Industrial Outdoor Storage Continues to Steal the Spotlight

Industrial outdoor storage (IOS), once brushed off as an add-on to warehouses and logistics centers, is a CRE sector that is generating interest from investors. A recent Newmark write-up reported that IOS has delivered outsized rent growth in recent years, especially compared to other industrial asset types.

Since 2020:

• IOS rent growth increased by 120%

• Bulk warehouse rent growth increased by 58%

Furthermore, the estimated 1.4 million square feet of IOS across the United States has a possible market capitalization of $200 billion, while “the total market capitalization for IOS could conceivably exceed $1 trillion,” the report said.

What is IOS?

The term “industrial outdoor storage” might conjure up images of, well, outdoor storage yards. Newmark analysts take the concept one step further, indicating that IOS has two primary use cases:

• Transport, logistics and fleet operations. Land and flow-through facilities supporting cargo movement. This includes cross-dock truck terminals, shipping container storage, trailer parking and fleet maintenance.

• Equipment and bulk storage/rental operations. Land facilities that support yard storage and staging areas, such as contractor yards, building materials supply centers, car rentals and landscaping services.

The Fundamentals

Newmark analysts explain that, as a percentage of inventory, bulk warehouse development increased to 2.5 times the 2015-2019 average from 2020 to 2025 (YTD). Over the same period, IOS, which faced greater zoning restrictions than bulk warehouses, “has seen minimal purpose-built inventory additions over the same period,” the report pointed out.

Meanwhile, IOS is dealing with the following issues:

• Land density. In dense markets, land scarcity has driven some bulk warehouse tenants to lease industrial outdoor storage for drop yards or parking.

• Softening fundamentals. Both bulk warehouse and IOS have experienced an increase in vacancy. However, “with higher vacancy, bulk warehouse rents are softening while IOS rents are still rising as a national average,” the Newmark analysts said.

• Fragmented pricing. The report classifies IOS as having a “highly disparate ownership base with institutionalization still in the nascent stages, creating inconsistent pricing approaches.” Additionally, a limited understanding of IOS as an asset has limited acquisition and development financing.

The Future

The Newmark write-up acknowledged that IOS is still in its early stages with regard to institutional ownership, “but acquisitions by major equity managers are rising.” Additionally, the number of IOS properties reported in the National Council of Real Estate Investment Fiduciaries’ (NCREIF) Expanded National Property Index has more than doubled over the past five years.

Newmark analysts also explain that limited supply and growing demand for IOS space could also spur institutional investments, “transforming IOS from a niche, fragmented market into a maturing, standardized asset class.”