Open Storage: A Growing and Viable Investment Option for Developers

When you think of property development, a certain kind of property will come to mind. Perhaps a large house redeveloped into apartments? A high-rise apartment block in a prime city location? Or even a sprawling low rise development.

The truth is that property development is a much broader church than just residential and commercial buildings. In this article, we’re going to look at an interesting option that probably wouldn’t come to mind at first.

We’re talking about open storage.

Gaining traction over many years, the concept of open storage is nothing new but with the potential for profitable investment, it’s catching the attention of investors in a big way. Below, we’ll explore the concept, it’s benefits and what makes a site viable for an open storage solution.

What is open storage?

The clue is in the name. Open storage is simply storage space that is uncovered and hence open to the elements. Obviously, this means whatever is stored on the site is going to need to be weather-hardy and waterproof.
For that reason, these sites are used for things like

• Off-site parking

• Van fleets

• Trailers

• Heavy goods vehicles

• Freight containers

• Scaffolding and certain building materials

The rise of open storage

Open storage is increasingly being recognised as a viable investment within the property market. Even large funds have taken notice with significant resources allocated towards open storage sites (the amount allocated is rumoured to be £300 million).

So why the sudden surge in interest? Well, it’s in no small part due to the sector’s high yield potential and the ever-increasing demand for flexible storage solutions.

There is some scepticism abroad in some quarters, most notably from Knight Frank, who suggest the enthusiasm surrounding open storage might be overly optimistic. However, the reality is that open storage serves a diverse range of mid-level and SME companies. These companies are always in need of storage solutions for non-weather-sensitive items and find open storage both practical and cost-effective. For that reason, we think the open storage is a promising investment option indeed.

Key Benefits of Open Storage

Let’s cut to the chase.

One of the most important things we look for in a development is the potential for high returns. The good news is with open storage projects, yields typically range from 6 to 8%, significantly higher than what’s usually seen in residential property investments, especially in London.

The potential for this level of return has caught the eye of major funds and even pension schemes that are beginning to include open storage in their portfolios.

What’s more, the infrastructure required for open storage sites is minimal, often just a case of hard-standing areas with little need for extensive buildings. This simplicity translates to lower development costs far below that which you’d find with something like a residential project.

The high potential yield paired with low development costs means you really get the best of both worlds.

What Makes a Viable Open Storage Site?

With the benefits of open storage so seemingly stark, you might be wondering why everyone’s not investing in it. While it’s a fantastic investment vehicle, it’s also not right for every site and location.

Selecting the right site is crucial to the success of an open storage development, so the obvious question is, what qualities does a site need to be a viable option for it?

• Location and Access:
Proximity to major arterial roads and motorways is a huge requirement for successful open storage developments. In the South of the country, sites near the M11 and M25 will enjoy easy access to various regions, including London, Hertfordshire and Essex. In the North, Proximity to roads like the M6, M60, M62 and others will offer fantastic access to Greater Manchester, Liverpool and even Leeds.

These transport links will ensure the site is accessible for business operating in these highly populous regions.

• Security: 

Given that many of the items stored at an open storage facility will be of high value, robust site security is a must. This will include features like fencing, surveillance systems and controlled access points to protect against theft and vandalism.

Having these elements in place will protect assets and give site users peace of mind.

• Hard Standing: 

Because the items typically stored at open storage facilities are heavy by nature, the ground must be durable enough to support them. Such items could include lorries and other large vehicles weighing in at up to 44 tons.

A well-constructed hard-standing area is vital to ensure longevity and functionality.

• 24-Hour Access: 

Many of the businesses that will make use of an open storage site will need access to their items at any time, day or night. Sites that offer 24-hour access will therefore be more attractive to potential tenants.

• Future Development Potential: 

Land that’s not suitable for residential development is often where open storage sites will find a home. This could be down to its location on a floodplain or another location-specific factor. Precisely because of the flexibility of open storage, this otherwise undesirable land can be utilised efficiently, providing a productive use for sites that would otherwise lay unoccupied.

• Space and location:

By their nature, open storage sites require a lot of space. This makes city or urban locations where space comes at a premium mostly unsuitable.

A VM Finance case study: A successful open storage development

We recently worked with a client on an open storage project on the borders of London. Close to a major motorway intersection. The 5.24-acre site was located in a perfect position and had already been used in a storage capacity, albeit with dilapidated sheds instead of expansive open storage. With our £5.5 million investment, our client cleared out old structures and installed a durable hard standing.

Recently finished, the site has already received significant interest and pre-lease inquiries from mid-level builders and firms, demonstrating the high demand for such facilities. With yields expected to be strong, the project is a prime example of the potential returns from open storage investments.

Conclusion

Open storage is proving to be a lucrative and growing sector within the property market. Its high yields, low development costs, and increasing demand from mid-level and SME businesses make it an attractive option for developers. By carefully selecting viable sites and understanding the key factors that contribute to successful developments, we’re committed to helping our clients capitalise on this burgeoning opportunity.