Industrial Outdoor Storage Gains Traction As A Core Asset Class

Industrial Outdoor Storage (IOS) is gaining momentum as a mainstream asset class, driven by institutional interest, rising rents, and low operational costs.

As the market matures, pricing is becoming more standardized, and investor appetite continues to grow. IOS properties serve multiple functions, from overflow storage and vehicle parking to housing emerging technologies like aerial delivery drones and autonomous trucks—uses that are expected to further boost demand. However, zoning constraints are limiting supply in some markets, according to a recent CommercialCafe industrial market analysis.

Investor activity in the sector is accelerating. In 2025, Peakstone Realty Trust entered the IOS market with a $490 million acquisition of a 51-asset portfolio. Barings and Brennan Investment Group also announced a $150 million investment in a joint venture targeting IOS assets. Additionally, Realterm acquired a 13-property IOS portfolio for $277 million.

These investments are supported by strong fundamentals. Since 2020, IOS rents have surged by 123%, reaching $8.66 per square foot in August—up 6.1% year-over-year—amid limited new supply. At the same time, the sector’s vacancy rate dropped 30 basis points to 8.7%.

Inland markets such as Memphis, Atlanta, and Phoenix are experiencing the highest rent growth. Meanwhile, Southern California—after peaking in 2022 and 2023—has seen a cooling trend due to rising vacancies. In-place rent increases include 8.3% in Orange County, 8.1% in the Inland Empire, and 4.2% in Los Angeles. Vacancy rates in these markets rose to 7.7%, 8.2%, and 8.6%, respectively, from historic lows of around 2%.

In the Midwest, Kansas City remains the tightest IOS market with a 4.5% vacancy rate. St. Louis and Minneapolis also reported below-average vacancy, while Columbus, Ohio, continues to struggle with high vacancies at 13.5% as of August.

Nationally, nearly 340 million square feet of industrial space are under construction, with 205 million square feet delivered through August. Dallas–Fort Worth leads with 28 million square feet underway, followed by Houston (17M SF), Phoenix (16M SF), Memphis (12M SF), and Atlanta (10.5M SF).

Manufacturing construction has slowed significantly after peaking in 2024. Fewer than 20 million square feet have started construction this year, compared to 200 million between 2021 and 2024. Longer development timelines continue to delay manufacturing completions compared to logistics-focused facilities.

In the Northeast, new industrial development remains limited. The region’s four major markets collectively have just 15 million square feet under construction—less than the pipeline in single markets like Phoenix or Houston—driving continued lease premiums.

As of August, industrial sales totaled $43.2 billion year-to-date, averaging $137 per square foot. Dallas led all U.S. markets with $3.9 billion in industrial transactions.

Source: GlobeSt.