Self storage and the housing market

Self storage is often thought to be economically entwined with the fortunes of the housing market, a link that can’t be overstated. According to Big Yellow’s 2010 Annual Report, almost 60% of their customers were people storing goods while moving house; 35.95% moving within the owned sector, and 21.55% moving between rented accommodations.

The closeness of this link means that occupancy rates at self storage centres tend to rise and fall in line with the property market’s seasonal variations: they are often lowest during the winter months, when relatively few people are moving, and reach their peak in the bright days of summer.

However, as everyone knows, the property market has had a tough time of late, with very low levels of activity recorded at any time of year during the recession, compared to the boom period it had enjoyed previously. With buying and selling still yet to pick up again, this raises an interesting question: will there be a seasonal peak in the property market this summer, or is the self storage industry set to lose out?

Self storage: property prices on the downturn

Certainly the outlook for the property market in the near future isn’t anything to write home about, according to the experts. New figures released by the Land Registry show that average house prices fell 0.8% in February, making it the fifth month in the last six during which they have fallen (January recorded a nominal rise).

This means the average house price this February was 1.7% lower than it was last February, and represents a 2.9% fall from last summer’s seasonal peak of £166,978, which it reached in August. This means the average property is now worth £4,763 less than it was 7 months ago, and the Office for Budget Responsibility announced recently that it expects property prices to fall another 2.3% this year.

If that wasn’t bad enough, some analysts have been even more pessimistic. The property website Zoopla.co.uk argues that house prices have actually fallen by 11% from July last year, knocking a huge £25,000 of the value of the average property ( they calculate their figures differently).

The indicator that makes the least pleasant reading of all for the self storage industry, however, is the overall number of transactions. Between September and December 2010, an average of just 56,257 property sales were completed each month. This is 9,000 fewer than in the same period the previous year. However, what’s really surprising is the scale of long-term downward trend over the last few years; December 2010 saw 54,812 completed sales, 30% below the number in 2009, and a staggering 55% below the December 2006 total of 122,000.

This remarkable decline in property market activity has been put down to both the difficulty in obtaining mortgages while the banks are reluctant to lend, and also the glut of unsold homes which have been on the market for over a year, which people are unable to buy at their current asking prices.

Self storage: declining alongside the property market?

All this means that the self storage industry should be in trouble if it relies on people moving house for much of its business. However, this doesn’t appear to be the case; Big Yellow Self Storage actually made more money from storage-related activities in the 4^th quarter of 2010 than it had the year before, while Safestore’s revenue grew by 5.7% in the year as a whole.

One reason for this is that a lot of people have been canny, using the lack of opportunities to sell their house as a reason for having it renovated. The low price of building supplies has created discounts in the renovation sector, making this attractive to homeowners, who then put their belongings in self storage as a way of keeping them safe while the work is taking place.

There is also the fact that self storage companies are very proactive against falling occupancy levels, which they often attempt to halt by reducing rent per square foot. Both Big Yellow and Safestore have strategically lowered their rates at different times during the recession in order to increase revenues.

However, possibly the biggest reason that the woes of the property market haven’t forced self storage into terminal decline is that the property market has done much better in London than it has in the rest of the country, and this is where the major self storage firms are concentrated.

While it is still difficult for buyers to obtain mortgages in London, the overall attractiveness of living in the city means prices are continuing to grow. The average London home actually increased in value by 3.2% over the last twelve months, to £341,048 – 110% more than the average for England and Wales as a whole.

For as long as the self storage market remains centred on London, and is able to be pragmatic about what it charges, no downturn in house prices is likely to have too much of an effect.

6 Responses to “Self storage and the housing market”

1. 90805 Storage Facilities says:

   March 29, 2011 at 9:35 pm

   Great post! Thanks for sharing your idea.

2. Ft Carson Self Storage says:

   March 31, 2011 at 4:50 am

   I don’t quite understand the idea of people moving a lot. The stress that comes with it especially if you are one family unit. But if you are an individual, I don’t think that it matters. I for one wouldn’t moving alot.

3. Alan Stephenson says:

   April 2, 2011 at 12:14 am

   Good points indeed! A modest house price increase was announced today bucking the trend somewhat. Even so difficult trading conditions prevail in the moving industry. I think storage is certainly an excellent house staging tool when buyers are thin on the ground, this can improve occupancy in a tough Market. Also storage can be the answer when a keen buyer is found and the vendor doesn’t want to loose a sale. Moving into a rented property is also commonplace when house price fluctuations and supply are uncertain. This often involves some storage for items such as pictures etc which can’t be hung. I always try to explain to people moving to a temporary rented property to not rent a large house just to accommodate the furniture, when infact it would be far cheaper to rent a small property and store all but essential items.
   There is a possible link between the activity of the housing Market and storage activity however, there are circumstances that increase activity. It’s a good idea to try and identify these markets and Market for them, possibly giving you the edge over your competition.
   I look forward to your next post.

4. Hitchin self storage says:

   April 30, 2011 at 11:06 am

   We have certainly seen people storing because of house renovations as your article suggests and also a number of young people caught out by the recession being forced to move back in with their parents.

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   July 25, 2012 at 12:38 pm

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6. alex @ removals coventry says:

   April 9, 2014 at 12:25 pm

   We offer secure and self storage and have seen an increase in both due to such things as renovations.