uses, all the main players are considering a suite of other ways to expand, including enhancing and extending existing facilities. Safestore, for example, is redeveloping and extending its Wandsworth store on Garrett Lane, which is 16,000 sq ft. "We are tearing it down and rebuilding a state-of-the-art, very visible building with a lettable area of around 35,000 to 36,000 sq ft,” says Vecchioli.
Consolidation will also play its part, as those wishing to sell take advantage of the promising economics and others’ thirst for expansion. Here, the internet could play a role too, as small players struggle to compete with the paying power of the big firms: Big Yellow invests around 4% of its revenue on internet-related aspects.
"The biggest barriers to small operators are linked to the internet and the cost of the internet,” says Gibson. "One-third of our customers are using mobile websites that have fewer search results - and they come at a higher and higher price.”
However, the relative immaturity of the UK self-storage market means there will still be plenty of room for small players, says Schafer: "It is still a young market. While the large operators will grow and consolidate and buy up middle-level operators, we will also have small independents starting up. There are always opportunities just to open up one site because self-storage is a very local business.”
It seems there is still a lot of development ahead for self-storage in the UK.