Why Industrial Outdoor Storage (IOS) Is the Next Big Trend in Commercial Real Estate

The Industrial Outdoor Storage (IOS) asset class has rapidly emerged as a key player in 2024. With a market valuation of $200 billion and over $1.7 billion in institutional capital raised in the past year, IOS is transforming how investors and industries approach storage and logistics needs.

What Is Industrial Outdoor Storage (IOS)?

IOS properties are industrial lots typically featuring large outdoor spaces accompanied by small office or storage buildings. These sites are essential for industries requiring space for large equipment, vehicles, or materials. Common tenants include last-mile logistics providers, construction companies, and heavy equipment operators.
Unlike traditional warehouses, IOS properties are uniquely positioned to meet the demands of industries prioritizing accessibility and proximity to urban or infill locations.

Characteristics of IOS Facilities

• Large outdoor areas: Ideal for storing oversized materials, vehicles, and equipment.
• Minimal structural requirements: Often limited to small office spaces or storage sheds.
• Strategic locations: Frequently located near urban centers to support last-mile delivery and logistics.

What’s Driving the IOS Boom?

1. Demand for Last-Mile Solutions
   The surge in e-commerce has redefined supply chains, emphasizing the importance of last-mile delivery. Companies are increasingly seeking IOS properties in urban and infill areas to minimize transportation costs and enhance delivery efficiency. This trend, which gained momentum during the pandemic, continues to drive demand for IOS today.
2. Robust Supply-Demand Fundamentals
   • Strong rental growth: IOS properties have seen a 30% rent increase since 2019, outpacing traditional industrial assets.
     
   • Low vacancy rates: High demand and limited supply have resulted in extremely low vacancy rates, further bolstering rental growth.
     
   • Minimal capital expenditure: These properties require lower upfront investment compared to traditional industrial facilities, making them highly profitable.
3. Fragmented Ownership Creates Consolidation Opportunities
   The IOS sector remains largely fragmented, with many properties owned by smaller, private investors rather than large institutional players. This ownership structure creates opportunities for larger, well-funded entities to acquire multiple properties, consolidate them under a unified management strategy, and generate higher returns.
4. Institutional Investment Growth
   Institutional capital is flowing into IOS, validating it as a core commercial real estate investment class. Major institutional investors are increasingly recognizing the strong growth potential and resilience of IOS assets, particularly in a market characterized by high demand and low vacancy rates. As these investors allocate more funds to IOS, the sector is gaining credibility and attracting more capital, which further fuels its growth and development.

Why IOS Is an Attractive Investment

IOS offers compelling risk-adjusted returns fueled by resilient demand, strong rental growth, and low vacancy rates. As industrial operations and logistics evolve, investors are recognizing the strategic value of IOS.

The Future of Industrial Outdoor Storage

With its strong fundamentals and growing institutional interest, the IOS market is poised to expand further. For real estate investors looking to diversify their portfolios, IOS represents a lucrative opportunity to capitalize on the evolving needs of modern logistics and industrial operations.

As e-commerce, urbanization, and supply chain demands continue to shape the future, IOS is proving to be a cornerstone of the commercial real estate landscape.

If you’re interested in learning more about how IOS can fit into your investment portfolio, or if you’d like to gain access to upcoming opportunities, please reach out to our team here.

Sources:

Colliers: The Rapid Rise of IOS

CommercialSearch: Industrial Outdoor Storage Continues to Grow