The Rise of Industrial Outdoor Storage: CRE’s Latest Gold Mine
by: Cristina Sosa Lindo
As the world rapidly evolves, we see new concepts being born, and such is no exception for the industrial landscape. IOS, Industrial Outdoor Storage, is a relatively new commercial property type in the real estate world that grew as a result of the industrial boom the world experienced a few years ago when companies struggled to find proficient storage options (1). IOS refers to the practice of effectively using outdoor (industrial) space to mainly store vehicles, materials, and large pieces of construction equipment. With this said, they often partake as container storage and truck terminals. Most are sized between 2 to 10 acres, with a small building in the middle deemed for tenant’s use. While their look might not sound appealing to investors initially, their high returns lure them back to the deal (2). Their unattractive look, yet incredible returns, have made them proudly gain the name “a beautiful ugly duckling” by Green Street. They consider that “Industrial Outdoor Storage sites in infill submarkets are priced to deliver risk-adjusted expected returns that are superior to those available on most other commercial real estate property investments, including “traditional industrial.” (Green Street)
The Industrial Outdoor Storage market has witnessed a remarkable surge in demand, effectively meeting the storage needs across diverse sectors. However, despite its rapid growth, the market remains underdeveloped, thus presenting a tremendous potential gold mine for investors (2). In a comprehensive report by Commercial Search, the valuation of the IOS market was conservatively estimated to exceed $200 billion, with continuous new investors and developers attracted to it. Aside from this, Green Street analysis highlights that the IOS is a “fragmented” industry where a considerable portion of its supply is owned and managed by conventional operational methods or individual proprietors, not part of big institutions or platforms. This portrays a compelling opportunity for developers and investors seeking to enter the market and capitalize on its growth trajectory. (1)
The widespread success of IOS can be attributed to various factors. Yet, most of it is attributed to its unique set of tenants and how they are responsible for directly impacting the supply chain. According to Green Street, the transportation and logistics sectors are the primary users of these spaces. Third-Party logistics companies strategically leverage the prime locations of IOS units, which are typically near highways, ports, and airports, to capitalize on transportation cost savings. By taking advantage of these convenient locations, logistics companies can reduce transportation costs and allocate more funds to renting IOS units, thus enhancing the supply chain operations and making IOS an influential factor in improving its overall effectiveness. (1)
Due to many favorable factors, Industrial Outdoor Storage sets itself as an up-and-coming investment option. It portrays a compelling case for investors or developers seeking profitability with easy and cost-effective maintenance, consistent cash flows, low capital expenditures, and rapid growth in response to increasing storage demands. (3) However, its most enticing attribute is its relative newness in commercial real estate. IOS is the perfect opportunity for investors and developers looking for something new to build to capitalize on its current upward trajectory and position themselves for long-term success. Now is the time to take the risk and invest in this thriving sector.
Here at Lever Capital Partners, we thrive on embracing risk and actively seeking out innovative investment opportunities. Our extensive experience in financing successful developments has allowed us to identify promising ventures, and we believe that Industrial Outdoor Storage presents an exciting opportunity for growth and profitability. We are excited to offer our support and financial backing for your development in IOS, empowering you to achieve new heights of success. With our expertise and resources, you can confidently embark on this journey, knowing we are fully committed to your project’s triumph. Contact us today, and let’s take the first step toward a rewarding partnership.
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