The Group operates in a market with relatively low consumer awareness. It is anticipated that this will increase over time as the industry matures. To date, despite the financial crisis in 2007/08, the implementation of VAT in the UK on self-storage in 2012, Brexit and the Covid-19 pandemic and inflation and the conflict in the Ukraine, the industry has been exceptionally resilient. In the context of continued uncertain economic conditions, the industry remains well positioned with limited new supply coming into the self-storage market.
With more stores inside London’s M25 than any other operator and a strong position in central Paris, we have leading positions in the two most important and demographically favourable markets in Europe. In addition, our regional presence in the UK is unsurpassed and contributes to the success of our industry-leading National Accounts business. In the UK, Safestore is the leading operator by number of wholly owned stores. With 53% of customers travelling for less than 15 minutes to their storage facility (2024 SSA Survey). Our national store footprint represents a competitive advantage. Based on the revenue reported by Cushman and Wakefield in the various SSA reports, our market share in the UK based on revenue is 21%.
The Group’s capital-efficient portfolio of 203 stores in the UK, Paris and Expansion Markets consists of a mix of freehold and leasehold stores. In order to grow the business and secure the best locations for our facilities we have maintained a flexible approach to leasehold and freehold developments as well as being comfortable with a range of building types, from new builds to conversions of warehouses and underground car parks.
Currently, around a quarter of our stores in the UK are leaseholds with an average remaining lease length at 31 October 2024 of 13.2 years (FY 2023: 12.4 years). Although our property valuation for leaseholds is based on future cash flows until the next contractual lease renewal date, Safestore has a demonstrable track record of successfully re-gearing leases several years before renewal whilst at the same time achieving concessions from landlords. From time to time, we will purchase the freehold on leasehold properties, when these become available at appropriate prices.
In England, we benefit from the Landlord and Tenant Act that protects our rights for renewal except in case of redevelopment. The vast majority of our leasehold stores have building characteristics or locations in retail parks that make current usage either the optimal and best use of the property or the only one authorised by planning. We observe that our landlords, who are property investors, value the quality of Safestore as a tenant and typically prefer to extend the length of the leases that they have in their portfolio, enabling Safestore to maintain favourable terms.
In Paris, where 35% of stores (including the pipeline) are leaseholds, our leases typically benefit from the well- enshrined Commercial Lease statute that provides that tenants own the commercial property of the premises and that they are entitled to renew their lease. Taking this context into account, the valuer values the French leaseholds based on an indefinite property tenure, similar to freeholds but at a significantly higher exit cap rate.
The Group believes there is an opportunity to leverage its highly scalable marketing and operational expertise in geographies outside the UK and Paris to make a significant contribution to Group expansion.
The Group has 12 stores in Spain, including four opened in the year, 14 stores in the Netherlands and six in Belgium. There are a further nine stores in the development pipeline (Spain - six, the Netherlands - two, Belgium - one) at the end of October 2024.
These stores in Expansion Markets are principally located in the key metropolitan areas of the Randstad, Barcelona, Madrid and Brussels. The growth opportunity from these markets is in both the availability of high- quality sites for new stores and LFL income growth as the markets mature.
In 2022, Safestore entered the German self-storage market via a joint venture with Carlyle, which has acquired the myStorage business. After acquiring the freehold to one of their sites, myStorage now has five medium to long-term leasehold in addition to a further leasehold expiring in 2026. The 326,000 sq ft of MLA is spread across Berlin, Heidelburg, Mannheim, Fürth, Nuremburg, Neu-Ulm and Reutlingen.
Following year end, Safestore entered in a new joint venture in Italy. The EasyBox business comprises ten open stores and two under development in the key economic centres of Italy. The total MLA for the business is 780,000 sq ft.
Our experience is that being flexible in its approach has enabled us to operate from properties and in markets that would have been otherwise unavailable and to generate strong cash-on-cash returns.
We excel in the generation of customer enquiries which are received through a variety of channels including the internet, telephone and “walk-ins”. In the early days of the industry, local directories and store visibility were key drivers of enquiries. However, the internet is now by far the dominant channel, accounting for 89% (FY 2023: 89%) of our enquiries in the UK and 86% (FY 2023: 84%) in France. This dynamic is a clear benefit to the leading national operators that possess the budget and the management skills necessary to generate a commanding presence in the major search engines. We have developed and continue to invest in a leading digital marketing platform that has generated 39% enquiry growth over the last five years.
Although mostly generated online, our enquiries are predominantly handled directly by the stores and, in the UK, we have a Customer Support Centre (“CSC”) which handles customer service issues in addition to enquiries, in particular when the store colleagues are busy handling calls or outside of normal store opening hours.
Our pricing platform provides the store and CSC colleagues with system-generated real-time prices managed by our centrally based yield-management team. Local colleagues have certain levels of discretion to flex the system-generated prices, but this is continually monitored.
Customer service standards are high and customer satisfaction feedback is consistently very positive. The key drivers of sales success are the capacity to generate enquiries in a digital world, the capacity to provide storage locations that are conveniently located close to the customers’ requirements and the ability to maintain a consistently high quality, motivated retail team that is able to secure customer sales at an appropriate storage rate, all of which can be better provided by larger, more efficient organisations.
We remain focused on business as well as domestic customers. Our national network means that we are uniquely placed to further grow the business customer market and in particular National Accounts. Within our business customer category, our National Accounts business represents around 493,000 sq ft of occupied space (around 11% of the UK’s occupancy). Approximately 71% of the space occupied by National Accounts customers is outside London, demonstrating the importance and quality of our well invested national estate.
At the year end, business customers constitute 41% of our total space let in the UK. We are accelerating the conversion of larger units (over 250 sq ft) into smaller ones more suitable for domestic customers, reducing the historic over-weight towards business customers in the UK. Through this partitioning programme we expect to significantly reduce the current 1.0 million sq ft of larger units, which are predominantly located in London (36%) and south east England (24%), so that the UK ratio of domestic to business customers comes closer to the 70/30 split by occupied space seen in the rest of the Group.
The business now has in excess of 94,000 business and domestic customers with an average length of stay of 27 months and 21 months respectively.
The cost base of the business is relatively fixed with regard to changes in occupancy. Each store typically employs three staff. Our Group Head Office comprises business support functions such as Yield Management, Property, Marketing, HR, IT and Finance.
