Self Storage FOCUS · ELEPHANTE SERVICES LIMITED 2 Goddard Road, Astmoor Industrial Estate,...

2008 Volume III

FOCUSSelf Storage

ELEPHANTE SERVICES LIMITED2 Goddard Road, Astmoor Industrial Estate,Runcorn, Cheshire WA7 1QF

Tel: +44 (0) 1928 500005Fax: +44 (0) 1928 500006E-mail: [email protected]

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BAR Services LimitedMoor Hall, Sandhawes Hill

East GrinsteadWest Sussex RH19 3NR

Email [email protected]

The Self Storage Supply Specialists

www.barservices.co.ukCall now on 01342 870087

Get up to date with your Self StorageRetail Products and make the most ofyour membership benefits.

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FOCUSSelf Storage

Self Storage Focus2008 Volume III 7

FOCUS may be subscribed to by applying to the SSA Head Office at Priestley House, The Gullet, Nantwich, Cheshire CW5 5SZ. Tel +44 (0)1270 623150. Fax +44 (0) 1270 623471 E-mail [email protected]. Current subscription is £4 per issue in the UK and Europe. EDITORIAL: News items and articles on all aspects of the self storage industry are welcomed, and should be sent, together with photographs, if appropriate, to the Editor, Stan McKerron at: [email protected] Opinions expressed in Self Storage Focus are not necessarily those of the Self Storage AssociationADVERTISING: In the first instance please contact: Stan McKerron,48 Talbot Way, Stapeley,Nantwich, CW5 7RQ. Tel: +44 (0) 1270 624 622 E-mail: [email protected]

CONTENTS

The end of the beginning As some of you will know by now we have just bade a somewhat sad farewell to Mrs Jane Rowe. Jane started her time with the SSA on 1 October 1997 and after ten and three quarter years’ service for the Association she has decided to retire from the “front line”. It would probably take a healthy book to cover all that she has done for everyone involved in the self storage business throughout the UK and across the whole of Europe; maybe she will even write it! However in thanking her for her remarkable support to us all, and her achievements over such a long time one cannot forget that, in the early stages, she was on her own, ‘picking up the bits’ and helping the members, who at that time, were almost the industry in its totality. Her mastery of the business and her continuing, insatiable interest in members (and non-members) along with her memory of the detail and her insistence on setting high standards, will never be forgotten. She was, of course, a friend to many and I would, in particular, pick out her relationship and help to all the supplier members. But above all was her mastery of our events, the national and international Conferences and Trade Shows, and our Members’ meetings. Jane, we are very, very grateful and wish you all good fortune for the future. With Jane’s departure we have also decided to centralise all our activities out of our Head Office in Nantwich and this includes the preparation and production of this magazine, Focus. Steve Webb has been the Editor and in charge of publishing ever since its inception over 5 years ago. We are most grateful for all that he has done and are pleased that he has agreed to continue to assist us in the provision of material including at the UK Conference in Brighton on 11/12 November. Further details on the Conference will be circulated soon and will appear on the SSA UK website – www.ssauk.com. As previously promised we have just held our first Regional Meeting and I am delighted to report that it went well. Twenty nine of us, mainly from the north west of England, met in a hotel near Warrington for an evening of relaxation and robust discussion on a variety of issues to do with self storage. The success of the evening has added impetus to our intended programme – our next meeting is likely to be in Scotland late in August. Full details will be circulated and will appear on the SSA UK website. There is a lot going on at the moment and we realise that you are all pitting your wits against credit crunches and challenging times. We will cover the main issues in a separate newsletter including an update on Fire Safety, on a Consultation by HM Treasury on the de-regulation of insurance provision and the latest information on Empty Property Relief.

Yours sincerelyRodney WalkerCEO

SSA News 8New Members… Dates for your diary

News 10Lok’nStore reports resilient trading… Big Yellow opens wine self storage… Self storage with women in mind… New Steel Storage MD at the Conference… Sir Stirling moss speeds into Uckfield… Philip Pouncey heads DBCi Ltd in Europe

Company Feature 21Diversifying farmer turns to self storage

USA 29Confident US self storage operators

Asia 35Self storage in Asia

Employment 37Tell me why I don’t like Mondays

COVER

Brighton is the venue for the UK Conference to be held on 11/12 November 2008. Further details on the Conference will appear on the SSA UK website – www.ssauk.com

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New Members

On behalf of the Directors and members of the Association we would like to extend a warm welcome to:

Full Operators

● Bude Self Storage, Bude● East Midlands Self Storage, Barrow-on-Trent● Lopen Self Storage, South Petherton (including Dorset Self Storage, Blandford Forum)● Pack and Stack, Ipswich

Provisional Operators

● Andrew Freeland, Suffolk● Fergusons (Blyth), Cramlington● Greenbox Storage, Kent● House-It, Woodbury, Devon● King’s Lynn Self Storage

Supplier

● Worldwide Self Storage (Consultants)

Overseas

● Stor Age Self Storage (Property)● SA Self Storage Investments (Property)

Dates of Meetings

The programme for 2008 includes:

11 – 12 November 2008 UK Conference in Brighton

Training Dates

September 2008

Deadline for contributions to the Next Issue of Focus

Contributions on all aspects of the self storage industry are welcomed. They should be sent to Stan McKerron – [email protected] The deadline for the next issue is 2 October 2008.

PoundGates & Company LimitedSt Vincent House, 1 Cutler Street, Ipswich IP1 1UQ email: [email protected] & Co is authorised and regulated by the Financial Services Authority, an ISO accredited company and a member of the Self Storage Association. www.poundgates.com

Self storagecover. It’s as big as you are.Our flexible, affordance insurance from PoundGateshas been designed specifically to fit businesses inthe self-storage sector, whatever size they are.

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B U S I N E S S F I N A N C E

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Specialist finance for Self-Storage Specialists

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Lok’nStore reports resilient tradingLok’nStore pre-tax profits came to £216,020 in the six months ended 31 January 2008. Turnover increased to £5.51mn compared with £5.30 previously. “I am delighted to report another successful period for the Group, during which we strengthened the operating performance of the business and acquired a record three new sites,” said Chairman Simon Thomas. The Chairman went on to report the Group has not experienced any turbulence seen in much of the property market throughout the reporting period. The business model remains a robust one with good operating margins, strong cash flow, and relatively low gearing backed by substantial property assets. Current trading continues to be resilient reflecting the strong fundamentals and defensive qualities of the self storage business model. It has not seen any increase in late letters, bad

debts, or lien sales over the period. In October 2007 Lok’nStore purchased a freehold site in North Harbour, Portsmouth, which extends to nearly two acres and will be used to build a new self storage centre of around 60,000 sq ft. The store fronts the A27, opposite a busy retail store, and close to the M27. Total net investment to the store is likely to be around £6mn. “Subject to market conditions, it is our current aim to acquire between two and four stores per annum. A part of our strategy is to increase store size and number in order to increase profit margins. Our current average size is around 53,000 sq ft, up from just over 50,000 sq ft at 31 January 2007. We view the current slowing of the property investment market as a potential opportunity to increase the rate of growth of new stores,” the Chairman reported.

New Operations Manager for KeepsafeLiz McCutcheon has joined Keepsafe Self storage as operations manager. Keepsafe is part of the Castlecroft Securities group of companies. Liz will be responsible for the day-to-day running of three self storage centres in Perth and two in Dundee. Prior to joining Keepsafe, Liz was assistant managing director of a 70-strong commercial printing company in Fort William responsible for sales and staff development. Before that she worked as a trainer and sales person for Slainte Training providing training services to organisations in the Fort William area. She also advised business start-ups and carried out Investors in People feasibility studies whilst working for another subsidiary, Slainte Limited. “I am very excited to be joining Keepsafe,” said Liz. “They are expanding rapidly and there is huge potential to grow the business. My aim is to get the products right and

deliver the highest levels of customer service. During the summer we will be opening Tayside’s largest self storage centre in Dundee and I can’t wait to start promoting it.” The Perth-based company was established in 1984 and now has five office developments in Perth, three in Dundee and three industrial units in Perth and one in Dundee. In 2006 the company opened its landmark £5m King James VI business centre on the banks of the Tay in Perth. The company also provides portable toilets, temporary site accommodation/storage and waste management services through its Scotloo, Scotbox and Scotloo Waste Management divisions. The company has ambitious plans for the future, including the development of a new business park on the outskirts of Perth at Methven and, during 2008 there are plans to make further acquisitions of land to develop additional office and industrial spaces.

Have you news for Focus?

If you have news for Self Storage Focus or Self Storage Europe please send it to Stan McKerron - [email protected]`

Co-operative Bank backs young entrepreneur

Vista compatible

O’Neil’s RS-SQL document storage interface is now fully Microsoft Vista compatible. O’Neil is a Gold-Certified partner of Microsoft.

Bison Self Store has opened a 42 unit store at Lower Healey Business Park, Chorley. The new site joins one already owned by Rob Jones, 24, at Moss Side Industrial Estate, Leyland which has 120 units, from

25 sq ft to 200 sq ft. A £350,000 deal, financed by the Co-operative Bank, has allowed Rob to buy a self storage company from a consortium, which included his father, two years ago.

