Increasing demand and rental levels for open storage sites are supporting its progression as a new asset class within the industrial sector, according to new research from Carter Jonas.

Carter Jonas data shows that 2020 enquiry levels for open storage sites increased by 73% on the previous year. This activity shows no sign of abating, with half-year levels in 2021 nearing the 2020 12-month total. To find out more about Open Storage, click to read our latest report >

Andrew Smith, Head of Industrial, Carter Jonas, said: “Open storage often provokes thoughts of low-grade sites of hardcore or broken asphalt, rented on a short-term basis with poor covenants. However, our research identifies open storage as a vital urban land use, key to servicing some important and growing sectors of the economy. Changing market conditions have caused demand to rocket, with rents increasing as a result. Additionally, new types of users, including some big-name brands, are pushing for higher specifications. As an emerging asset class, the sector has several attractive characteristics.” 

The need for HGV parking, last-mile delivery services and distribution facilities to accelerate the flow of goods are causing demand to increase. These levels have been boosted further due to the lack of movement and parking space at many modern urban distribution warehouses within the M25 and in key UK cities.

Andrew continued, “There has been a surge of enquiries from operators needing bases for fleets, catering for overspill requirements not satisfied by many of the modern distribution centre developments. Some of the newer developments have site coverage that is reaching 65%, leaving minimal external space for HGVs etc. Parcel operators normally require a site cover of 25%-35%, so you can see why open storage sites are helping to fill the gap.” 

Having analysed the rapidly changing nature of enquires relative to the type of supply, Carter Jonas has developed a four-tier classification index for open storage sites. This system is based upon certain factors, including surfacing, security, services and facilities, accessibility, and planning. Class 1 provides the highest specifications - fully concreted, easily accessible, highly secure space with water, electricity and drainage, and unrestricted B8 use.  

Andrew said: “Categorising sites using our four-tiered index enables us to look at supply and demand issues in more detail. In contrast to the burgeoning levels of demand, the supply of open storage sites remains highly restricted. And, whilst there is a shortage of supply across all four classes, it is particularly acute in the high-quality Class 1 category, available on leases of two years or more, where there is strong competition for the sites from other users, including residential development and, increasingly, distribution sheds.”

Given intense competition and high urban land values, increasing the supply of land available for open storage will always be challenging, however, further rises in achievable rents and interest from mainstream investors is strengthening the viability of the sector, and should enable it to compete more successfully against other uses. Recent investment deals include the sale of 121 British Car Auctions (BCA) site in Corby to DTZ Investors for £67.65 million, achieving a yield of 4.8%. The site, surfaced with tarmacadam, has a long lease with a rent passing of £3,241,000 per annum. Separately, Royal London acquired a 35-acre site in Stoke-on-Trent from Stoford. The tenant of the tarmacked site is Jaguar Land Rover, for use as a car park with 6,500 spaces.

Andrew concluded: “Open storage is sparking the attention of investors looking for low-risk returns, with good reason. It benefits from long-term structural drivers supporting the outlook for occupier demand. Additionally, it offers the potential for rental uplift and supplementary income streams, including the provision of electric vehicle charging points, 5G/6G masts, and advertising hoardings. Perhaps the sector’s main weaknesses are poor perception and the lack of transparency around demand, supply and pricing. However, this represents an opportunity with significant potential for open storage to transition to a more mature and distinct property sector.”

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