Category Archives: BREXIT

How To Make Money Off Our Junk

 Issue 74 – Safestore UK

Introduction…Investors in London’s premium real estate know their tenants are among the world’s wealthiest and most stable.  Schroder Plc has $3 billion worth of property with these most stable tenants.

But, in the era of Brexit, the market can change.  That’s one reason Schroder is the largest self-storage company in UK with 109 stores in 45 cities.

Demographic logic…What storage lacks in cachet, it makes up in demographic logic. Downsizing retirees and growing ranks of home renters in London are creating what Schroders and other real estate investors see as a Brexit-proof and recession-proof opportunity.

In the U.S., growth has been pretty amazing.  Today there are 54,000 self-storage facilities in the United States, which is 90% of the global storage industry.  Those sites hold 2.63 billion square feet.

Storage beats Hollywood…All that space is sold in small increments generating $32.7 billion in revenues.  Last year that was three times Hollywood’s box office gross.  In most cases, self-storage is far more profitable than other conventional real estate. As an example, in 2016 self-storage rented for 97 cents per square foot in Phoenix which was similar to the average one-bedroom apartment.  In larger cities, storage can rent for two to three times higher rates.

Growth factors…Americans are relentlesss at accumulating consumer goods.  From 1967 to 2017, expenditures for durable goods – like furniture, bikes, electronics, clothes, books – increased almost 20 times.  As a result, Americans have run out of room for their stuff.

The industry also thrives on disruption to our lives.  It serves as a temporary resting place for stuff of the dead, divorced, downsizes, and dislocated.

In conclusion..These trends are driving investments in a sector that most real-estate investors barely notice.  And in uncertain times, self-storage looks like a place to stash money.

The near term opportunities in self-storage are exciting.  Be sure to stay tuned.  If you are not a subscriber to this newsletter, do so in the upper right of this page or go to self-storageinsider.com for your FREE subscription.

How Will BREXIT Affect U.S. Commercial Real Estate

BREXIT

Monday, June 27th Headlines…BREXIT turmoil deepens: Dow down nearly 900 points in two days.  British pound down 12% to lowest level since 1985.  $2.5 trillion wiped out of world markets. However, by the close of markets on June 28th, the Dow was up 269.5 points (1.57%) and the S&P was up 35.5 points (1.78%) erasing some of the loss from the BREXIT decision by the British voters.

All the attention to BREXIT may just be an overreaction as Britain won’t be exiting the EU any time soon.  If and when the U.K. government invokes Article 50 of the Lisbon Treaty of 2007, there will be two years of negotiations about the terms of Britain’s future relationship with Europe.  And it could still be delayed quite a while as a general election or a second referendum could take place.

It seems the market’s reaction to BREXIT is one of fear of the unknown rather than something that will definitely take place.  It is doubtful the U.S. trade with either Britain or the E.U. will change.

In Conclusion…This is an example of why we like commercial real estate.  It is not likely that any of the 100 or so construction cranes will come down in the Dallas-Fort Worth area due to a referendum in the U.K.  Nor will it stop the 1,000 people on average per day moving to Texas.

And for our self-storage industry, Americans are not going to stop storing stuff because of this referendum passing.  Nor will the demand for new space decline.  This is why we like self-storage in particular.