Barclays has upgraded Safestore Holdings to overweight from equal weight, citing the self-storage operator as the preferred exposure in a sector facing growth headwinds. The bank also cut its ratings on Big Yellow, Shurgard, Unite and Merlin Properties, reflecting a broader reassessment of European real estate valuations.
The reassessment follows Barclays’ shift away from total accounting return methodology toward a free cash flow (FCF)-based framework, with FCF weighted at 80% and dividend discount models at 20%. The new approach forecasts five years of free cash flow per share, deducting capitalised interest, maintenance and sustaining capital expenditure from recurring earnings.
Safestore received a price target of 670 pence, while Big Yellow’s target was lowered to 820 pence and Shurgard’s to €22. Barclays also reduced its earnings estimates for the sector, trimming adjusted EPRA EPS forecasts for Safestore by 3% for fiscal 2026 and 11% for fiscal 2030. Big Yellow’s estimates were cut by 7% for fiscal 2027 and 25% for fiscal 2030, while Shurgard’s were reduced by 9% for fiscal 2026 and widened to 21%-22% for fiscal 2028-2030.
Barclays downgraded Big Yellow, Shurgard and Unite to underweight, and Merlin Properties to equal weight from overweight. Swiss Prime Site and SEGRO also saw downgrades to equal weight, though SEGRO’s target was raised to 970 pence, anchored to Prologis’ agreed offer of 978 pence per share plus a 22.54 pence final dividend. In a downside scenario where the bid fails, SEGRO’s target would be 740 pence. Swiss Prime Site’s target was set at 125 Swiss francs.
The bank highlighted weaker occupancy, affordability pressures and higher customer-acquisition costs for Safestore, despite its upgraded rating. For Merlin Properties, higher data-centre operating costs and a partner promotion were cited as limiting near-term earnings progression. Barclays also noted that industry capacity in the self-storage sector has expanded by about 30% since the COVID-19 pandemic, while demand has moderated from pandemic-era peaks.
