Self-storage: The men who got rich selling empty space

By William Yearsley

Rodger Dudding, the king of lock-up garages, says his portfolio of properties is worth £100m

Thirty years ago Britain did not have a self-storage industry. Now it's the biggest in Europe. Who are the canny entrepreneurs who have grown rich selling empty space?

"Storage… it's not shopping centres, it's not hotels, it's not fashion, it doesn't seem on the face of it the sexiest of products," admits James Gibson, one of the founders of the Big Yellow Self Storage Company.

It may not be sexy but the self-storage industry has bucked successive recessions.

Brands like Safestore, Big Yellow and Access have covered the land in gargantuan multicoloured sheds into which more and more of us are loading our excess stuff.

It's a business that yields an annual revenue nearing £500m.

The industry is the product of huge sociological shifts.

Danny Dorling, professor of geography at Oxford University, says we have six times more "stuff" than the generation before us.

This stuff - clothes, furniture, technology and knick-knacks - has to be crammed into some of the smallest dwellings in Europe.

Add our age-old hoarding instincts and you have the perfect conditions for the storage boom.

Yet every opportunity needs people to seize it. A lucky few were able to see the potential in selling empty space and became storage millionaires.

One of the first was Rodger Dudding, known to his many clients simply as Mr Lock Up.

He is the largest private owner of garages in the country, having amassed more than 12,000.

Dudding acknowledges the shady reputation of the business, having seen his garages used for everything from "very useful afternoon nookie shops" to dumping a dismembered body.

Brightly coloured self-storage centres have become a staple of Britain's urban landscape

Dudding estimates his portfolio is worth more than £100m but becoming the largest private owner of lock-up garages wasn't straightforward.

There was no directory of garages and their owners, and so Dudding took to driving around on Sunday mornings to "winkle out the garages… hiding behind blocks of flats".

He'd wait until someone came along to use them, and politely enquire as to the identity of the owner.

As Dudding built his empire, he freely admits that he didn't anticipate their ultimate use.

He expected people to use the garages to store their cars overnight. But today, swamped as we are by a tidal wave of stuff, 80% of the garages are used instead for domestic self-storage.

If Dudding showed the simple act of storing our belongings could yield a fortune, it was Doug Hampson who gave Britain the modern self-storage industry, with its bright, clean corridors and endless rows of brightly-coloured doors.

In the industry he is widely credited with the enviable title of the "father of UK self-storage".

Hampson followed the time-honoured tradition of importing a successful business idea from America.

While today's entrepreneurs might take their inspiration from Facebook founder Mark Zuckerberg, Hampson's own guiding star was a self-storage facility in Los Angeles that he happened to drive past in 1977.

Self-storage had got started in America in the early 1960s, and today the scale of the industry is staggering.

Each US citizen has access to 7 sq ft of storage, meaning that - should the mood take them - the whole population of the US could fit itself into storage.

But it wasn't just the popularity of self-storage that made Hampson think it could be a great import.

"It was very basic, nobody lived in them, there's no plumbing, and what you had to do to keep your customers completely satisfied was very little," he recalls.

When he returned from the US in 1979, he and his wife founded Abbey Self-Storage, the UK's first storage chain.

The ingredients were pretty basic. Hampson used disused factories and warehouses, often ones "past their sell-by date, and obsolete for their former use".

Today he is politely reticent about how much introducing self-storage into the country made him, but it's estimated to be tens of millions of pounds.

Scores of others followed in his wake.

Andrew Jacobs, founder of the Lok'nStore empire, says when he first saw the potential of self-storage he "felt like I'd come into the kitchen and there was a briefcase of £20 notes sitting on the table that nobody else could be bothered to take".

Experts say we have six times more "stuff" than the previous generation

Yet it wasn't until the late 1990s that the mainstream business world caught up.

Big Yellow founders Nicholas Vetch, Philip Burks and James Gibson had already made a fortune in retail property.

