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  • Writer's pictureE.R.Cornwell

Industrial with Outside Storage

The demand for properties with outside storage can depend on various factors such as location, size, zoning regulations, and the specific needs of businesses. However, more and more businesses - specifically smaller ones - need the space that they can put their entire operations in one location.

Generally, industrial properties with outside storage can be attractive to operations that require space to store large equipment, raw materials, and finished goods. These businesses can include construction companies, service companies (lawn care, plumbing), manufacturing firms, logistics companies, and others. The growth of e-commerce, the expansion of supply chains, and the need for businesses to have efficient and cost-effective storage solutions have all increased the demand for these assets as well. Additionally, the availability of land and the cost of real estate in a particular area can also play a role in demand for industrial properties with outside storage.

Industrial outdoor storage facilities, considered critical in the shipping of goods to U.S. consumers, are attracting more investment as buyers turn to a property type that’s in short supply to hedge against higher interest rates and economic uncertainty. In the past month, several firms have announced new ventures targeting these sites used for parking trucks, containers and equipment. That’s spotlighting a wider bet by investors on this niche commercial real estate sector that provides some protection from economic volatility because of its limited supply and the need for storage space in good times or bad. However, the biggest hinderance to additional supply is going to be the zoning regulations for anything outdoor.

Industrial outdoor storage facilities are usually built close to large airports, ports, railroads and major highways, and typically are mostly concrete, with less than 20% of the property covered by a building. Tenants use the space to store and sort products, equipment, building materials, containers, trailers and trucks, making the properties an important link in the supply chain.

Though no property sector is totally recession-proof, several firms view industrial outdoor storage as highly recession-resistant. Specifically, logistics firms need space to store equipment even if it is not being used, he said. Currently, some investors plan to invest in properties that provide space for vehicle parking as well as storage for containers, trailers, construction materials and machinery are going to be part of the development plan moving forward.

Brightstar, a real estate investment and development firm out of Kansas City, is bringing out a new strategy of targeting port-proximate infill sites with high barriers to entry and strong demand drivers that are difficult to replicate elsewhere. Makes sense, as areas with high barrier to entry, like port locations, will always have strong rent pressure and high demand.

If it's not containers, it's tractor trailers; if it's not tractor trailers, it's service trucks... or materials... or finished goods. The need for outdoor space is simply growing. Developers need to create returns and the highest value is typically increased building coverage - but with the need of additional storage simply leasing the ground or leasing areas with minimal improvements might provide higher than benchmark returns without the need for additional capital and risk.


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