The European Self-Storage Market: Still Growing

The European self-storage industry continues to grow steadily. There are now around 7,000 facilities in operation comprising about 13.9 million gross square meters of space. The United Kingdom dominates the continent with 32.9% market share, followed by France (13.4%), Germany (10.9%) and Spain (10.4%). All told, those four markets account for 68% of Europe’s total facilities.

Despite the dominance of those regions, self-storage is present in almost every European country, with notable emerging markets like Poland and Portugal showing significant growth in recent years. Across the board, the industry has grown at about 10% per year in terms of total space for the last seven years, and that trend looks like it will continue.

2023 in Review

Self-storage performed exceptionally well during the pandemic years, so some softening in the market this year was expected. However, it’s been compounded by inflationary pressures and cost-of-living increases. Across Europe, physical occupancy levels have fallen about 1% to 79.3% at immature sites and 86% at mature locations. Rental rates have continued to increase, with many operators showing 10% income growth over 2022.

Europe is a supply-led market. New sites are difficult to find, and competition between quality, existing stores is extremely high. This means operators have been more focused on maximizing rates and yields rather than occupancy, due to the difficulty in adding space to an existing location or opening a new store if full. A facility with occupancy above 95% is generally considered to be overfull but could generate more profit with better pricing strategies.

This summer proved not to be as strong as many operators had hoped, but it generally brought improvements in occupancy and rental rates. Customer churn dropped considerably during the pandemic and has increased only slightly this year, remaining well below 100% for most operators. This means there’s less pressure to replace move-outs with new tenants. There’s also generally more room to push price increases on longer-term customers.

Upfront discounting has increased in 2023, which will improve profitability. Interestingly, many markets in Europe have seen a decrease in self-storage inquiries but an increase in lead conversions. It’s unclear if this is because customers are shopping around less or if those inquiries are more need-based.

With that overall picture in mind, let’s look at some of the driving factors that will shape the European self-storage market in 2024.

Cost of Debt

While the increasing cost of debt has impacted the self-storage market, the industry has much lower debt now than during the last recession. There’s no evidence of businesses coming under pressure from lenders due to an inability to pay their loans. To the contrary, existing operators with access to cash or equity for purchases are in a good position to obtain development properties, as property values have generally dropped in most…