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Economic situation will reduce competition for sites

Despite the tougher economic climate, Big Yellow grew same store revenue by 5.5% for the year ended 31 March 2008. Adjusted profit before tax fell to £13.3 million from £14.2 million due to an increased interest cost on Big Yellow’s development pipeline. Commenting on the outlook, Chairman Nicholas Vetch said: “Trading conditions are likely to remain difficult for some time. However, we have spent much time planning for a more testing environment. The Group has a strong brand, an unmatchable portfolio of stores owned largely freehold together with significant available financing, over £350mn of property assets uncharged,

which the company fully intends to exploit. Additional acquisitions would be added to the 47 stores in London and the South and one in Leeds – trading as Big Yellow Partnership. A further 23 stores are in development and of the 70, 60 are held freehold and three long leasehold. At the year end, occupied space represented 1,817,000 sq ft, up 2% from 1,780,000 sq ft at the same time last year. This represents a 62% occupancy rate across all 47 stores open at the period end. Six stores opened during the year, including Fulham, Big Yellow’s flagship store. The portfolio of 32 stores

Big Yellow opens a wine self storage facility A purpose built wine self storage facility has been opened by Big Yellow Self Storage Company in London. Oz Clarke, wine writer and TV personality, was invited to cut the tape. The four floor facility in Fulham, situated next to Chelsea’s Harbour Club, will have 1,200 state of the art wine storage cellars - the first in the country claims the company - which are both temperature and humidity controlled allowing individuals and businesses to keep their wine in highly sophisticated cellar conditions. Unlike traditional wine storage, which doesn’t offer regular access, you get your own private wine cellar with safe and easy access seven days a week. It’s perfect for anyone, from the country’s

38% who want to build up their own wine collection, to the 71% who don’t have the necessary space at home. In the capital space is even more of an issue for home-owners with nearly nine out of ten Londoners not having enough storage space but over half wanting to store a great wine collection. The new flagship store offers wine cellars in different sizes, from 18, 36 or 54 case cellars, to full height rooms taking up to 500 cases or more. Prices start from £7.50 a week for the 18 case cellars. The CCTV is monitored by staff round the clock, and each room is protected by its own alarm. There is also unique PIN entry access, with well lit corridors and fire detection systems in all self storage locations.

and a first class partner in our Pramerica joint venture.” The Chairman added that the current environment will considerably reduce the competitive threat for sites,

that were open for more than two years at the beginning of the period was 79% occupied at the end of the year, with an average occupancy

during the year of 82%. In May 2008 Big Yellow put through an annual storage rent increase of approximately 6% across the whole store portfolio.

Wine storage cellars at the Fulham store

Oz Clarke officially opens the wine self storage facility at Big Yellow’s new flagship Fulham store


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CAVALE supplies many of the main European Self Storage Companies.

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Manufacturer and component supplier of roll up doors, swing doors, various hallway systems, compartment walls,mezzanine floors, double deck systems, island deck systems, mobile units, palette units, various types of direct access buildings, steel constructions and multilevel buildings.

Cavale can supply all the needs and solutions to the Self Storage Industry from advice on storage unit configura-tions to complete “Turnkey Projects”. We pride ourselves on our computer aided design and manufacturing systemswhich can accommodate any enquiry. Our Sales and Design teams will provide all the answers to optimize the layoutof an individual site to maximise your revenue that will work within your budget and the site. We can project managefrom conception, feasibility, design, planning, construction, fabrication, manufacturing, fitting out, operational software to handover. Cavale has a vast catalogue of self storage components and a large portfolio of designs of completed contracts.

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Self storage with women in mindThe Storage Pod business partners, Emma Dodi and Linda Conway, have now opened their first self storage facility in Weybridge, Surrey. Having purchased their site in November 2008, the grand opening in May came as a huge reward after months of hard work. The project started as an idea 18 months ago when Linda and Emma were still

Customer friendly interior

Storage Pod facility

Opening ceremony


in the City working at large investment institutions. After six months of researching the sector they decided to take the plunge, quit their jobs and started working on the project full-time. “Choosing the right site was by far the most important thing,” says Linda. “We needed to be in an area with the right demography, and the right size of facility,

but we wanted it to be close enough to home so we could manage it ourselves”. The facility, in the famous Brooklands Business Park in Weybridge, was purchased as a shell and after fit-out offers five storeys of self storage and 10,000 sq ft of bulk/ inventory storage. The site is also large enough to offer substantial parking for business vehicles.

At The Storage Pod, customers securely store their goods in a brand new fully alarmed store in rooms ranging in size from a 10 sq ft locker to a large 500 sq ft room.

Additionally, the company offers a wide range of packing materials which can be purchased from its store shop. To make moves even easier for customers The Storage Pod has also partnered with local removal companies so entire house moves are simple and fuss free. “Positioning ourselves at the top-end of the market

was always critical as we plan to become large players in this space,” says Emma. “If you visit our store you will see that it is very modern, large, clean, bright and most importantly, secure.” The company’s philosophy is very green; from the green peapod logo to the use of recycled paper for stationary and marketing materials. The reception with its walnut display area and clean glazed divider walls

aims to look more retail than industrial and certainly customer friendly. The company is also very aware of its female customer base. “I have been into too many self storage facilities

which did not feel safe,” comments Linda. “We believe that women are key decision makers in this space and the sector is under-serviced.” Every step of the way Emma and Linda asked themselves whether they would feel safe, comfortable and welcome in The Storage Pod, and being women themselves they believe they have achieved this.

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SELF

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SELF STORAGE ASSOCIATION

CONFERENCE 2008

11th - 12th NOVEMBERBRIGHTON

For more information call us on 01270 623150 or visit www.ssauk.com

SEMINARSspecialising in Self Storage Sales & Customer Service

INDUSTRY UPDATES

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Blue riband for SafestoreThe RBS/NatWest Business of the Year award went to Safestore. The company’s turnover has grown from £53m to £73m between 2005 and 2007, with the business now operating from more than 100 sites in the UK and France - growing through a mix of acquisitions and development of new sites. The judges were impressed with the financial performance of the business and the way in which the management team has developed the brand and its marketing strategies in an evolving sector. They were also impressed by the way in which Safestore has recognised the challenges of maintaining a firm-wide culture across newly acquired businesses. The award was presented by Julie Highfield from RBS Group.

The new Managing Director of the London based European office of Steel Storage, Colin Jeromson, attended his first FEDESSA European Conference in Rome. Steel Storage was the main sponsor of the conference and trade show. Colin comes to Steel Storage with over 20 years experience in the construction industry, having spent the last ten years working for Schindler, the Swiss elevator company. The company extends its best wishes for the future to Colin’s predecessor, Michael Homan and thanks him for his contribution and leadership during his six years with Steel Storage. The trade show at the conference was an opportunity for Steel Storage to show its new door design capabilities, which it claims are unique, and allows operators to customise their facilities with individually branded doors produced at the company’s Twickenham manufacturing plant. “With competition in the self storage industry at a premium, operators can now re-enforce their branding throughout the facility in a way that has never been seen in the market to date. The new design capability is representative of the company’s constant commitment to product innovation having invested

New Steel Storage MD at the Conference

Safestore in Glasgow


a substantial amount on new door manufacturing machinery with the benefit of its customers in mind,” said a spokesperson for the company. Speaking about the FEDESSA conference Colin said: “As a first time attendee, and indeed exhibitor, at a self storage industry event I am delighted to have met so many of the long standing members of this fast moving and exciting industry. “The organisation was seamless and we all thoroughly enjoyed it. In an economic climate where there is widespread caution and concern over the “credit crunch”, it has been encouraging to hear from so many inspiring speakers about positively managing the effect that this economy has on the self storage industry as well as meeting so many new entrants taking on their first storage venture.” Also representing Steel Storage at the Rome conference was the owner of Steel Storage Holdings, Jonathon Perrins along with the General Manager of the new Steel Storage Dubai operations Danny Karey. “This is an exciting time for the company with

lots of positive changes taking place across the organisation,” said Jon. “Over the next year we look forward to developing our new build operations and are currently mid construction on one of our largest European new build projects to date at Capital Self Storage in Derby”.❐ Steel Storage has issued the results of its 2007/2008 European Self Storage Industry Survey. For a copy call 0208 744 9444.❐ Colin also recently attended his first British Association of Removers conference in Edinburgh where he witnessed the inauguration of the BAR’s new President, Matt Purdey of SSA member company, Matt Purdie & Sons Ltd.

Colin Jeromson

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PARTITIONSMEZZANINESTURN-KEY

Tel: +44 (0) 1270 215200Fax: +44 (0) 1270 215214Email: [email protected]

The Mill HouseCrewe Green Road Crewe Cheshire England CW1 5NW

ACTIVE SUPPLY AND DESIGN



Sir Stirling Moss speeds into Uckfield to open Cube Self Storage

Sir Stirling Moss and Charles Hendry recently opened Cube Self Storage’s new purpose-built facility in Bell Lane, Uckfield. The official opening was followed by refreshments and the chance to meet a legend of motor sport. Says Cube’s MD, Robert Bradley, who is the son-in-law of Sir Stirling: “After 12 months of building works and a total investment of more than £1mn we are delighted to be officially opening our doors. We can offer local people and businesses a top quality centrally located facility with experienced staff in a safe and clean environment. To celebrate our opening we are offering all new customers 20% discount on all storage for the first three months they are with us.”

There are over 360 rooms at Cube of varying sizes to cater for most requirements. The specially designed warehouse has a state of the art security system and a very enticing price match promise where Cube will beat their competitors’ prices as well as offering the special launch discount. In addition to the normal storage rooms Cube also has specially adapted archive rooms for business users and drive-up rooms for easy and regular access. For those who need a hand with their packing there’s a huge selection of materials and price saving kits. There are also trolleys and trained forklift drivers to help move in.

