Industrial Outdoor Storage (IOS), the sub-asset class previously coined the “beautiful ugly duckling,” is spreading its wings within the investment community. Josh Neill, president and chief investment officer at Outpost, opened a panel discussion this week at NAIOP’s I.CON East in Jersey City, New Jersey, offering two facts that have piqued investor interest: IOS rents are up 100% since 2020, and yields often exceed 8%.
The panel of industry experts included Justin Horowitz, senior managing director at Cooper Horowitz, LLC; Jason Lundy, managing director of capital markets at JLL; Alex Olshansky, managing principal at APEX IOS; and Seth Zuidema, director at Cushman & Wakefield US, Inc. They explored how IOS is maturing and what opportunities remain as the sector scales.
“IOS has been defined as truck parking, contractor storage, fleet yards, low coverage industrial, and covered land play for purposes of institutional investment,” said Neill, who asked the panel to weigh in on their definitions. Olshansky noted a broader way of thinking about it is a low-coverage industrial asset where the primary value to the tenant – over 50% – is in the land. Lundy added, “Most of the value that is attributed to these sites is relative to the excess parking or storage, and not necessarily a higher and better use [as is typical with a warehouse].”
Not All Sites Are Created Equal
Many will say a prime site has the “magic three:” it is fenced, paved and lit. “But there’s more nuance. What about utilities?” Neill said, “And is there a bathroom off-site?” These are items that tenants such as Tesla and Lucid seek. Lundy mentioned clients who wanted gravel instead of paving so their containers wouldn’t break through the ground. And in this instance, the capitalization rate was the same for both gravel and paved assets.
From the investor side, Olshansky said his firm underwrites the buildings more than the land. “The best site appeals to the biggest pool. We want to have a site that’s durable through economic cycles, through transportation, and booms and busts.”
On the ground in the New Jersey and New York City markets, Zuidema added that the perfect site in his market is multimodal, with active rail, a deep-water pier, and multitruck access. Location is key, but a newer trend has emerged: power access is the latest aspect that creates the perfect site. Horowitz shared, “That’s where the new acronym EOS [Electrified industrial outdoor storage] comes from in IOS.”
How Have Deals Changed?
“You used to underwrite in this order: location, basis price you’ll pay, level of improvements,” answered Olshansky. “Now it’s location, then level of improvements, which informs and correlates to what basis you’ll pay.”
Lundy stated, “The mix of IOS tenants has evolved as well, from more transportation-oriented to business services-oriented, with electrified parking,” naming Tesla, Lucid and Rivian as large tenants. Olshansky added that tenants are backed heavily by balance sheets and venture capital, indicating they can offset risk, especially when considering a deal’s leverage.
And the financing has become larger. The panel participants’ first deals were relatively small. It wasn’t until 2023 that Horowitz saw financing hit $10 million. “It really wasn’t until 18 months ago that these large-scale portfolios started to come about … the space has just gotten more efficient on the financing front.” Around the same time, he started doing deals with a couple of life insurance companies. “The leverage on deals is only about 60% for life insurers, whereas leverage on other deals is stabilized to an absolute maximum of 75%,” Horowitz added.
Deal interest is starting to attract separately managed accounts on behalf of investment managers, Odyssey funds, sovereign wealth funds, and pension fund money.
What is the Single Largest Underwriting Mistake?
Zuidema advised not to overlook zoning. “We speak a lot about zoning risk, and you have to understand zoning to a T. What are the adjacent zones? What types of structures and actual zones are there? What’s the existing use? You need to know if it’s specifically for vehicle storage, truck storage or container storage.”
Another area is looking at comparable deals or “comps.” “You need a good understanding of how to comp. It can give you an edge.” For instance, Olshansky stated, “We price every deal in the market across the country every day.” A local broker he calls might have a couple of comps, whereas he can find “complementary” comps in similar markets elsewhere.
Lundy added that some tenants will pay only for usable acreage, not growth acreage. “Truckers are big on only paying usable storage, whereas others will price gross. This is not a mistake but a nuance.”
But be careful not to “over-underwrite” in your underwriting, Horowitz added. And Zuidema maintained that in his market, with tight pricing, investors sometimes must get in and take a long-term approach.
One Bull Market and One Bear Market
Olshansky answered that he prefers assets with certain physical characteristics. He likes what he calls “manufacturing + IOS.”
Lundy liked Long Island and northern New Jersey for population density and supply constraints.
Horowitz liked Nashville, Tennessee, for its dense population growth and Mobile, Alabama, for its growing port.
Zuidema concluded the discussion, “Never bet against New Jersey. The New York City outer boroughs as well. If you look at Green Street, it has the highest projected rental rate growth in the industrial sector.”
This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON East 2026. Learn more about JLL at www.us.jll.com or www.jll.ca.
