Investing in self-storage - affordable capital investments

Self-storage - Warehouse real estate

Why should investors invest in self-storage?

Self-storage parks offer a service not only to private users such as students, families, and camping enthusiasts, but also to companies that use commercial properties. Businesses such as janitorial services, master painters, drywallers, artists, and many other groups use self-storage facilities. Investors benefit from the security of a tangible asset and their own land registry entry. According to the Association of German Self-Storage Companies (Verband Deutscher Self-Storage Unternehmen eV), the self-storage market in Germany is on a steady growth trajectory. With a manageable initial investment in self-storage, investors can establish their investment strategy on a sustainable basis, while the value of their property increases over time. It is also possible to switch between owner-occupation and renting, and vice versa. This makes self-storage facilities attractive even to people who do not live near the storage park.

Purchasing self-storage garages as an investment can be an attractive way to generate stable rental income, as the demand for storage space is constantly growing. This is due in no small part to rapidly rising rents and the shortage of secure storage space for small businesses. More and more savers are therefore asking why they should invest in self-storage and how it works.

Returns in this sector are often significantly higher than the market average for traditional residential properties, making the self-storage investment strategy a successful investment. Investors can rent out their storage units to private and commercial tenants and resell them if necessary.

Increasing demand:

The demand for storage space is continuously growing, driven by urbanization, e-commerce, flexible working hours, and other societal trends. High rents in metropolitan areas mean that storage space for files or sports equipment is being reduced.

What is the demand for self-storage in Germany?

The demand for self-storage facilities in Germany has increased significantly over the past 15 years, especially in major cities like Cologne, Hamburg, and Berlin. However, smaller cities also offer great potential, as self-storage facilities are in high demand, especially in university towns, among young people and tradespeople. There are many reasons for this increase.

For businesses and individuals, self-storage is a great option for storing items while still maintaining flexibility. The returns are positive, and the low initial investment makes it possible to become a property owner for less than €20,000.

What role do the so-called 4 D's of Self Storage play?

The so-called "4 D's of Self Storage"—Death, Divorce, Dislocation, and Downsizing—play a crucial role in the self-storage industry. These life events often lead people to need storage space to store their belongings, be it furniture, cars, art, sports equipment, or entire household liquidations. Flexible storage units allow customers to customize their storage based on term and cubic capacity.

Social developments show that the increasing number of singles and an acute housing shortage are driving demand for self-storage solutions. Downsizing, semesters abroad, separations, job-related relocations—self-storage offers permanent or temporary secure, dry, 24/7 accessible storage space for all of these situations.

Since some providers also market individual units rather than entire sites, investments are often possible for less than €20,000. This makes this form of investment attractive to a broad range of investors, especially those new to real estate. It should be noted, however, that when purchasing a single unit, the risk diversification within this investment is lower.

Financing: It is often only possible to obtain construction financing from 50,000 euros, because banks usually do not issue real estate loans for smaller amounts.

Security: Thanks to Germany's legal regulations regarding land registry and formal requirements, investors enjoy a high level of security with minimal administrative overhead compared to funds or insurance. It should be noted that notary and court fees, as well as real estate transfer tax, are incurred, similar to other real estate.

When investing in self-storage, technical considerations are essential to developing a successful investment strategy. A self-storage facility offers an opportunity to literally see the value of your investment. Technological advances help reduce labor costs by implementing access control solutions and automated systems.

Important investment considerations include a good mix of ground-floor and first-floor units, as well as a variety of sizes to accommodate client needs. Low-maintenance construction, camera surveillance, and 24/7 access are also essential. Adequate general lighting, individual electricity meters for each unit, and an on-site parking manager increase the attractiveness of the commercial property. The saying "location, location, location" remains a crucial criterion for the success of any property.

How do the providers differ from

Self-Storage Parks?

In Germany, there are several self-storage providers that differ significantly in terms of their target groups and their approach to investors. These differences can be described by the type of tenants, the investment model, and the providers' business orientation. The industry is essentially differentiated according to the following criteria:

1. Target groups of tenants

Private customers

Traditional households and private individuals: This group primarily uses self-storage for short-term or long-term storage of furniture, household items, seasonal items, or for storage during a move or renovation. However, storing classic cars, camper vans, or car trailers is one of the options in high demand, both in rural and urban areas.

Special needs: Small storage units (1-10m²), easy accessibility, high flexibility (monthly cancellation), low to medium prices. These units are often located in former retail spaces and are more in demand for temporary storage.

Business customers

Small businesses, startups, and freelancers often use self-storage as a cost-effective and flexible alternative to traditional office space or warehouses. Self-storage is especially popular with online retailers who need to store their inventory or archival materials.