Charles Hendry MP, Robert and Allison Bradley, Sir Stirling Moss and Uckfield’s Lady Mayoress, Louise Eastwood

PoundGates moves its head office

PoundGates, SSA supplier member insurance broker, recently moved office. It is still based in Ipswich but has moved to large, modern premises. Kevin Collins, Managing Director of PoundGates comments: “We have taken 11,000 sq ft, which is more than we need at the moment, but our rapid growth led us to the conclusion that we had to invest for our future. Our old office was where the business began. “Our new office has been tailored and fitted-out to our personal specification. Other than client files, just about every piece of furniture or IT kit is new. We were delighted to raise significant funds for our chosen charities when disposing of our old equipment. PoundGates, established in 1988, devise and manage bespoke insurance programmes for corporate clients in a wide range of trades and industries. As well as providing solutions for the self storage sector it is also a specialist in

the needs of removals businesses. Working closely with a local office interior company the new office layout suits the workflow of the business with a bright, airy and spacious place of work. The management team consulted staff every step of the way including choosing location, lay-out and furniture. Kevin further comments: “As a business accredited to Investors in People we take the opinions of our staff seriously. For an insurance broker your business premises are little more than a base for your staff. Having an office where they can be comfortable and get on with effectively looking after our clients’ needs is the primary issue.” PoundGates achieve carbon neutrality by offsetting emissions using Climate Care, a charitable organisation that invests in energy efficiency and renewal projects around the world. The office has state of the art warming and cooling systems which dramatically reduce energy use.

Betco appoints two sales reps for Europeand is active in several professional organisations. Jürgen Müller comes to BETCO with his most recent professional credentials with T D Lichttechnik, a German subsidiary of a Spanish enterprise, where he was Managing Director responsible for redeveloping and restructuring the organisation.

Two new sales consultants have joined Betco Inc to service the European market. The Statesville, North Carolina based company offers customers self storage building construction, doors and hallway systems as well as conversions. Andreas Kraft joins

Andreas Kraft and Jürgen Müller

BETCO with a varied background and experience in construction, engineering and management with Wohnpark alter Steinbruck and Ludwig Schneider, both in Giessen, Germany. Andreas has a civil engineering diploma

Robert Bradley welcomes guests to the opening of Cube Self Storage


Self Storage Focus

Driving Forward with

EnvironmentallyFriendly PackagingA key concern for us all today is making sure we do not wasteresources and as businesses we can all play our part by usingenvironmentally friendly products. The SSA UK has been driving thisforward by ensuring that the SSA Retail Packaging Products arewherever possible recyclable.

“I am pleased to say that all SSA corrugated boxesand packaging materials are 100% recyclable includingthe bubble wrap and shrink wrapping. At present theboxes are made from 90% recycled material andwithin a few months all stock will be made from 100%recycled material. The strength and performance of theboxes will remain at the current high standards. Thisreinforces our green policy which we are very proudto communicate to all members”, says Kevin Allwood,Managing Director, Smithpack.

Sustainable Forestry PolicyAt Smithpack we take great pride in ensuring that oursource of corrugated materials comes from sustainableforests. This means that we look at the biologicalintegrity and community needs of the forests thatgrow the pulp material.

It is important that the volume of sustainable wood ismaximised per unit area. The land must be managedwell so the rights of the indigenous peoples and localcommunities are recognised and respected.

We check that our suppliers of materials have clearlydefined and established land use rights and abideby the relevant national and regional laws, andinternational treaties. The forestry operators alsohave to demonstrate that they are supporting forestresearch including natural ecosystem research.They have to identify and protect high conservationareas and maintain or enhance the critical environmen-tal and social values of the associated ecosystems.

SSA Helping Members Go GreenA question often asked bymany venture capitalistsfunding self storage companies is: What are they doingabout being environmentally friendly?

The SSA RPP range of boxes is green and any owner ofa self storage company should be proud to use them.

If you are considering retail packaging, why not moveforward with the SSA range of environmentally friendlyboxes and be green?

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New Storage King franchise in Newport

Heartlands Furniture has acquired the former headquarters and warehousing from a Newport business in a deal worth £2.25m. Leeway House, on the city’s Leeway Industrial Estate, comprises a 70,000 sq ft building on a three-acre site with one of the acres of land available for redevelopment. The freehold building, once refurbished and converted, will be run as a franchise of the Birmingham-based self storage business Storage King. Some 10 jobs are likely to be created by the new venture. Newport-based Hutchings and Thomas chartered surveyors, brokered the sale of the building while John Bodinham, of John Bodinham and Partners, acted for Storage King. Glenn Haley, of Hutchings

and Thomas, said: “This deal is solid evidence, if any is needed, that despite the current gloom affecting the commercial property market, there remains very strong demand for freehold industrial property, even for large scale buildings such as this one at Leeway Industrial Estate. If the property is priced correctly and fulfils various key criteria, such as prime location and has easy access to the motorway network, then there is excellent demand. “Leeway House, which is a headquarters-type facility benefits from eaves height of up to 20 feet. It is arranged in several bays, including offices and it is just a short distance from Junction 24 of the M4. The addition of the one-acre development plot was also an attraction for the purchaser.”

You may all know by now that Sue Kenny, one of our Head Office team, married her partner Doug Brash on 17 May 2008. The wedding took place at the lovely old Soulton Hall near Wem in Shropshire followed by a reception

at the Hill Valley Golf and Country Club near Whitchurch, Shropshire. The day was a huge success with 87 guests from all over the world (including Australia) at the wedding breakfast and the bride proved that her

Wedding bells for Sue

Sue and Doug Brash after their wedding

organizational ability at work, was surpassed by being virtually the sole organizer of her wedding – with 160 guests in total at the evening party!!

companies will benefit from the housing crises. They expect that the ranks of renters will swell as more people leave foreclosed homes or postpone buying their first homes because of tighter credit and falling values.

Four REITS that own and operate about 12% of self storage facilities in the USA report, according to The New York Times, returns that have soared 31%, on average. The report goes on to say that some investors believe that these dividend paying

US housing downturn benefits self storage

Teresa KingPhilip Pounceythe infectious desire in his voice. We had already started our own investigation into the European market and supplied our products throughout Europe, but we decided a local presence and the ability to provide a quality installation service for our products was the way forward.” One of the first things Philip did was to appoint Teresa King as Head of Marketing and Human Resources to ensure the hiring of quality staff.

The Managing Director of DBCi Ltd is Philip Pouncey well known in the industry for the last six years. On a recent visit to the US Philip left the family to sunbathe and took a busman’s holiday to look at the local self storage facilities. “One facility I visited had a definite ‘wow’ factor, from the external façade through to the immaculate reception and its high gloss partitioning system. I was amazed to find out the store was five years old,” said

Philip, who decided there and then he wanted to bring DBCi to Europe. “Negotiations started immediately on my return and I was delighted that Tom Bishop, Vice President of Sales for DBCi shared my vision for Europe,” said Philip. Tom recalls: “When Philip first called I could hear

DBCi Ltd was launched in the UK in February this year. Based in Wellingborough the company supplies a door and partitioning system throughout Europe. Its parent company DBCi Inc’s is located in Douglasville, Georgia with manufacturing plants in Georgia, Texas, California and Arizona.

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Farmer, brewer, self storage operator as well as franchisor of self storage operations for farmers; diversification on a grand scale as practiced by Martin Bazeley of SSA member Barn-Store. Martin inherited the tenancy of the 900 acre Offwell Farm close to Southwick in Hampshire from his father, Roger, and uncle, Michael, who had taken on the tenancy from the Southwick Estate in 1952 and started their farming career with nothing more than three dairy heifers named Faith, Hope and Charity. After agricultural college Martin travelled to Australia and New Zealand working on various farms before returning home to work with his father and his uncle. On their retirement he took over the farm and in addition to the self storage and brewing runs a 220-strong dairy herd, and 200 acres of award-winning

barley, plus wheat and oilseed rape, on the northern slope of Portsdown Hill. Just over Portsdown Hill is the conurbation of Portsmouth and its adjoining towns. However, it is from the local rural towns and villages that most of the self storage emanates. “Despite accounting for just 19% of Britain’s population, rural areas enjoy a quarter of the UK’s business stock, and equal to the rest of the country in terms of the proportion of new business start-

ups,” quotes Martin. Martin finds his domestic customers relate to the relaxed style and rural setting of the farm surroundings and benefit from the round-the-clock service of the site. Even if he is on a tractor, he is still accessible by the divert function on his phone and will be at the unit to welcome a potential customer

and show them around, even on a Sunday afternoon, although his sister Jane looks after the day-to-day office administration and reception. “Small businesses appreciate the 24/7 option. A small builder can get a tool on a Sunday afternoon ready for Monday morning and a disk jockey can store his gear in the early hours after a late night gig,” says Martin mentioning two of his customers. Faced with declining revenue from dairy farming, Martin decided to do something about it. That something was, in 2003, to convert his under-utilised farm buildings to self storage by placing 40ft and 20ft previously used ISO containers inside the barns and cladding the exteriors of the buildings. He can now accommodate 100 customers in various buildings.

