The Rise of IOS: Industrial outdoor storage is becoming an institutional asset class
By Brendan Wewer, Commonwealth Commercial Appraisal Group
Drive through an established industrial corridor and you will see properties outside the traditional warehouse category. They may include a small office or maintenance building, but most of the site is paved or stabilized yard used to store trucks, trailers, equipment, containers, or building materials.
Long viewed as contractor yards or low-coverage industrial sites, these properties are now recognized as industrial outdoor storage, or IOS, an active commercial real estate niche. Logistics companies need trailer parking. Contractors need space for vehicles and equipment. Utility providers need yards near service areas, while equipment rental companies require accessible inventory space. For these users, outdoor storage is essential.
IOS reflects a growing imbalance: demand for functional outdoor space is rising while industrial land is disappearing. New sites are also difficult to approve. Municipalities raise concerns about truck traffic, noise, lighting, and compatibility with surrounding properties. IOS may also provide fewer jobs, less building investment, and lower tax revenue per acre than conventional industrial development. Municipalities may therefore favor higher-coverage projects, further limiting the supply of properly entitled IOS assets.
Scarcity has attracted institutional capital, private equity, logistics operators, construction firms, and fleet users to a property type once dominated by more local owner-users. Within the Mid-Atlantic, IOS markets can generally be viewed in three tiers:
• Gateway markets: North Jersey, Philadelphia/South Jersey, Baltimore–Washington, and Northern Virginia
• Established markets: Lehigh Valley, Central Pennsylvania, Wilmington/New Castle, and Richmond–Hampton Roads
• Up-and-coming markets: Northeast PA, Harford/Cecil, and Hagerstown/Martinsburg
The Yard Is the Fundamental Demand
IOS requires a different valuation lens. Conventional industrial analysis is building-driven, which can mislead for IOS. Consider a 5,000 s/f maintenance building on eight paved acres. A building-based metric may make it appear unusually expensive because it attributes the purchase price to a relatively small structure. In reality, the buyer is paying for the ability to operate across eight secure, functional acres.
The yard may generate most of the rent, determine operating capacity, and drive acquisition and occupancy decisions. A small building on a large, paved site is not necessarily underimproved. For many IOS users, it is the ideal configuration.
What Separates Quality IOS?
Quality IOS typically shares six characteristics:
• Location: Access to highways, ports, customers, construction markets, and complementary industrial uses improve operating efficiency.
• Entitlements and Site Constraints: By-right use, durable approvals, or established rights create a competitive advantage. Limited wetlands, floodplain, contamination, easements, and setbacks preserve utility.
• Usable Site Area: Gross acreage can mislead. Quality sites maximize revenue-producing land through trailer parking, fleet storage, equipment storage, or material laydown.
• Yard and Infrastructure: Heavy-duty paving, drainage, utilities, fencing, gates, lighting, cameras, fueling, and wash bays support intensive operations.
• Access and Circulation: Wide curb cuts, adequate turning radii, efficient ingress and egress, organized parking, striping, and signage improve safety and capacity.
• Operational Flexibility: Quality sites accommodate fleets, contractors, equipment rental companies, utilities, and construction-material operators. Maintenance garages, dispatch offices, and driver facilities broaden the user pool.
IOS properties may look simple, but their value reflects more than land and paving. Location, legal use, functional acreage, infrastructure, circulation, and adaptability all matter. In established industrial markets, the greatest value driver may be that an equivalent site cannot be created within a reasonable cost or timeframe, or replaced at all.
Brendan Wewer, MAI, CCIM, ASA-GC, is a partner at Commonwealth Commercial Appraisal Group, serving clients throughout Pennsylvania, Delaware, Maryland, and New Jersey. He specializes in complex commercial real estate valuation, feasibility analysis, highest and best use studies, litigation support, and consulting.
