Thought of the Week
The lucrative opportunities in store for self storage
October 17, 2024 4 Minute Read
Despite financial pressures and rising costs, the European self storage sector continues to demonstrate remarkable resilience. It has seen strong performance in recent years; driven by uptake from rising urban populations, in addition to pre-existing healthy demand levels.
With an average occupancy rate of 78.7% and year-on-year investment increases since 2020, investor appetite remains robust. While rental returns have seen some fluctuations this year, the overall average rose by 2% to €296.53 per sq m/annum excluding VAT.
Traditionally, self storage assets have had low operating costs and required little capital improvement. But technological change and the sustainability agenda are both pushing operators to innovate and invest more cap-ex into their existing portfolios.
Investing in tech
With new technology such as electronic locks, advanced monitored security systems and access control available, many operators are modernising their stores. Simple PIN access systems are being replaced with two-factor authentication through mobile devices to provide more security for customer goods. These improvements streamline operations and ultimately improve the customer experience. Another trend more common on new and smaller sites has been leveraging technology to make stores remotely managed. The proportion of remotely managed stores across Europe has increased significantly in the past 12 months.
As with other industries, the adoption of artificial intelligence (AI) in the self storage sector is gaining momentum. As the sector continues to evolve, the integration of AI will undoubtedly play a pivotal role in driving future growth and enhancing customer experiences. AI-driven analytics are being implemented to analyse large datasets, adjust pricing in real-time according to demand fluctuations, and interact with customers. Many operators are already using AI for content creation, helping with blogs, web pages, and marketing material. This not only saves time but also makes content more personalised for targeting prospective customers.
It is likely that the share of operators using AI will increase as the ability to access and analyse large quantities of data will invaluably change the way operators interact with consumers. Initial reluctance to adopt AI is largely due to lack of understanding, and the initial upfront cost of implementation. However, where they are able to absorb initial upfront costs, over the longer term, AI will help operators to reduce costs through automation, increase operational efficiencies, and remain competitive market players.
Sustainable self storage
Sustainability has gained significant traction across the real estate industry, and self storage is no exception. Investing in sustainable buildings helps to lower operating costs, ensure compliance with regulatory changes, and make assets more attractive to both investors and customers. Sustainable practices in stores have increased in the past 12 months, demonstrating that operators are actively seeking ways to reduce their carbon footprint. Common sustainability practices include LED lighting, recyclable packaging boxes, and passive infrared detection. Regulators will also be driving more sustainable buildings through planning and building laws. The sector already uses low levels of energy and water compared to other commercial buildings, and the addition of solar or wind power generation can make the business carbon neutral operationally. Additionally, EV charge points have increased considerably, likely due to planning and ESG requirements from regulators, as well as demand from staff and consumers. The general sentiment in the industry is to make self storage as sustainable as practical.
Self storage remains a profitable and resilient asset class, but there are opportunities for proactive operators to further develop the sector. Increased investment into new technologies, AI, and efforts to make businesses more sustainable, demonstrate that the sector is evolving to meet the challenges of today, while positioning itself for a sustainable future.
Explore CBRE’s latest survey, published in partnership with the Federation of European Self Storage Association (FEDESSA).
Thought of the Week
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