Diversifying farmer turns to self storage

Martin Bazeley, Lisa Taylor and Charlie Corbet outside the Barn-Store franchise at Holden Farm, Cheriton, Hampshire

Interior of the refurbished barn

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The 40ft containers have been divided with steel partitions and steel doors, using the cut out sections fitted back in a frame for the doors, allowing secure access to the rooms that can, for instance, offer four 8ft by 10ft rooms if three partitions are fitted to a 40ft container. The interior partition steel work and door frames were completed by a local firm. Access is 24/7 by electronic key fob with padlocks fitted to each individual room door in the container. CCTV is installed to ensure security. As Martin points out, many such buildings on numerous farms have been allowed to become derelict once the cows have departed. Now, with the introduction of self storage to the farm they have been spruced up, as has the remainder of the farm buildings and yards to welcome members of the public. Having worked out the intricacies of gaining planning permission from planning authorities, sourcing containers and devising the optimum ways to fit them in a farm building, a

company to convert the containers for self storage, lined up the electricians, CCTV, insurance and key-pad installers, Martin took the project to the next step which was to franchise the operation to other farmers. Business rates will follow

once the planning permission has been gained, but following analysis of the use of the key tag Martin can prove to planners that the sites are very seldom visited by those using them. He has as a friend, a London solicitor, whose practice had gained considerable expertise in franchising, and with his help Martin set up the Barn-Store franchise. He now has four franchisees up and running: the Isle of Wight, Burton–on-Trent, Selborne, near Petersfield and Winchester. The latter is near Cheriton at Holden Farm on the A272 and it is also on the South Downs Way. Here farmer Charlie Corbett (52) opened his Barn-Store a year ago and is now

80% full. He has converted his cow shed, having given up his dairy herd, to house twenty-one 40ft and four 20ft containers and finds that 80% of his customers are private lets. “A freehold farm can still run self storage when only about 40% full,” says Martin, pointing out that the building is already there, and the other costs are not great. When starting in a new locality it is not initially known what the customer breakdown between private and business will be. For this reason the first containers at Holden Farm were placed down either side of the barn, with a passageway between the outside wall and the containers, leaving the centre of building empty until required. It turned out that 80% of the occupancy is private which meant that Charlie could assess how the additional 40ft containers should be sectioned into three and four or even six room units. Charlie employs Lisa Taylor part time to look after the paper work and take

Barn-Store at Holden Farm with new fascia

Martin Bazeley’s own self storage at Offwell Farm, Southwick




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the calls while she is on site. She will be on hand while he is on a Help for Heroes 320 mile Halford sponsored cycle ride with 299 others. The cyclists start at HMS Victory in Portsmouth dockyard, board the ferry to Ouistreham, near Caen in Normandy, cycling via the WWII Normandy landing beaches, Pegasus Bridge, then across northern France to Dieppe and on to the battle fields of the First World War in Flanders, visiting the WWl Thiepval memorial before returning to England via Dunkirk. Help for Heroes was launched in October last year and its first task is to raise £5mn for the tri-services rehabilitation centre at Headley Court, Surrey to help injured service personnel. The cycle ride alone has raised over £1mn. Returning to self storage Martin explains that each franchisee has a designated area of some 10 mile radius around the site. As franchisor he gets a £5000 introduction fee from the franchisee refundable, less £500 if planning permission fails, and 5% of the site’s annual turnover. For this he provides the website pages and joint Yellow Pages ads - which now cover a great arc of southern England - besides organising all the previously mentioned planning and LPA approaches. Following an article in a NFU magazine he received many enquiries from farmers wishing to diversify and to be less dependent on supermarket prices for their products. However, many farmers have never had to diversify and deal with the general public. There is therefore a steep learning curve regarding telephone techniques and dealing with the public but the franchise route allows each one to “hit the ground running”. One pending site wishing to convert a chicken broiler house to self storage is, with Martin’s help, endeavouring to convince the planning authority that there will be far less traffic for customers visiting the facility than there were for hgvs bringing in chicks and feedstuff and collecting chickens ready for slaughter and vast volumes of droppings! At his own site Martin has an unusual USP: a three-pack of his own brewed real ale for each new customer plus a £1 voucher off a purchase from the Real Ale Bottle Shop in Southwick, which retails 175 beers and ciders including his own. This is situated in an original

brewery in the village just behind The Golden Lion. It was to the Golden Lion that Generals Eisenhower and Montgomery would repair from Southwick House, the headquarters for the D-Day landings in 1944. As an original Victorian steam brewery it closed in 1957 when the 81-year-old Master Brewer retired. With 200 acres of award winning barley, Martin decided in 2000 to start brewing his own real ale from some of his barley, which he has to send away to be malted. Like the self storage he had to learn brewing from the ground up.

Martin now brews his beer in an industrial unit. He calls his brewery Suthwyk Ales – the ancient name for Southwick. He brews four: Skew Sunshine Ale, Liberation, Bloomfield Bitter and from this Spring Palmerston’s Folly, after the forts built on the orders of the then Prime Minister Palmerston to repel a possible French invasion from another Napoleon. The Self Storage Association has attracted numerous farmers to its ranks. As William Lawrence, diversification specialist with the NFU said, diversification has helped farmers to make a profit. “There is no question instances of diversification are increasing across the UK.” In 2004 to 2005 diversified farming projects were worth an estimated £332mn, by the following year it had grown to £420mn. Martin’s recipe for success is: “If you want to sell something you just have to make contact, whether it’s by phone, email or wearing out shoe leather.”

“Like all small businesses starting out, your problems can seem insurmountable. I had a batch of beer which was as flat as a pancake, and a brewer recommended adding a bit of sugar to the barrels. That put some life back into it and we kept it by the Aga in the kitchen to help the process along. “Well it certainly worked. One night there was this almighty bang, and we came downstairs to find the corks had exploded out of the barrels. We had plumes of beer shooting up to the ceiling, which didn’t go down too well, but I don’t believe in giving up easily.”

Pack of three real ale from Southwyk Brewery held aloft by Martin Bazeley


2008 Volume III 25

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According to the newest Self-Storage Confidence Index survey results, second quarter confidence has grown with regard to rental income, occupancy, capital expenditures, and profits, despite an uncertain economy. Holliday Fenoglio Fowler Managing Director Minh Tran, who is based in the company’s Houston office, is not surprised, saying: “I like to use the term recession resistant for the storage industry.”

Rental income and concessions

Fifteen percent of responding self storage professionals expect rental income to increase substantially over first quarter 2008, while just over half expect rental income to increase slightly and a quarter expect rental income to remain unchanged. Only

nine percent expect a slight decrease in rental income in the second quarter, and none expect significant rental income decreases. Comparing first quarter 2008 with the same quarter 2007, 50% of respondents indicate that rental rates have increased, and over a third of the

Confident US self storage operatorsThis article reports on the second quarterly Self-Storage Confidence Index (SSCI), an initiative sponsored by MiniCo Publishing, Cushman & Wakefield, Inc, and Holliday Fenoglio Fowler (HFF), formerly Storage Investment Advisors (SIA). The SSCI is based on questions about expected changes in the storage industry and the national economy. Respondents include self-storage facility owners, operators, and other industry professionals from 37 states, the District of Columbia, and three Canadian provinces.

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respondents indicate that rates have remained the same. Only 10% report year-to-year rate decreases. Self storage industry professionals are substantially more confident about rental rates today than they were three months ago. In the first quarter of this year, just under half of SSCI respondents expected to see rental incomes increase during that quarter compared with 66.4% this quarter. The proportion of respondents expecting rental incomes to decrease has dropped by over 25%. Upward trend lines in rental income forecasts between first and second quarters are typical due to seasonal occupancy changes. Self storage owners and operators report mixed, but mostly negative trend results regarding discount incentive offers. Fifty-six percent report having offered some discount this quarter, up from 54% last quarter. Twelve percent offered a dollar move-in discount, up from 10%. While the percentage of owners and operators offering discounts of under five percent dropped, the percentage offering higher discounts grew.

Occupancy levels

Industry professionals are bullish on physical and economic occupancy rates. Fifteen percent of SSCI respondents expect to see substantial increases in physical occupancy and a 9% expect to see substantial increases in economic occupancy. Over half expect to see slight increases in physical and economic occupancy and nearly a quarter expect each to remain unchanged. Only 12% and 13% of respondents expect slight decreases in physical and economic occupancy respectively. Here again, confidence levels show

substantial increases over first quarter findings, with nearly 66% and 63.3% of respondents forecasting increased physical and economic occupancy, respectively. In the first quarter only 45% and 32% expected increased physical and economic occupancy, respectively.

Financial concerns

SSCI respondents expect interest rates to result in neutral or increased capitalisation rates. A third of respondents expect interest rates to influence slight increases in cap rates and another third expect cap rates to remain unchanged. Cap rate confidence is virtually unchanged. Respondents report significantly greater expectations of industry sales in the second quarter. They also expect significantly greater profits than they did last quarter. Chris Sonne, Managing Director of Cushman & Wakefield’s Self Storage Industry Group, points out that: “Self-storage is a very local business. The facilities in stable markets with fair share market penetration will continue to cash flow well.” Tran agrees: “Everything is market-specific in our industry.” In the first quarter of 2008, most respondents expected industry capital expenditures to decrease as compared with the previous quarter, but now most respondents expect capital expenditures to stay the same or increase slightly. There are somewhat greater expectations this quarter that the cost of materials will increase. Respondents’ outlooks remain substantially unchanged in the area of new self-storage development, with 42% of respondents expecting development to increase slightly, 16% expecting no change, and 42%

expecting either slight or significant development decreases. This outlook is evenly balanced between those predicting increased and decreased growth.

The larger economic picture

The nation’s credit crisis continues, as demonstrated by continued rate cuts from the Federal Reserve, yet inflation is growing. America’s construction and auto industries are in down-trends. The Consumer Confidence Index has plummeted to lows not seen since 1973. Fifty-nine percent of self storage industry professionals expect the national economic outlook to decrease either slightly (49%) or significantly (10%). Twenty-two percent expect the outlook to remain unchanged and 19% expect it to increase slightly. Respondents are forecasting a somewhat gloomier national outlook now than they were three months ago. Industry professionals’ second quarter expectations for interest rate trends are mostly unchanged. Twenty-three percent of SSCI respondents expect interest rates to increase slightly during the second quarter, whereas 20% expected slight increases in the first quarter. Fifteen percent fewer respondents expect rates to remain unchanged this quarter, and virtually the same percent (41% compared to 42% last quarter) expect rates to decrease slightly. Seven percent of respondents now expect significant decreases, up from two percent last quarter. The quarter-to-quarter changes, while small, are trending in opposing directions with fewer respondents predicting no change, and more respondents predicting both increases and decreases. This likely reflects


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continuing uncertainty about how the economic slowdown will play out with regard to availability of capital.

Larger trends and forecasts

How can we understand self storage industry professionals’ optimism about industry prospects? The major driver of self storage industry health is population growth, which is projected to continue at roughly the equivalent rate as new project development. That is likely to lead to stable occupancy rates. Demand for land is limiting growth, positively influencing rental rates. Summing it up, Sonne says: “Self storage has tended to hold up in bull and bear economic cycles better than other real estate asset classes.” The self-storage industry can be sensitive to job loss and its impact on relocations. Recent job loss increases could indicate that national economic trends may have more of an impact than currently anticipated on our industry.

