JLL Self Storage

Market overview

Swedish Self Storage Association Conference 2019

• Real estate trends • The Swedish market • Self storage trends• Big data• Market transactions • Valuation metrics • Future outlook

Real Estate Trends

• Transaction volumes likely to fall in 2019 but market robust

• Longest positive trending market in modern history

• Some market hotspots including Stockholm

• Increasing allocation to Living & Alternatives

• Search for income yield

• Industrial growth : retail decline

• The move to flexspace

Real Estate Trends in 2019

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Allocation to Alternatives – 2008 to 2018

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Allocation to Alternatives

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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2017 and 2018 % of total European alternative investment

Alternatives – Predictions for 2019

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0%

5%

10%

15%

20%

25%

30%

35%

Elderly Care Retirmeent Living Leased Hotels Student Housing Multifamily Primary Healthcare Automotive Data Centre Self Storage

Sector Allocations

Proportion of respondents Average allocation increase

Alternatives – Predictions for 2019

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Elderly Care Retirement Living PrimaryHealthcare

Hotels Student Housing Private RentedSector

Automotive Data Centres Self Storage

Res

po

nd

ents

Yield expectations

harden unchanged soften

Real Estate Trends in Sweden

Swedish GDP

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-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 P 2019 P 2020 P 2021 P 2022

Nordic transaction volumes

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-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Bn

Eu

ro

Sweden Norway Finland Denmark

Transaction volume by sector in Sweden

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Office24%

Retail13%

Industrial13%Mixed-Use

3%

Residential32%

Hotel2%

Other13%

Prime Rents Q1 2019SEK/sqm (Y-o-Y)

Källa: JLL Research

Kista

2 400(+4,3%)

Solna/Sundbyberg

3 300(+3,1%)

ÖvrigaInnerstaden

4 900(+4,3%)

CBD

7 500(+4,2%)

Närförort

3 200(+3,2%)

Swedish yields

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3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Q4´08

Q2´09

Q4´09

Q2´10

Q4´10

Q2´11

Q4´11

Q2´12

Q4´12

Q2´13

Q4´13

Q2´14

Q4´14

Q2´15

Q4´15

Q2´16

Q4´16

Q2´17

Q4´17

Q2´18

Q4´18

Logistics Stockholm >10,000 sqm Retail warehouses (>1,000) Stockholm

External Shopping centre (>40,000) Sweden Stockholm CBD Office Yield

Self Storage Trends

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Strong macros drivers …

Propensity to move

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Some of the most mature markets

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Major operators market share

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0%

20%

40%

60%

80%

France Italy Sweden Belgium Germany Netherlands UK (inclcontainers)

Spain

An ageing stock …

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European rental levels

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Rental growth in Europe

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0.00

1.00

2.00

3.00

4.00

5.00

6.00

Sweden Finland Ireland Netherlands UK Denmark Spain Germany Belgium Italy France

Ind

ustr

ial M

ultip

lier

Industrial Multiplier

Industrial Multiplier

Rental growth in Europe

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• Fragmented ownership in most markets

• Move from ‘mom & pop’ to professional operator and investor

• Rising interest from PE and institutional capital

• Rental growth in most markets – 7.5%+ in Germany

• Yield compression at an accelerating rate

• Availability of debt

• The problem of scale and lack of product and developers

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Key European trends : self storage

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Rental growth – Older stores

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Rental growth –newer stores

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Rental growth –size vs location vs generation

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Big Data & Technology

Rental pricing algorithms

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GIS and Demographics

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MLA vs Staff costs

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Market transactions

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35

Key Transactions

Recent Sales

36

Valuation metric and methodology

• Explicit discounted cash flow

• Income multiple (or inverse of yield)

• Value psm MLA

• Running yield at maturity – typically 8%

• Cost of replication

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The five valuation methods

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• The greater emphasis on value psm

• What is a Reasonably Efficient Operator

• Portfolio premiums of 10% to 20%

• Prime discount rates @ 7.5%+

• Capital value – new build tone is €3000 ++ psm with €2000 psm in regional locations

• Multiples – 30+ but “normalised” are 15 – 20 – leaseholds are c 6 – 8 with 15 years

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Valuation benchmarks

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Future outlook

– Mixed use

– Complementary uses – expanding the offer to build bigger

– Metro vs Satellite

– Digital transformation

– Pricing algorithms

– Online pricing and reservation : importance of e-marketing

– Institutional ‘retail’ grade stock

– Serviced storage and concierge

– Unmanned vs Automated

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Key European trends : self storage innovations

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