IOS HAS BEEN GROWING DRAMATICALLY
Over the last few years, IOS has become more popular with industrial developers and private equity firms. There has always been demand for this type of product and typical tenants include truck terminals, vehicles/heavy equipment rent/sales, large contractors, trailer and container storage, etc.
Most of these are “owner occupied” but now its become popular for developers and equity funds to purchase as they are chasing a higher yield than traditional warehouses. It’s also a form of “land banking” for future industrial buildings. Typically, the sites considered are a minimum of 5 acres, subject to yield, and have good access to interstates
Commercial Search says:
- During the past three years, IOS has been growing dramatically and increasingly attracting the attention of—and significant outlays—from institutional investors and private equity firms
-There’s definitely a rush to acquire product as quickly as possible. The demand for industrial storage space increased during the pandemic as e-commerce exploded and continues to be a significant part of the supply chain as more businesses seek locations for last-mile delivery and also want to be near ports and major industrial corridors
-Some of the biggest players in the IOS subsector include J.P. Morgan Global Alternatives and Zenith IOS, which formed a $700 million joint venture in February
-Warehouse development in super infill locations near ports and in the major MSAs that typically sacrifice parking spark demand for IOS sites that can provide parking for trucks as well as storage for containers and pallets
-There are high barriers to entry in IOS due to a limited supply and many municipalities frown on these kinds of properties and are not likely to approve new uses in their communities
-The renewal rate for tenants in the IOS sector is greater than traditional industrial properties
Freightwaves says:
-Demand for industrial outdoor storage (IOS) is at an all-time high
-The IOS market also has highly fragmented ownership when compared to other real estate asset classes
-Buyers are attracted to the relatively low capital requirements of maintaining IOS sites when compared to indoor storage spaces
-Rental growth has been extremely strong across the IOS market, often outpacing warehouse rents, which logistics real estate giant Prologis (NYSE: PLD) forecasts will increase by 22% in 2022
Bisnow says:
-There were $1.4B worth of truck terminal sales in the U.S. from 2018 to 2022, double the previous sales volume, as a result of the pandemic boosting the growth of e-commerce
-“Truck terminals are a real hard product type to buy because there’s pent-up demand from e-commerce companies, retailers and trucking companies for facilities to move goods and consolidate product," Bridge Logistics Managing Director Paul Jones said to CoStar
-Truck terminals are often owned by longtime operators and rarely go on sale
As the article states, lease rates have escalated just as fast, if not faster, as warehouse rental rates and will continue to do so. Look for this trend to continue as more buyers enter the market. Also expect the new Infrastructure Bill to increase demand
A reminder to check your lease’s renewal/notification dates. We recommend at least 18 months in advance to start the review process and I’m happy to discuss with you.
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