The Self-Storage Confidence Index (SSCI), produced by the editors of the Mini-Storage Messenger magazine, is a groundbreaking initiative of MiniCo Publishing, Cushman & Wakefield, Inc., and Storage Investment Advisors (SIA), that measures what self storage business professionals in various aspects of the industry anticipate about the economic conditions and trends that affect their business. Ongoing market sentiment will be measured and published quarterly from an online survey of self storage owners and vendors. The complete results, including all charts and graphs, may be found at www.selfstorageconfidenceindex.com. – Poppy Behrens, Executive Editor, MiniCo Publishing


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There are opportunities in Asia for the diligent self storage entrepreneur reports Jes Johansen, Managing Director of Steel Storage Asia Pte Ltd.

The self storage industry is still in the early stages of development in Asia and there is a long way to go before reaching the market penetration levels of the more developed regions of America or Australia. That said, the industry clearly has established itself in Japan, Hong Kong and Singapore; all areas with high population density, concentration of wealth and consequently space at a premium. Add to that an ever increasing acceptance of western (materialistic) values and developers have found receptive customers to outsourced storage solutions. So while the industry may have established itself, recognition, even in the most advanced markets, is still very low. Focus therefore remains on developing the concept in each market, building brands and gaining industry acceptance and recognition. In this process we have seen the markets develop differently. Acknowledgement and consideration of local customs and peculiarities are pre-requisites before starting operations in Asian markets. Not only are unit mix and sizes different in each market, but also location and average facility size vary greatly. Consider the case of Hong Kong versus Singapore: the two countries are often compared since they have great similarities in geographical and population size, wealth development, strategic position and location, etc. When looking at the table below, the difference in the approach to self storage soon becomes apparent. Market penetration in both markets is about the same but the approach

Self storage in Asia

more than 20% there is still a long way to go. There is interest in getting self storage off the ground in other Asian markets – in particular countries such as South Korea, Taiwan, Thailand, India and China look to be promising markets. They represent a real chance for the diligent entrepreneur to gain an early foothold and help shape the industry and effectively set the benchmark. So while this may be a great opportunity, it is not one to be taken lightly. If the last five years in Asia has taught us anything, it is that self-storage will work in Asia, but do your homework first: it is not a “fit one – fit all” scenario, but rather a model that must be adapted to the local environment and carefully executed accordingly. If done right, Asia has enormous potential and we look forward to being part of this development with adventurous, yet diligent, self storage entrepreneurs.

in getting the product to the customer clearly is very different. There are good reasons for this such as available infrastructure, layout, and real estate cost. Further, while storage facilities in both markets are primarily conversions, the types of buildings available for conversion vary greatly as well as building size and regulatory environment through which to gain the required approvals. The real difference, however, is in the approach the operators have taken when establishing the market. The Singapore model is a hypermarket model with large facilities that customers are willing to travel to. Ease of access for customers and prominent location are the key facility drivers. Operators in Hong Kong have to a larger extent followed a “7Eleven” like strategy, where dots on the map and proximity to the customer are key drivers. Facilities are less identifiable due to shared use coupled with signage restrictions and marketing is therefore often done through media advertising. Clearly for an operator, exponentially increasing the number of sites will complicate operations and benefiting from economy of scale becomes difficult with many smaller sites. Various arrangements through joint ventures, site management agreements and franchise models are therefore pursued. Japan too has seen a unique approach to self storage. The development from the traditional containerised ‘trunk rooms’ to a sleek and modern storage solution with air-conditioning and carpeted floors has been readily accepted in Japan, but with industry recognition figures hardly

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Table 1

Market Population (Million)

Area (Square miles)

Population/ Square mile

Total Net Lettable Area (sf)

# of storage facilities

Avg. facilitySize (sf)

NLA /pophead

Singapore 4.8 268 17,910 500,000 9 55,555 0.10

Hong Kong 7.0 462 15,151 700,000 100 7,000 0.10

(end 2007 approximate numbers, author’s estimation)

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Tell me why I don’t like Mondays?

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Dear Caroline

I have two full time staff (Johnny & Gerry) and one part time member of staff (Bob) at my Dulwich facility. The facility is open 7 days a week. Johnny and Gerry work 6 days a week but their rotas change from time to time which means their respective days off a week change. They get the Bank Holiday off; but only if they are scheduled to work that day. Part time Bob has just asked me for a day off in lieu for a Bank Holiday Monday even though he normally only provides cover for the weekends. The last thing I want to do is pay someone or give them a day off in lieu when they are not working on a Bank Holiday. Bob can be vocal if he is not happy and I know if he thinks he’s getting a raw deal I’ll never hear the end of it. He was grumbling about how “part time staff are subjugated to a capitalist regime.” What should I do?

YoursPaul Nash.

Dear Paul

1. Do part timers get special protection?

The UK Law gives protection to part time workers. This is to make sure they get the same rates of pay (pro rata), access to benefits and promotion etc.

Caroline Doran, an employment law specialist with SSA Supplier Member Rooks Rider, explains the pitfalls of days off in lieu of Bank Holidays for part timers

The issue of Bank Holiday Mondays is one which has been debated in the Courts in the UK.❍ The good news is there is a recent case which can give you some comfort if you do not give him a day off for Bank Holiday Mondays.❍ The bad news is that this case is not definitive. So, unless you are feeling particularly ballsy or are willing to keep your ears open and do a volte-face if there is a new case which overturns this, the safest route would be to pay “Part time Bob” on a pro rata basis for Bank Holiday Mondays. If you discriminate against a part time worker they can make a potentially unlimited discrimination compensation claim. Realistically they are unlikely to get high sums (as the Courts will look at his loss of earnings).

2. Part Timer Case Law

The good news case McMenemy v Capita Business Services Limited, stated that a worker is not entitled to a day in lieu if they do not normally work on a particular Bank Holiday. The Scottish Court of Session (NB this is not an English case) confirmed that Mr McMenemy was not treated less favourably on grounds of his part time status by his employer imposing the rule that entitlement to paid bank holidays is dependent on if the bank holiday falls on a day one normally works. It was established that, in fact, the employer would have treated a full time worker the same if that worker did not work on a Monday like Mr McMenemy as the company operated a seven day working week. In effect it was “hard luck” that he chose not to work on a day that is usually a bank holiday. It is possible

that the position would have been different if Mr McMenemy worked in a business that had all full time workers working the traditional 5-day working week of Monday to Friday. Your full time staff Johnny and Gerry also do not get paid for Mondays if they are not scheduled to work on a Bank Holiday. They are treated in the same way even though they are full time workers. As such it will be difficult (if not impossible) for Bob to win an argument saying he was not being paid for Bank Holiday Mondays because he was part time. (NB if this arrangement with your full time staff changes it could impact on the discrimination element with Bob).

3. Other Considerations and Danger Areas

❍ There is still the consideration of indirect sex discrimination; statistically most part timers are women so if Bob

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2008 Volume III 39

was female he could have extra ammunition up his sleeve to use against the company. Luckily Bob is not female or I would urge you to err on the side of caution to avoid this allegation being raised against you and your company.❍ The DTI (now BERR) guidelines to regulations should be considered. They state that to comply with the law on part time workers where employers make workers work fixed days each week (and also not allow other time off in lieu, if their working days do not fall on the bank holidays) could put part-timers at a disadvantage, because most bank and public holidays fall on a Monday. So those who do not work Mondays will be entitled to proportionately fewer days off. In such cases, it may be necessary to remove the disadvantage suffered by those staff who do not receive particular days off as a result of their particular working pattern, for example by giving all workers a pro rata entitlement of days off in lieu according to the number of hours they work.

4. The Cost of Part Timer Discrimination

Part time workers have managed to successfully prove discrimination in a number of other benefits areas, notably pensions and pay. ❍ In 2002, HSBC was forced to spend approximately £25 million on backdating pensions to part time staff.❍ A Leeds Metropolitan part time lecturer, Ms Birch, was awarded £25,000 in compensation for successfully proving her discrimination. Ms Birch was a part time lecturer at Leeds Met for seven years doing work of a similar nature to her colleagues on full time contracts. Despite working more hours than her full time colleagues, Ms Birch earned as much as £10,000.00 a year less than them. She also claimed that she was denied career progression opportunities and had to work excessively long hours to make a living. Of course a claim for discrimination against part-time workers may be defeated if it can be proven that the discrimination was justified. To be justified, the treatment must be a necessary and appropriate means of achieving a legitimate business objective, but in our experience the Courts will be sceptical of all but the most persuasive objectives suggested and you should not try to rely on the “economic” factor alone. Please call me if the circumstances change or you would like to discuss this further.

Caroline [email protected]

The content of this article is provided for information purposes only and does not constitute legal advice. It is not a substitute for obtaining legal advice on a specific query and is not intended as such. Whilst every reasonable effort is taken to ensure it is up-to-date no responsibility is accepted for any consequence of relying on it.

Thanks to James d’Aquino, a trainee in the Employment Group, for his contribution towards drafting this article.

