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Time for the Giant to awaken?

01 Jun 2018

With a population of some 80 Million, economic growth of just under 2%, low unemployment of around 3.8% and as the country which embraces immigration like no other, some may rightly argue that Germany should be taking self-storage more seriously.

With an increase in facilities in 2017 of 14% over the previous year, the number of locations as at mid May 2018 is around 235, offering a nett lettable area of some 550000m2 excluding container parks and garages. This equates to a mean facility size of some 2340m2 and means that Germany currently has around 0.006m2 per capita, 10 times less than in the UK and, say, Sweden.

Whilst this quadrupling of the number of facilities since 2009 seems impressive, if we dig beneath the surface we find that the top 8 operators are cumulatively responsible for around 72% of the area on offer.

It would seem then that Germany’s thirst for self-storage has yet to be discovered. As in the rest of Europe, more people are moving into large towns and cities in a bid to be closer to work and to avoid an unnecessary commute and this, by definition, means that housing projects continue to be prioritised by local and regional government. Where a basement and loft were commonplace with building works, these are now done away with in favour of maximising living space. As the demand for renting a flat has increased, so has the price and affordable living space is now in short supply.

“It is alleged that the current generation has 6x more ‘stuff’ than the previous one so surely this must be an opportunity to promote the service offered by a self-storage solution. And therein lies the rub…”

The market perception of self-storage in Germany is tiny. Up until about 7 years ago, self-storage was almost only seen in larger cities such as Berlin, Hamburg, Munich and Cologne. Nowadays there is more of a presence in the smaller towns but little is done to practically promote the idea.

Financing self-storage projects is inherently difficult in Germany and banks cannot grasp the risk that the product brings. This is the very barrier to entry faced by the entrepreneurs. Germany is fond of neither credit nor debt, even the humble credit card being frowned upon outside of the regular tourist routes. Germany also makes it difficult to gain planning permission as every ‘state’ has its own rules and regulations. Added to this are the miles of red tape and bureaucracy for which Germany is renowned and which can slow down a project considerably.

So, what does the future hold and when will Germany realise the potential for our industry?

In short, it’s going to take a little more time. The main operators are already ‘on board’ with the idea and its potential and are competing with one another for the best pieces of land. But, the expansion will ultimately come from new entrants targeting smaller towns, relying heavily on their internet presence coupled with the feeling of being ‘local’ in order to provide that all important USP.

This will mean many more smaller facilities of around 500m2 to 1500m2 and we are already seeing the beginnings of these independents joining together to form ‘buying groups’. More emphasis will be placed on technology as they try to appeal to the next generation and its love of all things ‘smart phone’. Of course, the key players will continue to add locations to their portfolio and we are already hearing of the imminent arrival of groups, who intend to set up 10+ sites all within the next 2 years.

Our prognosis for the next 10 years is that we will see the market double in size in terms of area and triple in terms of the number of locations.

The Giant will undoubtedly open one eye at a time.

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