The rise of self-storage in the Nordics

Welcome back from the summer break! The Nordics Real Estate blog starts the second part of 2020 with an article focusing on self-storage, which has proven to be a versatile real estate investment.

The primary driver of self-storage in larger cities is a higher degree of urbanisation where a growing population density pushes the need for extra storage space. A new trend shows that small and medium-sized enterprises will demand more flexible storage solutions with a location in urban areas, and self-storage carries several attractive characteristics.

The primary driver of the demand for self-storage for citizens in larger cities is the growing urbanisation, which means that the population density increases. When the population density is high, it affects the demand for housing, and citizens often need extra storage solutions due to limited space in their homes. Other aspects affecting the demand for temporary storage solutions are social factors like more single-person housings, marriage, divorce, exchange stays abroad, etc.

Self-storage for the private sector supposedly accounts for the largest part of the turnover in the Nordics, but businesses’ demand for flexible storage solutions increases. It is particularly the flexibility of self-storage that appeals strongly to small and medium-sized enterprises, which are not interested in signing up for long leases. It can be accountants needing extra storage for their hardcopy archives but also import/export companies or webshop owners, who need flexible storage that matches their business and makes up- and downscaling easier. According to an analysis from the Federation of European Self Storage Associations (FEDESSA), companies who rent self-storage in Finland, Sweden and Denmark makes up for around 20% of the total area in 2019. This is below the European average, which was 32% in 2019. In Norway, the share is just over 40%.

The interest in alternative property segments is growing

As the yield levels for property investments have fallen concurrently with the falling interest levels, there has been an increase in the demand for operational properties from income-oriented investors. From an investor point of view, the primary driver of the need for operational property is the possibility for higher returns compared to more traditional property segments, diversification of risk, income stability and potential for capital growth. The rising attention from investors is, for example, seen in the US, where the fastest-growing sector is self-storage, which in 2018 had an investment body ten times the size as in 2008.

One of the most significant entry barriers for institutional capital for investing in self-storage has been the limited possibility to grow a portfolio with considerable size, quality and prime location. This means it is an advantage for self-storage operators to be present in more than one Nordic country. Nordic operators of self-storage include Pelican Self Storage (owned by NREP) and City Self-Storage, which is owned by Self Storage Group; Scandinavia’s first listed self-storage company.

But where the market in Denmark has become more consolidated, the markets in Norway and Sweden are instead characterised by being more fragmented where more companies operate a smaller number of facilities. In Finland, self-storage is not nearly as endemic and is only expected to become a more mature market in 2-3 years. According to FEDESSA, the four Nordic countries are part of the top 7 over self-storage space per inhabitant in Europe.

Key figures for self-storage in the Nordics

Source: European Self Storage Annual Survey 2019, FEDESSA

Please don´t hesitate to contact Christian or Katja, if you have any questions or would like to book a meeting.

Christian Bro Jansen & Katja Haizmann

Christian Bro Jansen & Katja Haizmann

Christian is the Head of Capital Markets in Denmark. Christian has extensive experience within real estate transactions, corporate finance (M&A), business development and project management. Prior to joining CBRE back in 2017, Christian was employed for four years in Falck, most recently as Director in charge of expanding the business to new markets, including purchases and sales.
Mobile phone: +45 31 40 38 63

Katja is Senior Analyst at CBRE Denmark. Katja provides specific analytical and research-based inputs into demographic, economical and statistical drivers in relation to real estate demand as well as market trends and bespoke property sector analysis. In addition, Katja also has particular focus into developing the data consulting services and predictive modelling tools as part of the digital valuation service line.
Mobile phone: +45 53 56 57 92

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