2008 Volume III

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EUROPESelf Storage

Self Storage Europe2008 Volume III 5

FOCUS may be subscribed to by applying to the SSA Head Office at Priestley House, The Gullet, Nantwich, Cheshire CW5 5SZ. Tel +44 (0)1270 623150. Fax +44 (0) 1270 623471 E-mail [email protected]. Current subscription is £4 per issue in the UK and Europe. EDITORIAL: News items and articles on all aspects of the self storage industry are welcomed, and should be sent, together with photographs, if appropriate, to the Editor, Stan McKerron at: [email protected] Opinions expressed in Self Storage Focus are not necessarily those of the Self Storage AssociationADVERTISING: In the first instance please contact: Stan McKerron,48 Talbot Way, Stapeley,Nantwich, CW5 7RQ.Tel: +44 (0) 1270 624 622E-mail: [email protected]

First European Conference a successWelcome to the third edition of Self Storage Europe for 2008. Since the last edition was published I am happy to report that we enjoyed a most successful Conference in Rome. You can read all about it in the following pages. Many thanks to all of you who made the journey, and to all our speakers who joined us from Australia, Europe, South Africa, and the United States. As you will see from the SSA UK Foreword it also proved to be the final European Conference for Jane Rowe who has now retired. FEDESSA and its members would like to extend their thanks to Jane for all her excellent support over the years. The General Council of FEDESSA met in Rome for its 2008 Annual General Meeting. The Council was happy to welcome Tone Wiklund-Hansen from City Self-Storage and Danu Temelie from Romania as visitors. All the Directors were re-elected and Joseph Collin, of Asociación Espanola de Self Storage (the Spanish Self Storage Association), was also voted in as a Director. It is our intention to include short biographies on your national representatives in the next edition. The Council concentrated on its intended strategy for the future which is focussed on improving information on the industry wherever it is operating in Europe and enhancing communication between all the countries concerned. It was the first meeting for Chris Johns as the new European Co-ordinator for FEDESSA whose role includes implementing this strategy, building up a knowledge centre, and ensuring that there is proper coverage of all your activities in this magazine. One of his initial tasks is to compile, with assistance from all National Associations and their members, as comprehensive a database of the industry throughout Europe as possible. FEDESSA as a forward thinking Federation also needs to have a website to match our ambitions and I am happy to report that a small working group has been set up to push this forward, and we look forward to the outcome. Clearly as we now seek to meet the goals given to us by our members, and to re-iterate a point from an earlier edition of this magazine, FEDESSA needs the co-operation of companies from every country to tell us about their concerns and matters of interest. For example, we need to know how the current squeeze on finance and property is affecting our industry so that we can properly portray the situation when asked. All help is welcome. Please note that there are two national conferences later this year which you can attend – UK: 11-12 November in Brighton, and Spain: 18-19 November in Valencia. And finally, I am happy to report to you that voting has begun on the final stage of the process for agreeing the CEN Standard and we expect the results of the Formal Vote in September.

Yours sincerely

Rodney WalkerSecretary General

CONTENTS

News 6Smedvig backs SelStor with £15 million investment

European Union 7EC says European standardisation must adapt to boost innovation and competitiveness

European Conference 9The f irst FEDESSA European Conference is held in Rome

Economy 13The anatomy of a recession

Property 15Self storage and the property market

COVER

The brand new Annexx opened in Toulouse in May 2008. It is a highly visible facility located on the ring-road. 135,000 cars pass it every day. The site includes 700 sqm of offices and 6,000 sqm of storage.

Smedvig backs SelStor with £15 million investmentSmedvig Capital is to invest £15 million (175 million SEK.) in SelStor AB. A London based private equity firm Smedvig Capital has been instrumental in the growth of over 30 businesses since its founding in 1996. SelStor was set up in 2006 to build and develop self storage sites across Sweden. The company’s strong management team brings extensive industry experience. Managing Director, Michael Fogelberg, co-founded Shurgard Self Storage in 1992, SelStor is chaired by Patrick Metdepenninghen, former CFO and co-founder of Shurgard, and includes among its directors Carl Ameln, the founder of City Self Storage.

Commented on the financial backing Michael said: “Smedvig has chosen to partner with us in an exciting time of rapid expansion for SelStor. “Its experience in property development is a valuable addition to our business strategy and we look forward to a close working relationship establishing SelStor as a leader of the European self storage market.” Rob Toms, Managing Director of Smedvig Capital added: “Smedvig is delighted to be supporting such an outstanding team in a market with tremendous growth opportunities. “We are excited about the market potential in Europe, particularly when compared with the US or even the UK. SelStor is in the process

DBCi Rome Trade Show competition winner

Following the successful launch of DBCi Ltd at the recent Trade Show in Rome, we would like to announce the result of our competition to win the Apple ipod Touch. The winning ticket was held by Mrs Abigail James of Inner Space. Many thanks to all the delegates who visited our stand and participated in our competition, it was a pleasure to meet so many new people. We would like to thank everyone who has helped us make our first few months of trading as DBCi successful ones, and look forward to many more.

of developing an attractive portfolio of sites within a buoyant Swedish market, which will place it in a strong position to move into less developed geographies within a few years The European self storage market is in its infancy, particularly when compared with the United States. There are currently 1300 self storage units across Europe, 680 of which are in the UK which equates to 0.4 sq ft per UK resident. In the United States there are 51,000 units, or 6.8 sq ft per person. This striking difference is despite fact that Europe is more densely populated, has a higher population and the drivers of demand are similar.

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If European standardisation adapts, it will boost innovation and competitiveness, unlocking the potential of innovative markets and contributing to the development of sustainable industrial policy, and thus strengthen the position of the European economy. This is the main conclusion of the European Commission (EC) Communication “Towards an increased contribution from standardisation to innovation in Europe” published on 11 March 2008. The EC identifies standardisation as one of the most important challenges it faces and it presents concrete objectives for standardisation and the use of standards. It proposes measures to be launched to make the access to standardisation to all stakeholders effective, in particular to Small and Medium Sized Enterprises (SMEs). Its intentions are to accelerate the uptake of standards by users, to increase the impact of Europe in global standardisation and to reform the infrastructure and procedures of European standardisation in order to render it more supportive to innovation. A stronger role for standardisation in support of innovation is important for the European effort to address economic, environmental and social challenges, analyzes the EC. While the lack of standards, the limited uptake of new standardisation items or the slow updating of existing standards hamper the uptake of innovation, standardisation that is lively and strong has, according to the Commission, the power to accelerate innovation. The EC adds that while standardisation, bringing predictability and a level playing field, may be intuitively perceived as conflicting with novelty, it is an important enabler of innovation. Against this background, the Commission outlines a series of initiatives to ensure standardisation fully realises its potential benefits in support of innovation and European competitiveness. Of interest to FEDESSA’s members, the EC proposes:

Facilitating the access to standardisation of all interested stakeholders, in particular SMEs:

Standardisation is a powerful tool for the dissemination of the state of the art to SMEs and to facilitate the uptake of innovation by the market. However, this potential is often not realised because of barriers such as the complexity of the language of the standards, the time required to participate in standards making, lack of standards in national languages, the excessive number of cross-references between standards, the difficulty in identifying the group of standards relevant for a product or process and the cost of the deliverables – the cost of purchasing standards is increasingly mentioned by SMEs. Having assessed that the decision by some standards organisations, such as ETSI and ITU for all their deliverables, and CEN and CENELEC for some of them, to publish their standards for free has multiplied their diffusion, the EC recommends EU policy to address those barriers better and invites the European Standards Organisations (ESOs) to systematically publish abstracts of European Standards without access restriction. These ESOs are requested to address as a matter of priority the conditions of access to standardisation, and to reconsider, in close cooperation with the Member States and the Commission, their business model in order to reduce the cost of access to standards, with the ultimate goal of providing free access to standards developed in support of EU legislation and policy. The EC also promises to increase its financial support to European coordination of SME representation in standardisation substantially. Within the planned proposal for a Small Business Act, the Commission will introduce provisions to consolidate the commitment of the Member States to include SMEs in standardisation

at national level, which is the most accessible context for most SMEs. The EC adds that on the basis of existing SME associations and national bodies, SMEs need to organise themselves better to defend their interests in the standardisation process, with the institutional and financial support of public authorities. The EC will finally strengthen its support to the coordination of the integration of standards in innovative products and business practices through the Europe Innova standardisation networks.

Focusing on standards development for the global market:

The EC also assesses that it is important that European industry is involved from the onset in setting standards for global markets. In this context, the focus of the ESOs and the National Standards Bodies (NSBs) should be to facilitate European contributions to international standardisation work. The EC encourages the stakeholders of European standardisation to strengthen their involvement in international standardisation, to cooperate in addressing the standardisation activities and policies of relevant regions, and in particular to strengthen the role of the ESOs in increasing the impact of European input to international standardisation. The Commission concludes that it expects the European standardisation bodies, industry and all stakeholders of standardisation to consider the measures proposed in the Communication and to actively participate in fostering European innovation and competitiveness.

EC says European standardisation must adapt to boost innovation and competitiveness

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Interior courtyard at Casaforte

Delegates visit City Box Rome facility

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College explained to delegates what is happing in the global economy and the implications for business over the next three years. “When you talk about economics you really have to think about economists, because they basically fall in to two main types. The first type, are the mechanics and the second type are the organic. I was trained as a mechanic. “The vast majority of the economics profession are indeed mechanics and they reside in European, American and UK Treasuries and most of the central banks are full of mechanics. Mechanics are taught an economy is a

big machine of linked markets and these are driven by human beings who, for the most part, behave rationally. That is the key assumption mechanics make; rational behaviour on behalf of human beings as consumers or running businesses. “If you assume rational behaviour then you have a very elegant general equilibrium model of how any capitalist economy works. You can build some very large sophisticated forecasting equations. Typically, there will be between 600 and 800 simultaneous equations that are there to describe how people behaved in the past. If people behaved in the future like they

have in the past these models would be right. “The problem with these models is when they make a forecast they are always precisely wrong. The reason why they are wrong is this problem of rational behaviour. We like to think we are rational but we are not, that is why I am an organic economist,” explained Martin, who has written an update of the economic situation for Focus as the changes in the market are fast moving. Martin then explained what the current economic situation meant to self storage. “Self storage is in a particularly advantaged position right now. You depend on people saying ‘Yes, I’m willing to pay X for storage’. You also depend as an industry on

What FEDESSA European Conference delegates saw at Casaforte Self-Storage SpA in Rome caught their imagination. The substantial and secure complex of buildings, previously owned by Berretta, the gun manufacturer, but now owned by Gruppo Carcano, is operated by Casaforte. Cesare Carcano was there to welcome delegates and told them that the company has reversed the process of removal companies moving into self storage by moving from self storage to removals by starting a company called Casaforte Group Self Storage and Removals.

