Big Yellow Self Storage recently released their financial results for the third quarter (the final three months of 2012), which show the impact of VAT being levied on self storage for the first time.
“Seasonally weakest” period of trading
The results statement says that this part of the year is traditionally Big Yellow’s “seasonally weakest” period of trading, as a significant proportion of the new tenants who moved in during the summer move out. This effect was exacerbated this year because of an “unusually high influx of students” who stored their belongings during the summer vacation.
The largest part of the Big Yellow Self Storage portfolio – their 54 stores which are “wholly owned” – saw a decline in occupancy of 139,000 square feet, significantly higher than during the same quarter in either of the past two years.
However, revenues from this part of the business were £16.8 million, almost 4% higher than during the same quarter last year, although down nearly 10% from the previous quarter.
Total occupancy across the Big Yellow Self Storage portfolio of wholly owned stores was 2.1 million sq ft, which is 63%. However, this varied significantly between the group’s 32 established stores, which had totally a total occupancy of 72%, and their 22 lease-up stores, which lag significantly behind at 51.5%.
The average annual rent which Big Yellow Self Storage charges per square foot – arguably the most important number for any self storage firm – was £25.43.
Big Yellow Self Storage also includes another 12 limited liability stores owned in partnership, which earned £2 million worth of revenue from 50.5% occupancy
Impacts of VAT
For the first time, VAT was levied on self storage, a move announced in the Budget last March which came into effect on October 5.
It was argued by many people within the UK self storage industry that this could have a negative impact on a sector which is already having to combat the recession, as much of this extra tax would need to be passed on to the consumer. Storage.co.uk even started the “Don’t Over-Tax Self Storage” campaign to try and persuade the government to reverse this change, but this wasn’t enough to prevent it coming into effect on schedule.
The results refer to the introduction of VAT as one of the reasons for Big Yellow’s decline in revenue during this quarter. However, the Chief Executive Officer, James Gibson, said that he remained optimistic about the future of Big Yellow Self Storage:
“The introduction of VAT presented the Group with a significant challenge and we are broadly satisfied with the way the business has absorbed this change. Although it is early in the New Year to have much visibility, January has started positively with a return to more normal trading and an encouraging book of reservations. We look forward now to our seasonally busier period.”