Storage firm Lok’nStore today posted narrower annual losses and said it had seen “consistently encouraging” trading this year as demand for storage space picks up.

The group, whose fortunes are largely tied to the housing market, said occupation levels rose by nearly 2% in the year to July 31.

Lok’nStore reported annual pre-tax losses of £656,000, an improvement of 12% on losses seen a year earlier.

It also clawed back some of the falls seen in the value of its property, at £78.4m compared with £76.8m at the end of January. The property market has been steadily improving this year, which has an influence on the value of Lok’nStore’s portfolio and demand from home movers.

Lok’nStore said the “household” sector accounts for 62% of group turnover, while 38% comes from corporate demand.

Revenues over the year fell 7.6%, although the group said this was resilient against dire conditions in its target markets as the recession bore down – including a 41% plunge in housing transactions.

Shares lifted 8% today as the group confirmed signs of a recovery.

“Since the beginning of 2009 trading has been consistently encouraging with reservations, enquiries, square feet let and number of customers all turning upwards,” said the group.

“Turnover is now increasing with lower operating costs and lower financing costs boosting cash flow,” it added.

The firm saved money over the year by slashing staff costs by nearly 12% and reducing overheads by a quarter.

Sonia Kaur, an analyst at Hardman & Co, said Lok’nStore delivered a “credible” performance against difficult conditions.

She upgraded estimates for 2010 and now expects a sharp rise in revenues in 2011.

Lok’nStore employs 105 staff and has 19 storage sites across the UK, with another three in development.

Its flagship site, which doubles up as a head office, is based in Farnborough, while it has storage at locations including Ashford, Basingstoke, Poole and Woking.