How quickly will a safe deposit locker centre give a good return on investment?

Emmanuel Harir Forouch
Posted by Emmanuel Harir Forouch
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What is your most important consideration before making an investment? It is probably how quickly you are going to get your money back and then start making a profit. Nobody is interested in investing in something unless it is going to generate a profit, so this is undoubtedly the one overriding concern that could sway an investor’s decision either way.

When exploring investment opportunities, it is critical to know the payback period. This blog gives you a calculation example of actual figures from an existing installation and the projected investment return.


Why invest in safe deposit locker centres?

Having always been a service offered by financial providers, the demise of the bank branch is a strong factor in the reduction of the current availability of this service.

Leading Global Management Consultants, Kearney, predict that 25% of bank branches will close across Europe in the next three years as customers favour digital banking. This is a sharp increase in the ongoing trend of the shutdown of bank branches across Europe, which saw 35% percent of them close over the last ten years.

Customer demand for secure, flexible safe storage away from their home will increase further as branch numbers decrease - those that have valuables will need to re-site them, those that newly acquire tangible assets etc will have less choice. This has resulted in a great opportunity to fulfil the increasing demand for safe deposit box facilities.


Why are automated safe deposit lockers an attractive investment opportunity?

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The Investment - Automated safe deposit lockers as a service

Due to the increasing demand described above, the provision of self-service, safe deposit locker facilities, is an attractive investment opportunity. In the past, the service mainly provided by banks required staff escort to access the customer safe deposit lockers. The latest technology offers fully automated solutions that can be accessed by the customers themselves, at any time. The added beauty of such an automated solution is that it is also a familiar, user friendly self-service terminal concept with high customer acceptance and thus one potential obstacle is already overcome.

By combining next-generation automated technology and advanced customer identification features, service providers can offer their customers 24/7 accessibility and still uphold the highest levels of security.

Gunnebo’s most modern, fully automated safe deposit locker solutions offer the following features:

  • 24/7 Self-service solution, requiring no staff escort to access the customer safe deposit lockers
  • Most convenient user accessibility
  • State of the art technology for user authentication
  • Highest technological standards for maximum security
  • Best in class industry certification
  • Digital, software-controlled user management
  • Maximum user privacy

See how it works in our short YouTube video:

 

 

The Return on Investment

Although the primary investment for a fully automated safe deposit locker solution may initially appear high, the profitability potential to secure both a good ROI and a fast payback period are exceptionally promising and decidedly achievable in a considerably shorter time frame than many other investments.

The following business case example is based on a real-life scenario. Project scope and calculations are explained in the notes below.

SSA-profitability-calculation

Notes:

    1. Investment: Based on the design, project planning and installation of a Gunnebo SafeStore Auto solution, including a highly secure and certified vault system with fully robotised deposit box technology and the capacity for up to 2000 safe deposit lockers
    2. Annual rent: Our calculation is based on the actual lowest observed rental fee of the smallest safe deposit box (20 EUR). Moreover, monthly deposit locker pricing can range from 20 – 55 Euros dependent on the box capacity, so this could be significantly higher dependent on the mixture of locker sizes and occupancy rate
    3. Occupancy: Based on experience and market observation the average occupancy rate for automated safe deposit locker solution is 75%
    4. Average annual revenue: In the example the revenue is based on renting deposit boxes out to customers (Number of deposit boxes times average rental fee times occupancy rate). There are potential for further revenue streams derived from additional insurance premiums for high value items and other options that have not been considered in the example

      Running costs:
    5. Rental of floor space: Rental cost is based on the required surface area to house an installation with the capacity of 2,000 deposit boxes
    6. Maintenance cost: A robotised system, technology and software, that are all enablers for 24/7 access and minimal staff requirement, will always require upkeep and servicing
    7. Labour cost: Like the standard ATM service, no attending staff are required with an automated system as all transactions are self-serve. In the unlikely event of an issue, you may wish to have minimal staff on hand to assist or appoint security staff for an additional element of safety during riskier hours
    8. Total Average annual cost: Cost of rental space plus maintenance cost plus labour cost ROI
    9. Annual revenues: Annual revenues minus the total annual running costs
    10. Payback period: Installation cost divided by the annual revenues

With a higher occupancy rate and being able to command an elevated rental rate in premium locations or for larger lockers, this calculation will provide an even quicker return on investment.

Furthermore, if the location is owned or already fully depreciated rather than the space leased, the rental cost is negated in the above calculation

In recent years, the “self-service” concept has been applied to many services and solutions across all industries. In today’s 24-hour, high-tech society, customers expect to be provided with instant access to services and the precious items stored within them whenever they want. No longer being constrained by financial institution opening hours, customers are prepared to pay for the flexibility afforded by unrestricted and convenient access to their deposit box.

The above example shows that Gunnebo Safe Storage can provide you with a solid business case and evidential proof in the form of real examples of successful ventures to prove the profitability potential from a strategically funded project.

We appreciate that the profit element is probably the most attractive component of any commercial justification, but it is certainly not the whole picture. If this article has piqued your interest sufficiently, then please download our free investor guide entitled ‘’Why are automated safe deposit lockers an attractive investment opportunity? A guide for private investors’, where you will find a comprehensive description of the various criteria for a profitable investment, the current market conditions and environmental forces, as well as a presentation of a full business case.

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