A Year of Crazy Change in France Sixty-five percent of facilities sold

What a year! The French self-storage market was soft in 2003-2004, but last year was a turning point. Companies that didn’t get it right exited; those that chose the wrong location, developed a business plan based on U.S. ratios, or didn’t have enough financial support. During the last 12 months, 88 sites have been sold, representing 65 percent of all French facilities. After the wave of mergers and acquisitions, the market shows us a new face, with 68 percent controlled by only three corporations: Homebox, Shurgard and Une Pièce en Plus (UPP). Each company still in business now has an expansion plan, which wasn’t the case 18 month ago.

Evolution and Challenges in the French Self-Storage Market

What has changed? Following 2000-2002, a period of strong expansion fueled by U.K./U.S. developers, the companies that looked at their bottom line and didn’t like what they saw reevaluated their plans. Awareness of self-storage services was low in France, so developers had to slow ramp up and proceed cautiously. To reduce construction costs for construction and head offices, they sought better locations and had to keep pace with the market. Those who didn’t adapt were sold. The survivors are now ready to expand because the market is thriving. France is already the second-largest European market, and without a doubt, self-storage will be successful.

What didn’t change? Most new entrants have difficulty finding sites, insurance and especially financing. Obviously, financial institutions need to accept the industry. Lack of capital has contributed to a situation in which most established facilities are owned by large companies.

In April 2005, Une Pièce en Plus bought all French facilities owned by Access, one of the oldest European companies. Seven of the sites were sold by UPP to Armadillo Self-Stockage last summer. Access has disappeared from France, but its English counterpart continues to trade under the name.

Devon Self-storage’s Lyon and Toulouse sites sold to Homebox in March. The facility in Marseille is expected to be bought by Shurgard.

BoxAvenue, which built only conversions, had six Paris sites and four in the province, nine of which were bought by Shurgard in January. Only Nantes stays independent and trades under the BoxAvenue name.

Shurgard was acquired by Public Storage in March 2005. At the time, Shurgard had 46 facilities in France. The U.S sites will be re-branded Public Storage, but in Europe nobody knows that brand, and even if Shurgard is a weird name no French person can pronounce correctly, it seems the brand will survive here. Before the merger, the company tried to buy a maximum of facilities to boost its numbers. The main challenge now is to be profitable.

In August 2004, Safestore bought Bridgepoint, UPP’s parent company. The new owner has strong development plans for UPP. Safestore bought the Access sites in Paris, and is focusing expansion on Paris, where it already has 16 sites. The plan is to open one facility a year.

Homebox has 19 facilities throughout France’s largest cities. The company underwent major changes, developing a sort of franchise for all its sites, which is yielding positive results. New facilities are opening under the franchise agreement.

[b]Now Entering …[/b]

Three-year-old Annexx is focusing on developing third-generation sites in the southwest of France. It owns three facilities in Toulouse, one in Bordeaux and another in Perpignan. Construction plans call for three new facilities annually.

Armadillo Self-Stockage shines as the new meaningful entrant. Armadillo was founded in Scotland by Alister Jack, who started Aardvark Self-storage in 1996 and sold it to Mentmore Abbey in the autumn of 2002. Armadillo is his latest star venture. He joined the French market in 2005 with the purchase of seven former Access sites, three in Paris, three in Lyon and one in Nice. Armadillo intends to expand in France.

Flexi Stockage opened its first site a year ago in Argenteuil near Paris. The company, backed by Irish Investors, has plans to open two sites a year in the Paris area.

More small entrepreneurs are interested in developing self-storage in France. The thinking process goes like this: “I have this not-so-great (or half-empty) warehouse that I’m not sure what to do with. Maybe self-storage is the way to go!” But because this business requires lot of capital, few design large, third-generation facilities. Instead, they develop small facilities from 600 to 2,500 square meters. The stores are usually managed as a sideline to a main business.

The French Self-storage Association has behaved like an elite club. Because it snubs new operators, now it has only three members. That’s 8 percent of all operators, even if the trio represents 68 percent of facilities. The French association has been recently hard-pressed by the European association FEDESSA to change its policy and accept small operators. The change will be difficult but necessary if the association wants to regain credibility and true representation.

France’s population is roughly equal to that of the United Kingdom. According to a recently released Steel Storage study, the U.K. market boasts 976 facilities with more than 100 new ones opening annually. France, with its 138 facilities, is ripe for self-storage. The service is well accepted by the French, but remains five years behind the United Kingdom. Self-storage is a business that blossoms slowly; it takes time for product awareness to grow.

Lately, midsize U.K. operators have shown keen interest in expanding their business into France by acquiring existing facilities; however, what was for sale has been sold. They will have to wait a couple of years before new opportunities arise.