Find profits in storage units

Storage unit providers are taking good advantage of people’s reluctance to throw anything away. You can too.

946_MW_P28_Inv-Prop

Cash in on clutter

Storage unit providers are taking good advantage of people's reluctance to throw anything away.

Storage-unit investment schemes have a terrible reputation. Dodgy set-ups promising "guaranteed" returns of up to 12% have lost people millions, often from their pension funds. But scams aside, reputable companies that run storage facilities in the UK could prove lucrative investments.

Across all UK real-estate investment trusts (Reits), self-storage was the best-performing asset class last year, according to real-estate services firm JLL. These listed property funds rent out lockers and self-storage units to businesses, who want the space to store excess stock, and individuals who need more space than is provided by their city apartments or have perhaps got carried away with the Marie Kondo decluttering movement.

"In dense urban centres such as London, shrinking dwelling space, coupled with a growth in demand for rental accommodation has led to an unprecedented proportion of people seeking external storage facilities", noted JLL in October last year.

In 2018 it was estimated that there were 1,505 self-storage sites in the UK, offering approximately 44.6m sq ft of space, say the Self Storage Association and Cushman & Wakefield. The market continues to grow, but remains under-developed relative to the US and Australia. There is currently only 0.7 sq ft of storage space available per person, compared to 9.3 sq ft in the US and 1.8 sq ft in Australia. As it stands, the UK market is fragmented: four listed operators make up 18% of the sector, says JLL. However, expansion is coming from a combination of mergers and acquisitions, and development in London and the southeast, including customer-accessible sites as well as industrial sites.

Four big players

The 2018 revenues of Big Yellow Group (LSE: BYG) were up 7% on the year before, with average rent paid its tenants per sq ft up by 3%, and occupancy increasing to 81%. It has a "quality portfolio" and a five-star management team, noted JPMorgan Cazenove in November. Safestore Holdings' (LSE: SAFE) net asset value (NAV) per share increased by 22.2% over 2018, with revenue up nearly 11%. It also has four new sites in the pipeline, spanning 210,000 sq ft.

Although Lok'nStore's (LSE: LOK) portfolio has seen "solid" NAV growth recently, its shares still trade at a 2% discount to forecast NAV. It has also increased its banking facilities by around a third to £75m, giving it "plenty of firepower to enhance its portfolio further", points out Investors Chronicle.

Finally, there is Shurgard (Brussels: SHUR). Europe's largest self-storage company only floated in late 2018, so it is one to keep an eye on.

Recommended

How to invest in blockchain without buying cryptocurrencies
Bitcoin & crypto

How to invest in blockchain without buying cryptocurrencies

Many investors have been searching for a way to invest in bitcoin in their Sipp or Isa via a regular broker account. This fund fits the bill nicely, s…
27 Jan 2022
How to invest in energy and metals as tech stocks crash
Commodities

How to invest in energy and metals as tech stocks crash

It’s been a terrible week for stockmarkets. But not everything is crashing – “real” assets such as metals and energy are holding up well and should ha…
26 Jan 2022
A cheap investment trust with a good record
Investment trusts

A cheap investment trust with a good record

This cheap investment trust’s yield of almost 9% may look too good to be true, but should be sustainable, says Max King.
25 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022