Scotland’s self-storage pioneer set for southern push
Publisher Property Week
Storage Vault aims to become a top-three private UK operator with its unique blend of self-storage and flexible workspace.
In 2016, McGlynn, who has a diverse range of business interests, launched Storage Vault, whose unique selling point is that it combines self-storage with general-purpose, studio-type workspaces and offices.
Speaking to Property Week from Monte Carlo, McGlynn outlines his plans for Storage Vault, which include expansion south of the border, and explains why he is putting the majority of the capital he has accumulated in property since the mid-1990s into the business.
McGlynn embarked on his first entrepreneurial venture, the acquisition of an airport car park, after he spotted the opportunity while working party time as a student for NCP. “I counted how order the buses when by and saw there was a good business opportunity,” he says. “I incorporated the business in the university library on my 21st birthday.”
The business flourished an the ploughed the profits he made back into property. “My dad had been in business for himself for most of his life so it felt like a natural thing to do,” says McGlynn.
Fast-forward 20 years and McGlynn is ploughing head-long into building up his newest venture. Backed by McGlynn’s Scottish Capital, Storage Vault started with £50m of capital in 2016 and already owns 12 freehold sites in Scotland, totalling around 1m sq ft, eight of which will be operational by the end of June.
And there are more Storage Vault centres in the pipeline. “We’ll hopefully be at 16 to 20 sites by the end of the year,” says McGlynn.
The Storage Vault venture is the fruit of more than two years of global research by McGlynn. It was conceived from a desire to generate superior, annuity-like returns. “If you can get the right self-storage and work space portfolio it is as good an annuity as the old ground-rent portfolios,” he says, adding that the company secures rents similar to those of grade-A office space in Scotland, which average £22/sq ft.
Although Storage Vault does serve the consumer self-storage market, its main focus is business customers, which tend to be repeat users and to increase the amount of space they occupy as they grow.
Storage Vault’s approach is novel in that in that it serves the demand for work spaces and self-storage from the same site. “Our aim is to make the customer’s life easier so they don’t have to jump between two to three buildings,” says McGlynn. “I don’t know anyone else who is doing it, who has deliberately morphed these two together.”
Another key selling point that McGlynn is eager to emphasise is flexibility.
“We give people the ultimate flexibility,” says McGlynn. “Why would someone take a one or five-year lease on offices or workshops and have all the cost involved in doing that transaction? With us, you can take as much space as you need in the run-up to Christmas and hand it back in January. We offer a one-page document and a month-to-month contract. The easier you make it for someone, the more they will come back.”
He adds: “If I can give you as the customer an easy-in, easy-out agreement with a price guarantee for one to two years, I will do that. Customers tell us what they want and we provide the solution. I think flexibility is the way property will go; we think it is the big disruptor in the property sector.”
Storage Vault also offers tenants flexibility when it comes to the size of units available. “In the past, customers would typically take what you told them you had, but we want to flip this on its head and give customers the maximum choice of facilities and offices sizes,” McGlynn says. “We have built that flexibility in from day one. There are moveable walls at some sites, we can put new doors in and every site is planned for maximum flexibility.”
As for the location of the company’s sites, up to now it has focused on Scotland. But it has plans to expand south of the border. McGlynn says he looks for high-visibility, main-road sites – similar requirements to those of petrol station operators.
“It’s a simple equation,” McGlynn says. “You put a pin on the map, ask how many people are in the radius and you can see what the market can sustain. Subtract the competition and that tells you the market opportunity.”
Storage Vault doesn’t have a typical size requirement; its sirs dance from 25,000sq ft to 180,000 sq ft and the company has an open-minded approach to potential acquisitions. For example, it bought a five-acre site on the M74 new Glasgow, even though it had been looking for one or two acres, and put a Starbucks and a petrol station in the remaining space.
If a site does not perform as hoped as a Storage Vault facility, it can be absorbed into Scottish Capital’s portfolio, which includes about 2m sq ft of warehouse space.
For now, however, the model is working better than planned and being able to buy sites with cash has helped speed up the company’s acquisitions, says McGlynn. “We are 60% ahead of where we thought we would be by now. We have done deals in 48 hours. Case is king.”
The company aims to open more than 100 locations around the UK.” I have given my asset managers £50m to invest and they will get another £50m once that’s deployed,” says McGlynn. “That could take us up top 35 to 40 sites, but we will do as many sites as we can find that suit our model. If anything, we want to accelerate the rate of deployments and openings.”
While there is nothing to stop incumbents from copying Storage Vault’s model, this would entail significant investment and work to retrofit facilities. McGlynn says those seeking to roll out a similar model might struggle to find suitable locations or be hampered by debt. “I would like to think we would be the most competitive product offering on the market,” he says
McGlynn believes there is still plenty of growth potential in the UK self-storage sector. “If you look at the statistics, America has roughly 7 sq ft [of self-storage space] per person; in the UK, it is only 1.1 sq ft.”
Storage Vault is expected to soon become the four-largest private storage operator. By the end of the year, McGlynn hopes it will make the top three and estimates it will be in second place by the time its 18th site. If its impressive rate of expansion continues, it could become a challenger to the big two publicly listed companies: Big Yellow and Safestore.