This track record meant they were one of the first companies to raise significant backing from the City for self-storage.

It was Vetch who had first heard of the idea but when he spoke to James Gibson, he didn't immediately see the potential.

"I'd never come across it, I'd never used it and I don't think anyone in any of the presentations that we gave in raising money as part of the float in May 2000 had ever used it or ever heard of it," said Gibson.
'Gold rush is over'

But today Big Yellow is publicly listed, and valued at close to £750m. An idea once regarded as eccentric has stepped out of the shadows.

As a business, self-storage is perhaps no longer the gold rush it once was.

The owners of the major firms generally agree that it's getting harder and more expensive to get hold of the buildings and land needed, and the once rapid rate of expansion is beginning to slow.

But there is one clear lesson from the storage story.

If you want to be a millionaire, you'd be well advised to look beyond what's sexy.

Watch Real Storage Wars on BBC Two on Monday 14 April at 21:00 BST or catch it later on the BBC iPlayer.

Comments

This article misses the entire point of the self storage game, in that it's all about real estate. I'm not sure of the structure they have over in the UK but I'm quite sure it's the same type of thing, considering that land over there is much more valuable.

Here in the US you'll find a vast majority of the land used for self-storage is owned by either investment firms specializing in commercial/self-storage real estate, MLP's (Master Limited Partnerships), or REIT's (Real Estate Investment Trusts). There are a lot of nuances to it, but essentially these are tax vehicles that buy up a bunch of not particularly sexy land, but in an industrious location that has long term potential. The issue then becomes what to do with the land while you sit on it, and the answer to that is self-storage. Self-storage warehouses are incredibly cheap to build and operate, often times the largest cost is insurance (although that's not saying much nowadays). Many MLP's/REIT's either own their own self-storage company, own a controlling share in one, or at least own a good percentage of one, or the self-storage company in and of itself is an investment firm wrapped in a thin veneer of self-storage. Thus, on top of the rent you can get a nice cut of the storage profits. It's a fantastic racket if you can get momentum, after a certain point the money essentially prints itself and you still have control of a massive chunk of land to boot. The self-storage business is also very predictable, and highly tuned, so the investment returns on both the land and the storage business are very conducive to long term wealth building.

I'd be curious where you are getting that narrative from. It differs from what I am familiar with for sure in terms of knowledge of this industry. Not that that's not the play of some REIT's (or what they say they are doing but not really doing) of course but I wonder how many of the locations fall into that category vs. just "after a certain point the money essentially prints itself". Which sounds pretty good. [1]

(What you are saying is typically done though with parking lots in cities for sure for various reasons.)

"and you still have control of a massive chunk of land to boot"

Unless you have land in a particularly valuable location the fact that there is a building on it is going to contradict having someone purchase it for development purposes. It's being used. In other words "nothing to see here move along". And if it was in a super valuable upcoming area that would already be priced into the land cost and might be prohibitive.

I'd also would like to know what the time frame is for something like this to actually happen and how many times it has actually been done. That is, out of the entire self storage industry, how many locations (multi level for example - those larger buildings) have been raised for a higher use (with every tenant thrown out)? And something else built on the land which generates more revenue. Where a comparable piece of empty land was not available?

Of course it might be something that the REIT says marketing wise in order to enhance the appearance of the value of their properties. But to me it seems that the reality of whether that would actually happen (and how often) might be entirely different.

That said any links to this would be nice if you can pass along.

[1] For self storage that I am also familiar with they predictably raise the price every year. And it's not easy to move things out (you need a truck or you need to dispose of something.)

I've seen one self storage facility in my town removed in favor of a commercial medical plaza recently.

Self storage buildings around here are just cheaply built steel buildings. They are easy to dismantle.

There are those for sure. Separately I know of a 155 unit residential condo complex in Florida that is being torn down to build a high rise (resulting in 4x value to unit owners the market is so hot right now).

