Self-storage: a Shopoholic’s Dream?

The rows of tin shacks that crowd most Moscow courtyards are evidence that many of the city’s dwellers are in need of more storage space. As a result of Moscow’s economic boom and consumer craze, expensive square meters of real estate are quickly becoming cluttered. Until recently, the only storage available on the Russian market were roadside tin shacks, leasing your own warehouse or storing in someone else’s warehouse, none of which are very secure or convenient options. However, this past June, a new solution arrived in Russia - the KeySpace self-storage facility. Located just outside the Third Transport Ring in southeastern Moscow, KeySpace offers even the most chronic pack rats affordable, convenient and secure storage.

Storage space pioneers

Self-storage facilities are usually large warehouses or storage containers that are divided up into smaller storage units, which are then rented to residential and business customers. This system allows clients to maintain control over their storage, as they operate their own space, but under the ‘umbrella’ protection of the larger facility.

Prior to the arrival of KeySpace, the alternatives for storage in Russia included renting bulk space in someone else’s warehouse, which does not allow you to maintain direct control over your property, leasing your own warehouse, which creates endless bureaucratic and legal burdens, or tin shacks on the street, which might be a convenient option, but are not very secure.

As William Oswald, CEO of KeySpace, explains, “There is no other Russian equivalent to self-storage. Before we arrived in Russia, there where two extremes of options. This first was storing your things with big removal companies that have large warehouses. But in this case, you are not putting something into your own unit; rather, you’re putting it into a general warehouse, and the operator of that warehouse can do anything with it. Furthermore, such warehouses give you less access to your property, and when you do want to visit, you probably have to get permission - you can’t just show up whether you feel. The other extreme is to have one of these tin shacks, and although it’s absolutely up to you when you want to access your property, the space is not well protected.”

With over 4,500 sqm of lettable space, KeySpace, located in a converted factory on Nizhegorodskaya Street, 29-33, is the first of its kind in Russia. Mr. Oswald states that a major challenge in creating the facility was finding the right supplies and equipment, as there are no industry-specific suppliers in Russia and bringing in materials from Western suppliers would not have been cost-effective. Nevertheless, Oswald’s team successfully managed to create the necessary equipment themselves. Although the first floor of the facility opened in June, it is already full and work on the second and third floors is now underway, with units being filled as soon as they are completed.

This can be explained by the fact that they have no competition in Russia. Vadim Prozorov, director of the department of industrial warehouse real estate and land at the international consulting firm Knight Frank, states, “The concept of self storage facilities is only just beginning to spread in Russia. It is a new market segment that has good prospects for the future. I think that this service will be very much in demand in Moscow and other major cities of Russia, especially in light of the success self storage has had in Europe and America.”

Western tested and approved

In North America, people have long turned to self-storage to avoid tripping over their skis in the summer and their rollerblades in the winter, and this trend is now rapidly spreading across Europe. The statistics speak for themselves: the experts at Self Storage Association Ltd, a trade association in the UK, estimate that in North America, there are over 51,000 self-storage facilities covering 206 million sqm of lettable space. These facilities are used by 1 in 11 households to the tune of approximately 0.7 sqm per head, a figure which is growing 9.5% year on year. The leading brand on the North American market is Public Storage Inc.

Likewise, in the United Kingdom, there are approximately 700 self-storage sites covering 2.4 million sqm of lettable space. These sites are used by 1 in 240 people, with approximately 0.043 sqm of space rented per head, growing at 15% YoY. The strongest competitor on this market is The Big Yellow.

Furthermore, in Western and Central Europe (less UK, not including Russia), there are now 575 facilities covering 2.2 million sqm. These sites used by 1 in 1,800 people to the tune of approximately 0.006 sqm per head, growing at 25% YoY. Shurgard Europe, a subsidiary of Public Storage Inc., dominates this sector of the market.

The KeySpace security blanket

The main selling point for self storage in general and KeySpace in particular is the high level of individual security and overall protection available at the facility. Mr. Oswald notes, “We have a high level of individual security, where only you have your pin code and key to your lock. But that’s under an overall blanket security that we provide, so you get the best of both worlds.”

To access their units, clients have a unique pin code that they enter once to get into the building, and then a second time to deactivate the alarm on their individual unit. The client has to reactivate the alarm when leaving, but if he/she forgets, movement sensors in each unit automatically turn the alarm on after 20 minutes of no movement in the space. The movement sensors guarantee that people cannot burrow through to one unit from another, as well as enable the unit not to be completely sealed at the top; rather, some space is left open for air circulation.

The facility also is outfitted with an advanced video monitoring system. Motion-activated cameras are located in all the corridors, loading bays, exit/entry points, etc., and the footage is recorded and displayed on screens at the building’s entrance. The archived video footage allows clients to keep track of who has used the pin code to enter their unit, as there might be members of a client’s family who know the pin code but entered unbeknownst to the client. As Mr. Oswald explains, “Every time you enter your pin code, it doesn’t just let you into the building and then deactivate the alarm; it also records the fact that you have entered your code. All of the video footage is recorded as well, and both are integrated. So therefore, if a client feels that some one unknown entered the space, we can very easily show who it was by pinpointing the last time the code was used and then taking a look at the cameras.”