The visit to Casaforte followed an opportunity for delegates to see over the Easybox Srl facility sited on one of Rome’s busy main road arteries. Delegates were in Rome for the first FEDESSA European Conference sponsored by Steel Storage and PTI Access Control and Security. The first day of the conference was rounded off by the opening of the trade show at the conference hotel, Sheraton Roma, followed by dinner, sponsored by Reason Global Insurance, at the Tavena dei Mercanti in the old Trastevere part of the city. All the Conference sessions were well attended – a sure sign of a great conference programme. Roger Martin-Fagg from the Henley Management

Entrance to Casaforte’s self storage

property has had a fantastic bull run, he said. However, the recent fall in values has been very sharp. In March of this year values of commercial property had fallen 15% from where they were in July 2007, and the fall is continuing. If it falls another 10% it will mean commercial property values have fallen by 25% in a year. “Put into context values today are where they were at the end of 2005, so the super growth seen during 2006 has gone,” said Ollie, who has updated the situation in his article elsewhere in this issue. Barbara Sumner of the Institute for Training in Intercultural Management spoke to delegates about the work ITIM does helping business people realise cross border acquisitions and mergers, when investing in foreign countries

She explained that there are cultural clusters. There are North European clusters. Germanic cultures: Germany, Austria, Hungary. Southern European clusters. Anglo Saxons: the English speaking nations - and then there are the Irish. In these different cultures different words are used for the same thing, explained Barbara giving some

banking. And you depend on banks giving you funding to enable you to expand. “As housing markets begin to collapse then people find that their homes are re-possessed, they have to move into somewhere smaller, and they need to put their stuff somewhere. “So I guess that paradoxically when we go into a recessional phase – you may do quite well. The only bit that is probably not going to go so well for you is the asset value of the fixed assets.”

Roger concluded by saying that the next three years in the western world are going to be much more challenging than the last 15. “More challenging than the governments of the western world want us to believe, and it means very simply that to survive, you have to be absolutely clear what your value propositions are. 1 Why should someone spend money with you? 2 Do not borrow too much; 3 Watch your cash position. “Because as inflation pushes up it erodes your cash balances very quickly indeed. So watch your cash assume your value proposition and wait for the upswing which should be in about three years from now, as the global price of oil drops back towards $60 a barrel. Ollie Saunders, a chartered surveyor and a partner at Drivers Jonas spoke about the property market; how it impacts on self storage and the value of self storage properties. Since the mid-90s commercial

Cris Burnam Barbara Sumner

Lorraine Dicksee, Ryan Squirrell and Thomas McKenna Steel Storage trade show stand

Active Supply & Design stand


2008 Volume IIISelf Storage Europe 10

examples that had delegates laughing. For instance, a sign seen in a Copenhagen airline ticket office: “We take your bags and send them in all directions”. Then there was a Swedish agency copy for a US ad campaign: “Nothing sucks like an Electrolux”. Seen in a Rome doctor’s waiting room: “Specialist in women and other diseases” and in a Rome laundry a sign said: “Leave your clothes here and spend the afternoon having a good time.” She went on to point out that each European nation had cultural differences. Would they all disappear in Europe over the next 50 years? Doubtful, as cultural differences run very deep. In fact they are ingrained in children by the time they are 12 or 13 years old, she said.

Cris Burnam, President of TKG-StorageMart Partners in the USA, is a popular speaker at European conferences, who brings with him a wealth of knowledge regarding the industry. He updated members on the self storage situation in America following the sub-prime problems. “We have four listed companies on the NYSE, the largest being Public Storage with a $16bn market cap having swallowed Shurgard not too long ago. Extra-Space is a newer face in the market at $1.4bn and then there is U-Store and Sovran Self-Storage. “Public Storage is the 800lb gorilla in our business. It has a pristine balance sheet with virtually zero debt which means it can do virtually anything it chooses. With its amazing growth and footprint of 2000 stores comes an interesting challenge – that is what is there for an encore?” Cris touched on the sub-prime problem in the US. He said that sub-prime loans are only about 20% of the market that is labelled as problem or

in default. So when examining the housing mortgage industry in general in the US, it is quite healthy. In April 2007 Moody’s, a big bond rating agency that rates debt told the investments banks: “Look boys, you better slow it down, you are getting a little bit too aggressive on your underwriting standards. “The commercial loans in the US are healthy. I recently spoke to some bankers who could not name a single storage loan that was in arrears,” reported Cris. “Even through all this turmoil all the self storage stocks have significantly outperformed the S&P since the beginning of the year. Although it is real estate based I think a lot of investment, at least in the US, believes that self storage is a very rock solid investment.”

Jane Shaw and Ali Cowie enjoy a coffee Frank Carson with two fellow comedians!

Julie and Mark Lane with Margaret and Michael McCarthy

Philip Pouncey and Teresa King

Gavin Lucas Rennie Schafer


So what is the real impact of sub-prime on self-storage? “It comes down to equity. This time last year if I was doing a $10mn storage deal I needed $1.5mn of equity – today I need £3mn. “In 2006 we were in the middle of a gold rush with 4,500 new stores built in the US. In 2008 the estimate is as low as 500 new stores, which is probably the lowest new-start I’ve ever seen in the storage industry,” said Cris. Following Cris were two speakers from the Southern Hemisphere: Gavin Lucas of StorAge in South Africa and Rennie Schafer, Executive Officer of SSA Australasia. Gavin’s picture of self storage in the Republic of South Africa must be the first ever heard at a SSA UK or FEDESSA conference.

StoreAge Self Storage was founded in 2003. “We are a young entrepreneurial management team with backgrounds in construction, finance and investment banking. Along with StoreAge the team also launched South Africa Self Storage Investments, which invests solely in self storage assets and manages other facilities. South Africa is wide open to self storage

development claims Gavin. The country is performing financially, with the GDP growing by 5%. This economic growth has benefited the previously disadvantaged who are joining the middle class; one of the fastest growing middle classes in the world. A University of Cape Town study has found that there are currently 3.6mn “black diamonds”, the term for those that were previously disadvantaged who are joining the new middle class, in South Africa. These people are now joining and growing the economy. There is no regional or national self storage association in South Africa at present, and therefore there was no data available. Self Storage Investments therefore set up a trust and carried out a six month study in



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While delegates were riveted to their conference seats by the quality of the speakers, partners were enjoying a fascinating day out. This was a visit to Hadrian’s villa, the Villa Adriana, at Tivoli outside Rome. An exceedingly interesting guide was showing the party over the ruins, which had been built as the Roman Emperor’s summer retreat. It was more a town of 5000 slaves and servants than a villa! This was followed by lunch and then a visit to the nearby gardens at the Villa d’Este which was built in 1550s for Cardinal Ippolito d’Este, which is now a UNESCO world heritage site, with its fountains of every description enhancing the gardens.

Partners’ tour

for five years. During that time he has seen significant growth in the industry. The SSA Australiasia has 82% of operators in its membership representing over 1000 primary self storage facilities. Rennie told delegates that the industry started in the early 70s when Australians went to the states and saw self storage facilities and said “We can do that back home” and started ranch style stores. From these stores they have moved up to 2nd generation conversions and multi floor storage. At present the per capita is about 0.1 sq m, although the Gold Coast, the tourist and retirement Mecca in Queensland, storage per capita is twice that. While organic population growth is low there is population growth from immigration. Surprisingly New Zealand has a higher per capita storage rate than Australia. Rennie doesn’t see per capita occupation reaching the levels of the USA. Rennie’s presentation was followed by a panel chaired by FEDESSA President, Paul Fahey, who discussed the implications for the European self storage industry in the face of the economic slowdown. Between them, the panellists manage approximately 30% of the supply across Europe. On stage were Jimmy Gibson, a founder of Big Yellow with 49 stores in the UK. Stephen de Tollenaere, CEO of Shurgard Europe, now owned by Public Storage. Stephen has been with Shurgard for 11 years and seen it grow from five stores to current 176. Steve Williams CEO of Safestore, who has been with the company for seven years and has overseen the growth of Safestore from 23 stores in 2001 to 108 today, with an MBO and flotation and Cris Burnam to give an

input from the USA. The trade show was the venue for the reception sponsored by Active Supply and Design after which delegates enjoyed dinner sponsored by Gliderol Self Storage Solutions Ltd. At the dinner FEDESSA President Paul Fahey gave the sad news that Jane Rowe was retiring. Paul paid tribute to her eleven years, starting as the sole secretary of the Association and continuously organising conferences and members’ meeting as well as selling the advertising in Focus, that Jane had given to the SSA. An appreciation of Jane’s dedication to the Association is given elsewhere in this issue. The last day of the conference saw Peter Fisk, CEO of Genius Works, give an inspirational presentation covering the many aspects of driving forward a successful business. Cris Burnam took the stage again to round off his previous day’s presentation passing on his wealth of knowledge of the industry. The traditional round table discussion groups rounded off the conference.

