A constraint for open storage sites, especially in prime locations, is that they are often considered potential development plots. This means these sites are often offered on a short to medium-term basis whilst planning is pursued for development. Whilst the short-term option benefits some occupiers that require flexibility, it does rule out those occupiers who would otherwise look to invest in a site. Self-storage operators, for example, often look for 10-15+ year terms. Alternative fuel providers require even longer terms and are likely looking at 20+ year terms to make the initial capital expenditure viable.
Another consideration is that open storage sites are not generally subject to empty rates, whereas buildings (provided by either landlord or tenant) result in an entire site becoming rateable. Therefore, in these instances, it is important to create separate hereditaments. In the upcoming rates revaluation in April, land used for storage will see rates rise by almost 27.3% across England & Wales. Furthermore, it is not unusual for open storage sites to be subject to conditional or restrictive permissions. Common issues include restricted hours of use, noise limits, height restrictions and user number limits. These can prove to be a major obstacle for occupiers. However, we believe there will be a strong and long-lasting demand for sites that can provide a quality product in attractive locations and certainty over the potential for long-term occupation.
The ongoing supply chain issue has resulted in some warehouse occupiers struggling with excess inventory, but moving to bigger/additional premises is not quick and straightforward. It could be the case that an occupier has committed to new premises, but due to the chronic shortage of stock in the market, it may mean there could be a 12+ month period to wait before the new premises can be occupied. To alleviate the problem, some occupiers have had to overspill goods/materials in the short-medium term, to open storage sites too. This may be done in the form of temporary warehousing whilst a permanent solution is sought.
Open storage has been a solution to problems created by geopolitical issues such as Brexit, Covid, the war in Ukraine and lockdowns in Asia, particularly around ports.
An article from the Wall Street Journal from June 22 suggests that ”Ports are running out of space to store containers. That is leading to a land rush in an obscure corner of the real estate market. Logistics companies and port operators are racing to lease vacant land close to container terminals, driving up rents and property values and spurring more investment in coastal outdoor-storage properties.”
Whilst this is a commentary on the US market, the sentiment also stands up in the UK. In fact, container-storage sites in the UK have been increasing, with the number of sites increasing by 63% since 2018.
TOTAL NUMBER OF UK CONTAINER-BASED STORAGE LOCATIONS
Source: Self Storage Association
A knock-on effect of the often short-term arrangements is that some landlords are unwilling to provide suitable specifications matching the occupier's requirements. We conducted a review of currently available sites and found the characteristics of much of the land includes irregular shapes, poor surfacing, and lack of secure perimeter with an absence of welfare facilities. Basic sites still have their place, but increasingly, superior quality businesses will require secure perimeter fencing, mains services, solid ground surfaces, floodlighting and onsite welfare facilities. However, onsite welfare facilities are not always essential, as some occupiers are willing to install their own in portacabins or similar.
Security is often essential, meaning the viability of manned or automated ANPR entry systems should be considered. This is preferred by occupiers on sites where multiple tenants access via one entrance. Access to a site is key. Sites are limited in number, and those with uncongested access to the wider road network or to larger conurbations are hard to find. Depending on the target occupier, prominence can also play a part in a site's appeal, particularly for occupiers such as self-storage operators.