But then there are these examples which seem highly unlikely as the investment play involved. Browse the links on this (a typical larger storage company site) and you will see nobody is putting up a building multi story (with elevators) and hundreds of tenants with the intent of holding it to tear down. Not that like anything it couldn't be torn down if the right opportunity came along.

http://www.publicstorage.com/

http://ir.extraspace.com/phoenix.zhtml?c=180054&p=irol-irhom...

But hard to believe that is actually the business model they are relying on although it could of course be a future upside.

"Danny Dorling, professor of geography at Oxford University, says we have six times more "stuff" than the generation before us."

I run a storage business and I can say that this is no longer the case with the younger generation. We used to store boxes of CDs, Videos, 14" Colour TVs, Desktop Computers, Hifis. Now all this is in a laptop and mobile phone, which people just take with them. We now insist on up-front payment as the items people store are worthless to sell.

90% of what we store is now boxes/suitcases of clothes and books.

Do you see the overall demand profile for self-storage changing accordingly, i.e. it could be headed for a secular decline because younger demographics don't accumulate as many physical items?

When I was brainstorming startup ideas once I mentally kicked around "AirBNB for self-storage," but liability issues and what I saw as a trend towards minimalism among those who would have been a target demographic as reasons to discard it.

> younger demographics don't accumulate as many physical items?

We'll see how that plays out as they age, which tends to include things like getting married, having kids, buying a house, and that kind of thing. For instance, our garage now contains 2 strollers, 2 kiddy scooters, 3 kiddy biycles of varying sizes, and one sort of push-tricycle thing. I didn't have all that crap when I was younger, either!

I heartily agree with the advice elsewhere to look at "boring" and "unsexy" stuff. It also helps if it's "far from the tree" in the sense of not picking something that's immediately related to the world you know as a programmer.

I had a 10x20' storage unit for years -- it was full of all the stuff you mentioned - CDs, stereo, furniture, an astoundingly heavy 34" tube TV... All the media went digital (with multiple backups!) and everything else was either sold on Craigslist, donated, or hauled away to the landfill. Now I can move by just renting a small trailer.

Why didn't you just sell the non-essential things and make room for the rest? I only ask because I have lived in 7 different properties since starting University and now (almost three years into career) and I literally take what I need and chuck the rest; one could probably describe me as the 'anti-hoarder'.

They'd been in storage for over 3 years and I hadn't needed to use them, therefore I didn't need them at all.

I kept some things that were keepsakes, but the rest ... out with it all. Which also saved me $135 a month in rental costs.

I'll confirm this. I'm much older than the "younger" generation and I have virtually nothing compared to my parents and theirs. I can get everything I own in a 45l bag and a large box. They can't get all their crap in a 4 bedroom house with a double garage.

Also as a side issue, yes you're right; absolutely nothing out there is worth much any more. The Internet and particularly eBay has laid waste to the value of things by making everthing ubiquitous.

"We now insist on up-front payment as the items people store are worthless to sell."

Was this ever different? Boxes of CD's, videos and tube TV's don't sound that valuable. But reading into your comment, it seems it wasn't always like this...

It might now seem that way, but when you can put those things into a second hand shop for $1-$5 a piece someone's DVD, or CD collection can become quite valuable when its abandoned. Some people did/do store hundreds of cd's, dvds, and the like. A unit could have a thousand dollars(in real secondhand market value) of merch very easily.

Do CD's/DVD's not have this value anymore? I could CD's being phased out, but DVD's are still entrenched. Maybe with online streaming (Netflix) DVD's too are going away? I would think this would be a lagging indicator though as I can see many storing their DVD's now that streaming is an option.

CD's don't and never really did. If you bring in an early CD (like from the 80s) you can get a nominal amount because CDs were rare then. If you bring in a CD from the last 10-15 years they are nearly worthless. Most shops ended up shredding the extra.

DVDs have a bit of crazy market. Some distributors (Disney and Criterion especially) do a short limited run. The 2nd hand stores rely on these gems in a big box of junk to make profit.

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