Self-Storage News: Taxing Times For United Kingdom Market

June 12, 2012 2
Self-Storage News: Taxing Times For United Kingdom MarketImage courtesy of

by Mark Simpson, guest contributor

In self-storage news, the UK industry was hit by a surprise announcement in the 2012 budget— the British government proposed a change of legislation that would require Value Added Tax (VAT, equivalent to sales tax in the US) to be applied to storage rent starting October 1, 2012. The proposal is currently under review, a decision is expected within the next few weeks.

Until now, VAT has not been collected by many operators because they have been deemed to grant customers a licence to occupy their land. This has allowed the landlord of each asset to determine whether he or she wishes to be VAT-exempt or opt to tax their property.

78% of UK self-storage facilities do not currently charge their customers VAT. Imposing a forced VAT charge would mean price increases for storage units across the nation.

VAT aside, the UK self-storage industry has performed well during what has been a difficult economic period. A recent survey commissioned by the UK Self Storage Association showed that average occupancy of stores open five years or more had risen from 68% to 70% in 2011. Over the past five years, UK self-storage rent has risen 7.3% cumulatively compared to the overall UK property market, where rent has fallen by around 5% over the same period. This is despite net self-storage rent falling 4% in 2011, as operators competed to raise occupancy levels.

Rents vary significantly across the country, however. Storage in Tamworth, in the West-Midlands area of England, averages rent 24% below the national average of GBP 21.06 per square foot. Even so, these self-storage rates might appear enviable compared to those in some parts of the US, but space comes at a premium on such a small island. There are now approximately 815 self-storage facilities in the UK, giving about 0.5 square feet of storage space per person. This is still well behind the more than 7 square feet per person in the US.

With awareness of self-storage in the UK still relatively low (around half of the population is actively aware), there should be scope for further industry growth. However, the housing market remains slow, with transactions nearly 40% below the 10-year average. Combined with a tight lending environment, continuing economic uncertainty, and spare capacity in existing stores, this means there is little in the way of new openings expected in the near future. Only 15% of operators intend to open a new facility in 2012— down 24% from 2011.

The average net lettable area of stores who took part in the survey was 39,000 square feet, with the average-sized unit just 68 square feet. Business customers now occupy 39% of the space in UK stores, up from 36% last year.

Industry optimism remains high, with over 60% of respondents in the survey saying they thought business would be better in 2012 than 2011. But the survey was conducted before this VAT announcement, so the whole industry awaits a final decision.

Mark Simpson is the Director of Extra Room Self Storage, a state-of-the-art UK self-storage facility located just off the A5 in Warwickshire, offering  a full range of self storage in Tamworth, Nuneaton and Hinckley.

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  • Jasminjosafdin

    It’s best to stay up on your self storage knowledge, keeping safety in mind. Knowing what items are not recommended for rockford self storage units is the best way to keep them from entering your rental unit, even by accident. Read More about self storage.

  • Domestic household storage

    Imposing Value Added Tax on storage rent could be damaging to the self-storage industry. But then again, the new “affordable” British homes have a lack of general storage space. And we are not just talking about storage for holiday decorations and old belongings, we are talking about day-to-day items like vacuum cleaners. Homeowners will have to look into self-storage as one possible solution to their spatial issues. Having said that, it could really go either way.