There are emerging niches in the industrial real estate sector that are all primed as significant growth areas. The three most promising are outdoor storage, cold storage and facilities that support electric vehicles.
While outdoor storage has not been immune to headwinds facing commercial real estate of late, the IOS sector still boasts one of the lowest vacancy rates of any property type due to strong supply/demand fundamentals.
Although IOS is seeing growing demand in line with the broader industrial property boom, it is still a volatile market with demand and rents accelerating faster in upcycles but also performing worse during economic downturns. And one of the reasons IOS tends to suffer disproportionately is the overall weaker tenant profile.
In the past month, several firms have announced new ventures targeting sites used for parking trucks, containers and equipment. That’s spotlighting a wider bet by investors on this niche commercial real estate sector
IOS has rapidly become one of commercial real estate’s hottest asset classes as a flood of new money has sent prices sky-high. But investors looking to enter the space may crash on the rocks of an industry that is trickier — and less like the rest of the industrial market — than first meets the eye, and the talent pool of people with expertise in navigating the hazards is limited.