Lunch at a taverna

2007. It found that in the six major cities there are 120 facilities in total. With a population of 47 to 50mn people and approximately 6mn sq ft of self storage space, there is 0.13 sq ft of space per head. Occupancy was 98% and in some facilities in some cities it was 100%. “The industry in South Africa began in the late 1980s. Typically low cost facilities in industrial areas often near the airports. We are now starting to see the second and third generation sites coming to the market,” said Gavin who added that the industry is fragmented and there is no dominant player. “Operators have been able to sit back and watch the facilities fill up, as a result there is little public awareness of self storage, which means that there is a large untapped market.” The average size of units is 18 sq m a figure derived from the typical standard garage. In the past the self storage developers have opted for rows of garages rather than dedicated self storage facilities. Some 80% of the facilities are now multi-floor and of this 7% are conversions of industrial buildings. Only 8% of operators offer retail services such as boxes, locks and tape. A unique factor in South Africa is what is known as the one-foot syndrome, that is those people who are working in the UAE, UK or USA, but still have one foot in South Africa having packed their belongings away, but intend to return to look after aging family members or educate their children. “The need for a national association is now critical and important,” says Gavin. “We are already seeing government involvement where the government are investigating complaints of malpractice in certain parts of the country. “The biggest difficulty is that when we ask an operator to help form an association, their first question is: ‘What for? My facility is 98% full, I visit it once every six months, my overheads are exceptionally low, why should I need to come and share my ideas with other people?’ “However, the promotion of the product is very important, so we will continue to try to get an association off the ground,” concluded Gavin. The current situation in the Australian self storage market was updated by Rennie Schafer, who has been Executive Officer, SSA Australasia,

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2008 Volume IIISelf Storage Europe 12

Roger Martin-Fagg of Henley Management College spoke at the recent FEDESSA European Conference. Here he updates members on the current economic situation

In a capitalist system flow is really important. Sales flow, work flow, income flow, cash flow, anticipating and planning few changes in flow is a key component of running any enterprise. And households are always concerned with flow, many may not plan flows, but they certainly live by them; an unexpected bill for the car, house or from the children often creates a cash flow problem (normally the outflow for a period is larger than the inflow). The credit system allows companies and households to operate for some time with negative cash flow, where debt is increased at times of negative flow and priced down when cash flows are positive. A credit crunch is when banks reduce their willingness to lend for this purpose and simultaneously increase the price of any lending they do undertake. This can and does become a considerable shock for companies and individuals who have become used to abundant, cheap credit. And it is a shock to the system as a whole – an inability to finance the difference between cash in and cash out, results in a reduction in cash out (which reduces cash in for the next player in the system, and so on). This is a multiplying feedback loop which once established is almost impossible to attenuate. Any tax rebates get used for paying off debt or are held in liquid form to cover future expected cash outflows, so their impact on effective demand is usually minimal. As the reduction in rate of flow gathers pace, the prices of real assets, for example houses, commercial property, and land, begin to fall. This prompts the banks to charge ‘value impairment’ to their regulatory capital which, via a multiplier of around 10 times, causes further reduction in the rate of lending. This then prompts further value impairment changes and the calling in of loans from high quality customers,

who are then forced to delay payments to their suppliers, thus creating a further feedback loop. Or, after a time lag, they reduce their head count. Unemployment rises, creating a further loss of incomes and retail spending. This cumulative process finally ends when central banks and commercial banks cut borrowing rates, and also, the commercial banks add back some of the provisions to regulatory capital which in the end, they did not require. This boosts the willingness and ability to lend, which will be matched by an increase in the willingness and ability to borrow (there will be lots of bargain deals in real estate and going concern businesses). This point is reached three years after the initial downturn. So, if one assumes the initial downturn began in the 3rd quarter of 2007, it will be the 3rd quarter of 2011 before the recovery gains momentum.

Where are we now?

The current oil price is reducing US consumer discretionary income by 6%, UK by 3%, EU by 2%. Retail sales values and volumes can be expected to fall in the USA and UK, and be flat in the EU. The US is in recession, the UK will probably go into recession in the 4th quarter of 2008; Germany and Western Europe will be in recession in

2009-2010. This assumes that the oil price stays above $100 per barrel. Economic conditions will be described as ‘Stagflation’ where output is flat but prices continue to rise, or ‘Slumpflation’ where output is falling and prices are rising. When inflation is imported from China, and oil producers, there is nothing Government can do about it. When inflation is due to import prices rising because of a falling currency the only option is to raise interest rates, which of course impacts on the domestic flow of incomes. The Bank of England will not be cutting interest rates below 5% for at least two years: they may have to raise them if RPI inflation pushes through 5%. The ECB will not cut interest rates

The anatomy of a recession

Roger Martin-Fagg

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75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

20

40

80

60

Economic growth and the Real Price of Oil

100

120

Growth Boom Growth

Iranianrevolution

OPEC cutsproduction

End of Iranianhostage crisis

OPEC cartelcollapses

Invasion of Kuwait

Start of second war in Iraq

Stag-flation

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Source: International Monetary Fund

Average growthrate in real GDP,1970-2004: 3.7%

RECESSIOn

RECESSIOn

2

4

8

6

10

12

Per

cent

%

Real Price of Oil

World economicgrowth

Forecast

either; these will stay at 4%. Euroland inflation is running at 4%. If it goes higher, then they will also increase rates, even if output is falling. The impact of this general economic picture for the self storage industry is mixed but on balance, positive. The cost of debt will increase, the availability of finance will decrease. But rising repossessions in the UK, Spain, and Ireland will be beneficial to self storage. Also if small scale retailers use it for warehouse space, then the unplanned build up of stocks of unsold goods could be stored in this way. The current credit climate will reflect valuations of fixed assets; their price will fall and so the yield on Self Storage Assets is expected to rise. This will prove an attractive proposition for purchasers but not of course sellers. It is likely that the split between owner and operator will grow as institutional money looks for an asset class with practicable free cash flows. As with any business in recessional

times, be absolutely clear on your value proposition, deliver outstanding customer service, and do not borrow too much. In three years time, with oil

prices down to around $60, the global expansion will begin again. It was a great party whilst it lasted!!

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8

-3-2-101234567

-4

9101112

-5-6

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00

U.K. Gross Domestic Product - Average Estimate Annual % ChangeU.K. Volume of Retail Sales - Annual % Change

U.K. Real M4 Growth - Annual % Change*

* Nominal M4 deflated by the RPI excluding mortgage interest paymentsQuarterly periods when stocks were reduced

01

3 month INTEREST RATE

02 03 04 05 06

11 11 8 8 13 15 13.5 10 5.5 5.5 6.5 6 6.5 7.25 6.75 5.0 6 4.5 4.0 3.75 4.75 4.5 5.25 5.75 5.0 4.755.0

29 17 25 51 44 (36) 11

% change in FTall share index

07 08 09 10 11

18

Ollie Saunders, Partner, Drivers Jonas spoke at the FEDESSA European Conference, here he updates readers on the state of the property market

Let’s put the property market into context. Since the mid 1990s values for commercial property have had a fantastic bull run – for instance they rose by over 40% between 2003 and 2006. However, the fall in values recently has been sharp. In March 2008 values had fallen by 15% from where they were in July 2007 and some commentators think there could be another 10% to come. This would mean values would have fallen by a quarter in a year. 2007 was a year of two halves – the first half saw a rapid rise in values which was followed by major negative sentiment which has continued in 2008. Values are falling at around 2% per month. The occupier market is also softening and the volume of deals has halved. The good news for those looking to buy land to build new facilities is that this market is also softening! So how does this all impact on the self storage market? Recently, the institutional investor has arrived in the UK market. It used to be the domain of the owner operator where the people that managed the stores also owned the property. Now there are institutions who want to buy into the sector with someone to manage the facilities for them. These are some examples where Drivers Jonas has been involved: ❐ We sold Armadillo to HSBC Specialist Finance in early 2007 for £40m. There were ten stores which offered a total Lettable area of 350,000 sq ft. The portfolio was 35% occupied and was averaging about £15 psf. HSBC put in Personal Storage to manage the stores; ❐ City Box was sold in 2007 to Immofinanz - who are a large European property company. Management retained a stake in the business which has 480,000 sq ft of space and 14 stores in Holland;

❐ Space Maker was sold to Babcock and Brown in the Summer of 2007;❐ Keepsafe was sold to Macquaire with their link up with Storage King in the latter part of 2007. Again, an institutional investor buying a portfolio with a manager in place; ❐ Babcock and Brown has acquired the Exeter and Plymouth sites of Crown Storage. So where is the self storage market now? The fundamentals are strong: the industry has a good track record and in these difficult times most operators seem to be holding up well. Can we claim that the sector is coming of age – having proved this track record we now have institutions looking to buy on a leveraged basis. But with the cost of debt going up, it does affect value. The maths are simple: the buyer has to pay the lender more for the loan and has to put more of their own money in. And despite the current difficult climate, there are still problems with the limited supply of stock. There are still high barriers to entry in developing stores in the UK. The question for the property market is not only when the credit crunch will stop but when confidence will return. So what does the future hold? Let’s look at why people want to buy self storage. The cashflows are cracking – we have statistics going back about eight years and rental growth has been about 6% to 7% per annum. Analysts are still forecasting growth of 5% for the next few years. There is still a yield gap between self storage and other commercial properties with similar risks – but it has narrowed. But self storage values probably did not rise as quickly as other more traditional property types during the boom years – and I suspect that they will not fall as quickly either. But as there will be pressure on values and yields, self storage is attractive as there are ways to add value by being proactive – such as improving the way the operator sells the space, extending buildings, changing the VAT regime, renegotiating leases or buying in freeholds.

We know that economic conditions are much tougher, and there is much press comment on what the fallout from the credit crunch will be. I think that we will see innovation in these tougher times – not only in the way that operators sell storage but the buildings that are built, and probably we will see more mixed use schemes. There are more stores in the pipeline and there are new entrants trying to get into the market meaning competition will increase – but I do question whether we will see a significant increase due to the complexities of development. There will be new sources of capital and I think new investors will propose interesting structures in a debt constrained market. And there is corporate activity going on albeit at a slower pace. I think when we meet next year there will have been some more consolidation and some new investors in place. Values? They do go down as well as up but the fundamentals are there for the industry to sail through these choppy waters. Self storage is a different asset and perhaps the next few months will help us to demonstrate that values are less volatile than those of other commercial property types. If this is the case, then it will be another string to the bow of the industry.

www.driversjonas.com/selfstorage

Self storage and the property market

Ollie Saunders

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