Furthermore, the temperature and humidity levels in the facility are monitored to protect against changes in the environment, as it’s best for storage items to be kept under constant conditions. Protection from fire, water damage and other such hazards is another important function of KeySpace’s services. “You don’t have to worry what is going to happen when you are not around because we are making sure that roofs aren’t leaking and things aren’t catching fire. Whereas if you have one of the tin shacks out on the road, you might be the only one with the padlock, but there is no one guarding it or making sure that there are no leaks, damages, etc,” explains Mr. Oswald. He also points out that each unit has individualized, heat-activated sprinkler facilities

To prevent possible accidents, clients have to sign a contract agreeing not to store any items that are perishable, hazardous, poisonous, explosive, illegal, not theirs or for which they don’t have the right to possess. However, clients’ possessions are not subject to an initial search, and KeySpace management can enter and search a client’s space only when they have just cause to believe the client violated the contract or when there is a possible hazardous situation.

Time and space to suit

Alongside security, the flexibility of KeySpace’s facilities, both in terms of rental periods and the size of spaces, also makes it an extremely attractive storage option. “The great thing here is that you can take a big space or small space, you can take it for a month or for a year – whatever suits you,” Mr. Oswald comments.

All of KeySpace’s walls are movable, so the size of the units can range anywhere from 1 sqm to 100 sqm, allowing clients to continually change the amount of space they rent depending on the size of their storage. Mr. Oswald points out an example: “If you have a truck full of stock coming from Paris once a quarter, and you need 20 sqm the first month of each quarter, only 10 sqm the second month, and really nothing the third month, you can come to KeySpace and take two 10-sqm units, dumping one after the second month and the other after the third month.”

Among other convenient features of KeySpace is an adjacent car-park for 20 vehicles (plus overflow parking elsewhere in the compound), racking to create more space within a unit, carts for moving cargo, a very wide elevator and on-floor personnel, available round the clock.

Rates depend on the space of a unit and the length it is taken for, with lower rates available for larger units and/or longer-term use. Mr. Prozorov from Knight Franks estimates the market lease rate for self storage space to be from $180-200/sqm/year.

Who is using it?

KeySpace divides its clientele, most of whom are Russian, along two lines: between private individuals and corporations, and between parties who want storage on an on-going basis and those who are ‘event-driven’. “By event-driven, we mean people who need to store their stuff for a short period while they move houses, go on holidays or redecorate. This can also apply to the corporate side as well, when companies move offices, undergo renovations, etc. And then there are the slightly sadder cases involving divorce or death, when family members need to temporarily store things until property matters are resolved,” clarifies Mr. Oswald.

The ongoing use of self-storage – or what Mr. Oswald calls ‘the lifestyle thing’ - is particularly popular in North America. This is especially so considering the extreme seasonal and climate changes throughout North America, which cause most residents to have different sets of clothing and other equipment depending on the season. Mr. Oswald points out that seasonality is something that Russia and North America have in common: “In the UK, we wear the same clothes all the time and use the same car tires all the time because everyday is the same – it just rains, end of story. The one thing we wouldn’t put in storage is our umbrellas. But in North America and Russia, you have different tires, different clothes and different toys depending on the season.”

Individuals might also use long-term storage to keep toys for future grandchildren, store extra furniture, etc. “Basically, people have stuff that they want to keep, but don’t want it under their feet all time,” reasons Mr. Oswald.

Mr. Prozorov notes that the same applies to the corporate world: “Not every company, in view of the specificity and size of their business, is willing or able to store things in their own office space or lease a warehouse on a long-term basis. Many potential tenants often demand smaller areas (such as 20-30 sqm or even smaller), located in convenient places, such as nearby the company’s office or retail location. In Moscow, there are not yet such premises, and for the most part, only large blocks (office + warehouse) designed for large tenants are available to rent.”

Several businesses have already realized the benefits of KeySpace and are using the facility to store stock on both a long-term or short-term basis. “If, for example, you have a shop off Tverskaya and you are paying through the nose for your retail space, the last thing you want is to have to use that space for your stock. In fact, one of our clients has already begun to use the space as a stockroom, with a stock controller visiting once a day. He sets up his laptop at a small desk, gathers required stock items from picking shelves, updates stock records on his laptop and sets off to distribute the required stock items,” states Mr. Oswald.

Looking ahead

KeySpace’s first location in Moscow is very much the pilot facility, and Mr. Oswald is certain the company will spread to more locations in Moscow. The additional locations are expected to be less central than the pilot location (right outside the Third Ring Road), with rates possibly lower for locations farther away from the center. And of course, it doesn’t stop there; in the near future, the company looks to open facilities in St. Petersburg, followed by major regional cities.

Yegor Semenov, senior consultant of the industrial real estate department at Colliers International (Moscow), warns, however, that the company has to be cautious when expanding, as the Russian market may not be quite ready for self storage. He states, “The KeySpace product is an absolutely new service on the Russian market, which has appeared slightly before the demand for such a facility has formed. Traditionally, the majority of the Russian population saves their valuables in the ’darkest corner’ of their homes, and in order for them to begin storing their things in the ‘dark corner’ of a self storage facility, it is necessary to change people’s habits and preconceptions. As such, in order to show that storing one’s belongings in KeySpace is a reliable, safe and beneficial alternative, the company has to launch a very good marketing campaign.”

Nevertheless, sooner or later, people across Russia will fully realize the potential of self storage and demand it. Considering the current market dynamics, one can be sure that as Russia’s retail boom accelerates and spreads beyond the capitals, so too will the need for more storage.