Oh dear.
The main problem I can see here is that drop of 1m. This creates several problems.
1. there's the mass of soil to be held back, which means a beefier structure.
2. There's going to be a mass of water heading your way on wet summer days. If you don't block this, the interior is going to get damp (like your neighbours). If you do block it, you could end up with a wallow outside the shed window.
3. Since the ground level outside the shed would be about 1m higher than the floor of the shed, you would have to either, climb in through a window or put the entrance on the back side of the building. This would not only be an inconvenience it would also be a security risk. Light fingered types feel more confident when they are not visible from the house.
A possible solution to this would be to introduce a seperate retaining wall just before the shed. So if you can imagine, you would approach the shed by going down some steps that cut through the retaining wall. At the bottom of the steps you would have a paved area (say 1m wide), that runs across this face of the shed. The shed would then have a door that opens onto this area.
The retaining wall would itself, have to be quite substantial. At 1m it would need to be about 13inch thick. You could then have drainage built into the bottom of this, that would run off onto the paved area. The paved area would be laid to a fall so that the water runs harmlessly around the shed.
Building the shed would then be a simple afair.
This would of course escalate the costs quite considerably. By too much?