Demand and supply
Avison Young's data shows a significant increase in the number of agent-led requirements for a variety of open storage uses since 2019. Across the South East/London and the Midland markets, demand in 2022 far exceeded that of 2021. This underlines the growing opportunity in this sector as we anticipate occupiers will continue to focus on the best sites, specifically sites that offer 24/7 working, 365 days per year.
OPEN STORAGE ENQUIRY LEVELS
Source: Avison Young
With growing occupational demand, many more operators are entering the market, particularly markets with sites with easy access to large urban centres and ports. Some examples include Legal & General, who have some exposure to this market, with a site at Westbury, Wiltshire and via rail terminals for Honda at Swindon and Jaguar Land Rover at Castle Bromwich. Open Site Estates (JKS Group), an Essex-based landlord, are building up a portfolio of sites and are looking to improve upon the quality of its offering. Dainton Group offers self-storage/storage sites and operates internationally, although their target market is more aimed at the general public than commercial users. Recently Peloton Real Estate and Moorfield Group have announced a joint venture to assemble an initial £100 million portfolio of open storage assets throughout the UK.
Whilst more well-known property companies are now entering the market, up until recently, this type of asset had not been of interest to mainstream investors. Most sites were at the preserve of private landlords, many of which had been unwilling to invest in providing good quality facilities. However, this is where the opportunity lies, as, like the broader industrial market, the chronic lack of supply of open storage – of which landlords are seldom institutional but rather are private individuals or small businesses often offering single sites - will drive future rental growth, which is attractive to investors.
Supply remains constrained
As seen in the wider industrial market, supply remains limited and is subject to erosion as some sites transition to redevelopment. The problem is that much of the available stock is of relatively poor quality and is only available on short-term leases. Within urban locations, open storage sites often have occupied areas that have been regenerated - but this has resulted in the displacement of their tenants. To further combat short supply, former airfields have proven popular given the good quality surface. Also, farmers have seen smaller-scale open storage as a diversification opportunity, and it is not uncommon to see greenfield land used for this purpose without planning permission.
Occupiers are becoming increasingly focused on operational quality driven by multiple factors including Health & Safety demands, staff welfare and insurance requirements, and the cascading of ESG criteria. We anticipate future supply will continue to accommodate these elements. Larger companies will drive this through their supply chains but with consequent impact for all sizes of organisations.
The planning process has limited the current supply quality, which has delayed some better-quality open-storage sites coming through to the market. Planning permission will generally be required for legal use as open storage., There has been a rise in the number of planning application submissions for open storage use over the last year, however, the number of submissions remains low.
OPEN STORAGE APPLICATION SUBMISSIONS
Source: Glenigan, Avison Young