Spain has always stood out among countries most considered for self-storage expansion for several reasons: It has dense urban demographics, a booming economy, notable lack of competition and is service oriented. Also, the culture is shifting toward a more mobile lifestyle. The fact the 2005 Self Storage Association of the United Kingdom Conference was hosted in Barcelona was probably not a coincidence.
Over the last five years, a few pioneers successfully introduced self-storage to the Spanish market. Many local entrepreneurs became seduced by the concept and decided to follow suit. Now that major European self-storage operators are finding it increasingly difficult to expand in their respective markets, they’re increasingly looking toward Spain as a likely market.
Although still in its infancy, Spanish self-storage is crystallizing into a distinct industry with a growing number of local operators, the entry of several multiple-site companies, and the 2004 creation of the Spanish Self Storage Association. The SSSA now boasts nine affiliated members with another 15 operators yet to join. Approximately 35 storage sites are open or under construction across the country; the largest operators include Bluespace Self-Storage, Easybox Self-Storage and City Self-Storage.
Initial predictions that storage demand would be strong proved correct. Most operators have a successful fill-up rate, and potential customers throng the cities. Never-ending rows of apartment terraces packed with belongings are a typical sight along the wide avenues of any Spanish city; the urban population is doubtless in need of storage space. Plus, the flexibility of self-storage already greatly appeals to Spaniards.
In spite of this good news, self-storage in Spain has grown slower than expected since its debut five years ago—not in terms of rent-up, but the ability to cater to such keen demand.
Finding suitable properties in Spain has been tremendously frustrating. Larger operators are struggling to keep up with expansion plans and have learned that patience is essential. Not only must developers deal with basic site concerns such as visibility, access and location, they also face obstacles specific to the country.
A primary difficulty is the vigor of the real estate market. The healthy economy, combined with the scarce availability of decent-size industrial buildings, drives up prices in major cities. The average purchase price per square meter for an industrial building in Madrid is €800 and €1500, while one can expect a range of €72 to €100 per square meter annually for a lease transaction.
In addition to ever-increasing industrial-property prices, a rezoning process has been under way in most major cities for five years. It seeks to rid residential areas and city centers of industrial activity, banishing self-storage facilities to a radius of 15 to 20 kilometers.
Although construction and fire-protection issues tend to be a hurdle in any market, Spain is a special case. The kingdom is organized into autonomous regions and the level of competence among local authorities varies. This makes negotiations with town halls and fire departments substantially more difficult for outsiders than for local entrepreneurs seasoned in neighborhood politics.
Further, inconsistent interpretation of the same rules by a city council in Catalonia and one in the Madrid region can be puzzling for any operator intending to have a presence in more than one region.
Nevertheless, expansion isn’t impossible, as seen in Barcelona. Although nowhere near saturation, Barcelona is a competitive market with 12 stores and a handful under construction. Since early 2001, a few tenacious operators have shown they can grow. Bluespace Self- Storage operates four sites and is building another three, mostly in Barcelona and Valencia. [Editor’s note: Shortly before publication, Bluespace bought two additional sites from Easybox Spain.]
In July 2005, Pramerica Real Estate Investors bought the majority of Bluespace for €15 million. Pramerica has invested in the self-storage sector worldwide, including a successful U.K. investment with Big Yellow PLC, and a joint venture with Extra Space Storage in the United States.
City Self-Storage boasts five stores along the Mediterranean coast. Easybox Self-Storage developed the first purpose-built property in a prime location of Barcelona and also opened the first store in the Madrid market, four years ago. Reserva has an excellent third-generation site in Barcelona, and is actively looking for new opportunities in the area.
In the last two years, a multitude of local entrepreneurs have decided to make the best of these conditions and started leasing well-located, smaller buildings (between 1,000 and 3,000 square meters). In most cases, they optimize the net area by installing a dismountable mezzanine and keeping overhead costs as low as possible. Some of these operations, such as Tu Trastero in the northern Madrid area, are already multi-site enterprises; in every instance, facilities are successful and profitable.
It’s also worth noting that a few U.S. self-storage companies have shown interest in the Spanish market. One of them has already purchased properties and will soon start trading. This could be an important development as American operators tend to be more daring and locate their stores further from city centers. Should the public take to the notion of traveling a little further to store belongings, one could easily predict fantastic growth for the industry in Spain. This would be a realistic bet, given the high quality of roads throughout the country.
Forecasting what the Spanish self-storage landscape will look like in the next five years is difficult. Will it transform into its European counterparts, dominated by international big chains? Or will small family-owned operations continue to be the norm?
Much will depend on the impact of potential political changes in the country and the evolution of the real estate market. The industry’s future also depends on the tenacity of site developers to create necessary awareness, and the Spanish Self Storage Association’s continued hard work in promoting our industry and educating local authorities.
Serge Kaouane, a French national, is a pioneer of the Spanish market where he co-founded and was a country director for Easybox Self-Storage until 2004. He has been involved in the industry since 1996, primarily in France and Spain, where he helps entrepreneurs with construction and other aspects of their self-storage projects. For more information, call +34 916573210; e-mail firstname.lastname@example.org.
This article was first published in Inside Self Storage http://www.insideselfstorage.com