Special needs: Larger storage units (from 10m²), access to larger rental areas, possibly also options for receiving deliveries.

Students and those wishing to move

Special target groups: In large cities, self-storage facilities are popular with students and young people who move frequently or have limited space in their apartments.

Special needs: Small and medium-sized storage units, flexible contract terms, reasonable prices.

2. Distinction between investors and private investors

Private investors

Focus on stable cash flow: Private investors invest in self-storage facilities because they promise stable income and high demand. As an asset class, self-storage offers lower vacancy rates and is relatively immune to economic fluctuations.

Specialization: These investors often prefer smaller or regional providers that not only act as operators but also have a strong local market presence.

Examples of investors: Private individual investors or family offices that invest in regional self-storage providers or individual locations. There are only a few providers that sell individual self-storage units to private investors or owner-occupiers.

Institutional investors

Institutional investors, such as funds and real estate investment trusts (REITs): This group tends to focus on larger investment opportunities. Self-storage is increasingly viewed as a long-term, profitable real estate investment that offers low maintenance and continuously growing demand.

Long-term investments: For institutional investors such as pension funds and insurance companies, self-storage represents a long-term, stable source of income that often comes with low risk. These investors typically prefer large-scale, well-established providers that have already established a network of facilities.

3. Differentiation according to providers and business models

Full-service provider

These providers offer a wider range of services, including additional services such as moving helpers, packing materials, or their own transport service. Examples: Shurgard, Storebox, Lagerbox.

Specialized providers

Providers that focus on specific niche markets or geographical regions offer customized solutions, for example, for tradespeople and startups. Examples: BOXiT.

Self-storage park providers in Germany differ fundamentally, both in their approach to tenant target groups and in their offerings for investors. While large providers focus on broad target groups and offer a wide geographical spread, smaller providers often focus on specific niches or regional markets. For investors, self-storage in Germany represents an increasingly attractive asset class, promising stable returns and low volatility – with a differentiation in target markets ranging from private investors to institutional investors, who often acquire or develop large portfolios.

Advantages and disadvantages of construction designs for

Self-Storage

FAQs

Frequently asked questions about storage boxes

What is self-storage?

Self-storage, or self-storage, simply means "storing things yourself." These units, also known as bulk storage units, storage boxes, or units, offer a wide range of storage units in various sizes and allow flexible rental options. Your belongings, vehicles, tradesman's materials, or furniture are stored with us in a dry, secure, and accessible manner.

Do people suddenly need more space? Not necessarily. However, since housing has become very expensive, many people are considering whether they can store some of their favorite or necessary items more affordably. The perfect solution is self-storage, either for sale or for rent.

Who can rent self-storage units?

Who can buy self-storage units?

Quite simply – everyone! Anyone, businesses, and institutions that need space are well-advised to store household goods, furniture, vehicles, or merchandise in a self-storage facility. Thanks to the flexibility offered by various sizes, the storage space can be easily adjusted at any time.

How big are the units?

Most providers have their own size designations, which are often sorted alphabetically. Self-storage units range in size from closet-sized units in inner-city locations to two-story, oversized garages complete with an office and restroom. A size is available for every need. Please note that the door opening is often slightly smaller than the interior dimensions of the storage unit/garage in question. This opening dimension is particularly important for storing large items such as camper vans, paintings, or works of art.

What can you store in a self-storage facility?

• Objects
• Motor vehicles
• Vintage cars, campers/mobile homes
• Tools and building materials
• Furniture and household goods
• Art objects and antiques
• Estate of deceased
• Quads and motorcycles
• files
• merchandise
• Tires and spare parts
• etc....

How safe are self-storage parks

Self-storage parks are typically enclosed and secured with fences and automatic access gates. Motion detectors, high-resolution cameras, and electronic access controls also provide security. Sprinkler systems, fire extinguishers, and escape and rescue routes provide fire protection. Stored items are protected 24/7 from damage and theft. Facilities suitable for larger items are often located in commercial areas and operate without permanent on-site personnel. In these cases, sensors, so-called reed magnetic contacts, installed directly in the storage units provide additional security against unauthorized entry.

Is self-storage a franchise system?

Not necessarily. There are providers who offer the franchise concept to make it easy for entrepreneurs to get started. However, the entry-level prices are often considerably higher because a single franchisee has to bear many costs. This concept is often operated in small warehouse spaces in inner-city locations.

For providers of individual storage units and large garages within a storage facility, the costs are often lower and also offer land registry security. However, in these cases, the usual additional costs for real estate purchases must be taken into account.

Do you have any further questions?

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