Tips for Investing in Industrial Outdoor Storage

If you’ve heard about the rising demand for IOS property, you may be considering whether this type of real estate investment is a good fit for your portfolio. In recent years, the industrial real estate sector has broadened. Before, industrial outdoor storage spaces fit neatly as a small portion of the larger industrial properties sector. Now, they’re a high demand, niche market of their own.

Should you invest in IOS space? With these tips for investing in industrial outdoor storage, we’ll help you walk through some of the main considerations you should evaluate before closing on a property.

As one of the most highly-qualified real estate firms in the Carolinas, and with nearly 1000 successful sales and lease transactions under our belts, we understand what it takes to secure the most successful investment possible.

What is Industrial Outdoor Storage?

Industrial outdoor storage is a type of commercial real estate within the industrial sector that offers a significant outdoor storage component. While most industrial use properties focus on the building and its features, IOS space is mainly valued for its larger property size, which is used for storing outdoor items such as vehicles, equipment, building supplies and materials, containers, and more.

Commercial properties in the IOS sector usually do have a building on them as well, but it’s often on the smaller side. Generally, IOS properties are an acre or more.

Why Is Industrial Outdoor Storage So Popular?

The main reason why industrial outdoor storage facilities are so popular is because they provide incredibly cost-effective solutions for businesses who don’t need an excessive amount of indoor space. Since land is much more affordable than large buildings, a significant number of industrial businesses have found IOS space to be a highly effective way to lower their costs.

In addition, the types of businesses who benefit from industrial outdoor storage space tend to be incredibly recession resistant, which increases the strong demand for IOS facilities.

And because IOS sites are generally quite versatile, they can appeal to a broad market of industrial users. Some of the most common types of businesses who use these properties include those in the fields of manufacturing, construction, distribution, logistics, and vehicle or equipment rental.

In the last few years, and partially spurred on by the 2020 pandemic, industrial outdoor storage has grown drastically from a small niche of industrial space properties to its own, $200 billion market.

Types of Industrial Outdoor Storage Properties

Common features of IOS properties include significant acreage, proper zoning (either light industrial or heavy industrial), convenient access to the interstate (in most properties), heavy equipment viability (such as concrete or gravel lots with proper drainage and soil composition), and security measures (such as surveillance cameras, fencing, or lighting).

But within these basic features, there are a few main IOS property types that you’ll find on the commercial market.

1. Trailer storage

Trailer storage is important in the industrial sectors for holding large vehicles such as trucks and trailers. These transportation hubs provide a safe place for trucking companies and other types of freight carriers to store equipment.

Trailer storage IOS properties often have power and utility hookup options and are often located just minutes off the interstate for easy access.

2. Container storage

Shipping containers offer a versatile and cost-effective solution for outdoor storage. Many industrial storage facilities are turning to shipping containers for storing a variety of materials and goods. Many IOS properties are versatile enough to offer space for containers to be safely stored.

3. Yard storage

Yard storage properties are often used by businesses in the transportation, construction, or heavy manufacturing industries. These large yards can be used to store equipment, vehicles, machinery, or materials. They’re typically covered with pavement or gravel.

4. Open-air storage

Open air storage is used by businesses who need to store equipment, supplies, or other large materials without any protection from the weather. These types of properties generally have larger lots with very minimal infrastructure.

While these are a few of the main types of IOS properties, other IOS options are often tailored to fit more specific needs, such as for trash and recycling companies.

Should You Invest in IOS?

While IOS investments hold a lot of promise, there are also a number of potential risks with investing in this type of property. When it comes to choosing your next commercial real estate investment, there’s no one-size-fits-all answer.

At Regent CRE, we’re committed to taking into consideration your needs as a business or individual. Before we start searching for properties, we want to find out more about your goals and priorities. From our free market report to financial analysis, due diligence, and expert negotiation, we’re committed to using our knowledge and tools to help you find the best investment for you – whether in the sphere of industrial outdoor storage or not.

One of the biggest challenges with IOS space is zoning. Not all properties are zoned correctly for IOS, and it can be a major hassle to have zoning changed. Because IOS property usually generates lower tax revenue and can also increase traffic, municipalities aren’t always eager to re-zone properties.

Other challenges include the available infrastructure and whether or not it fits user needs. For example, is it viable for heavy equipment use? Is there (or could there be) adequate security? What type of infrastructure (if any) is currently available on the property?

On the plus side, industrial outdoor storage properties are usually more versatile than most other types of property. From trucking companies to construction businesses to equipment storage, there are dozens – if not hundreds – of different types of businesses who can make use of this ideal type of commercial real estate.

Tips for Industrial Outdoor Storage Investing

If you’re ready to invest in your next IOS property, here are some considerations and tips that you should keep in mind.

1. Choose a strategic location

Most companies looking for IOS property want to have easy access to major highways in order to save time and reduce transportation costs. This doesn’t mean that IOS properties miles off the highway are worthless, of course, but they’re generally not as valuable as the more accessible lots.

For the best return on your investment, look for properties near busy interstates and major transportation hubs.

2. Consider local zoning regulations

As we mentioned above, IOS zoning can be tricky. IOS locations are often situated near consumers, but not too near, since most homeowners and businesses don’t prefer to be right next to industrial sites. At the same time, you also don’t want your site to be too rural, making it hard to access the interstate.

Finding the right location with the right zoning can be tough. And re-zoning can be very difficult, if not impossible. When looking for a property, it’s important to have an experienced commercial real estate broker on your team to help assess zoning and make sure you don’t invest in a property that will only cause more headaches down the road.

3. Assess infrastructure

Although industrial outdoor storage has limited infrastructure in comparison to other types of properties that focus on the building, it is important to carefully assess any infrastructure that is on the property.

Firstly, is it secure and stable? The due diligence process includes inspections such as a survey, environmental inspection, and appraisals, which will provide assurance that you won’t end up with unforeseen problems on your property.

In addition, it’s important to consider versatility in regards to infrastructure. Can the property suit a variety of users, or do its current qualities confine it to one specific type of industry? This question will help to determine the value of your potential investment.

4. Ensure heavy equipment viability

Lastly, a majority of IOS users are going to be driving or storing heavy equipment on the property. Because of this, it’s highly important to assure that the quality of the surfaces is viable for heavy loads.

Ideally, a property will have concrete or gravel over pavement. In addition, the topography should have proper drainage and soil composition.

5. Understand IOS terminology

When searching for property, it’s important to note that these types of spaces aren’t always labeled as “IOS” or “industrial outdoor storage”. Other names for IOS-type properties include industrial service facilities (ISF) (generally used for storing equipment, materials, and vehicles), urban development (UD), or general industrial (GI).

Specific locations may also have their own names for IOS-zoned properties. For example, Mecklenburg County, NC uses terms such as ML2 or I2 for different types of industrial zoning.

Working with an experienced broker in your area will help you ensure that you’re not missing out on valuable IOS properties that may be classified under different terminology.