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Safestore Holdings & UK Self Storage

Former Operations Director at Safestore Holdings

Safestore Holdings PLC

Why is this company interesting?

Safestore Holdings (SAFE) is the leading self storage business that operates 130 in the UK, 27 in Paris and 3 in Spain and competes with companies such as Big Yellow (BYG) and Lok’nStore (LOK). The UK has 0.7 square feet of self storage per capita compared to nearly 10 square foot in the US and only 0.2 throughout Europe. There are over 2,500 stores in the UK including ~500 which are cheaper, container stores.

Over the last 7 years, the average rate per square foot has consistently grown 2% per year and the occupancy is up from ~60% to 80% today. SAFE freehold properties earn a 6-7% exit cap rate relative to the 4% average cap rate in London.

SAFE has been a 10-bagger in the last 10 years and has over 60 stores in the pipeline to fuel future growth across Europe.

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Executive Bio

Dave Davies

Former Operations Director at Safestore Holdings

Dave is an experienced self storage executive and was a member of Safestore’s management buy out nearly 20 years ago. He started a career in retail, managing stores for Wickes, a home improvement retail chain, and Pet City, a UK-based pet retail company, before joining Safestore in 2000. Dave was instrumental in buying, operating, and growing the store base across the UK and opening stores in Paris. He currently consults container storage companies in the UK.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Dave, can you share some context to how the UK market was structured for self-storage, in the early 2000s?

It was very different from how it is now. No one had heard of self-storage. Certainly, when I got the call and someone said to me, we’re moving into self-storage and I want you to go and have a look at this ailing business I thought, self-storage, what’s that? Frankly, I’d never even seen a self-storage site in my life and, at 40 years of age, that was quite a surprise, to be honest.

It was a very junior industry when I joined it and, I guess, the fulcrum of it was in London. The reason no one had seen it was because you bought the cheapest building that you could, and that was normally at the back of an industrial or trading estate, and it wasn’t visible to anybody. It was simply a building that nobody else wanted. The first time I went to Safestore’s head office, it was above a store, in Wood Green, in London. You could drive down the road and you would never notice it. It was a poor looking building, just sat back off the road.

It was a complete shock to me. I had come from retail, where I’d been all my life, with startup stuff. When we sold that business, I went on holiday and, when I came back, someone said, we’re going into self-storage. There were no stores. The biggest company had maybe 20 stores, if that, and no one had ever heard of them. A very different structure from how it is today.

Why is that density so low in the UK, compared to the US?

First of all, we’re 20 or 30 years behind the US. With the pioneers of the industry, a lot of the very first stores in the industry are based on US build and US style. It was just people travelling to the US, seeing self-storage, thinking it was a great idea and coming back. It’s an immature industry; the first building was maybe in the mid-80s. There are lots of factors as to why the US is different. The main one is that it is just 30 years ahead.

Is there any reason why the density can’t get to US levels, in the UK?

Loads. Mainly because we’re an island and we just don’t have the land. A few weeks ago, I read that to get to the density of the US, we would have to build 17,000 more stores in the UK. Given that, including container sites, there’s probably now only about 2,000 to 2,500, we’re never going to get to that density. Also, the availability and relatively cheap price of land in the US means that the prices that customers pay are maybe a third of what we charge a customer in the UK.

In the US, some would say that it’s a commodity. I think that one in three households in the US has a storage unit. There is no such number for the UK because it might be the other way round; one in 100. We’re never going to get to those densities.

What could it get to?

If it’s 0.7 today, five years ago, we were talking about it being 0.5 or 0.6, so it’s growing every day. Obviously, the last couple of years have seen things slow down a little bit. I would expect to see it get to 1, maybe 1.2, in the next 10 years.

Which is still almost double the market size?

Yes; I think it’s gone up maybe 0.2 in the last five years or so; I think that’s feasible. Land is still tough; planning is tough. But I think we’re seeing lots of innovation and I’m comfortable that the market has got a long way to go.

What about in Europe? As you said, 0.7 square foot per head of population in the UK. I think Belgium is 0.2; Paris is 0.2.

Obviously, with Safestore, we have a French business, based entirely in Paris; 29 stores in Paris. I have worked in Italy and Spain. If you take Europe as a whole, it is 0.2.

Why is that?

For some of the main powerhouse countries, such as France, Germany, Italy and Spain, it’s not even 0.2. Some of the biggest and wealthiest countries in Europe are not even at the average. We’re 20 odd years behind the US and they are 20 years behind the UK.

Safestore has been in Paris for about 20 years. Why haven’t they moved out of Paris into other European cities?

Due to the population; there is so much in Paris, with so little competition. We took the business decision to stick in Paris. We bought a business called Une Pièce en Plus, which is a spare room, and there is so much growth just in Paris, even today. A couple of days ago, I read that Safestore had bought another store in Paris and are building another two or three. They’ve come from the center of Paris and now they’re working out into the suburbs. If you look around France, particularly, it’s still very much big city driven. You don’t find self-storage in small towns; it’s very much the biggest cities where people are concentrating.

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Safestore Holdings & UK Self Storage

September 23, 2021

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