Understanding Industrial Outdoor Storage: A Comprehensive Guide
Industrial Outdoor Storage (IOS) is a key element of the commercial real estate sector, providing essential storage solutions for a broad array of businesses and industries. In this article, we will look into the world of IOS, and uncover the reasons behind its growing significance, the variety of storage facilities available, and the strategic considerations for investors and businesses looking to leverage this versatile segment.
What is Industrial Outdoor Storage?
Mostly used for the storage of vehicles, trailers, vans, big equipment, containers, and commodities, industrial outdoor storage (IOS) refers to industrial-zoned property. This storage option prioritizes the expansive, open spaces these properties offer. Unlike traditional enclosed industrial buildings, where value is measured in vertical space or square footage, IOS properties are rented based on the amount of land, often priced per acre. Any enclosed areas on these properties are minimal, usually under 20 percent, and are dedicated to secondary functions like maintenance, loading operations, or office work.
The Role of Industrial Outdoor Storage
IOS ultimate goal is to offer an affordable, scalable, and flexible alternative for storing products, equipment, and materials without the constraints of indoor spaces. It is essential to the operations of logistics, manufacturing, and distribution sectors, among others. The essence of IOS lies in its ability to accommodate large quantities of items, often too bulky or unsuitable for indoor storage, in open-air environments.
Growth Drivers of Industrial Outdoor Storage
Once considered a specialized segment within the broader industrial sector, Industrial Outdoor Storage has experienced significant growth in recent years. The market, now valued at an estimated $200 billion, has become a focal point for institutional investors and dedicated real estate investment and development entities that bring specialized IOS expertise to their operations. There are several factors that contribute to the growing interest in IOS:
Cost-Efficiency: IOS provides a cost-effective solution compared to traditional indoor warehouses, appealing to companies seeking expansive storage without hefty expenses.
Scalability: The flexibility to adjust storage space in response to seasonal demands or business growth is a key advantage.
Accessibility: Strategically located near transportation hubs, IOS facilities enhance accessibility, reducing transit times and fuel costs—a critical benefit in today's economy.
Versatility: IOS areas can hold a diverse range of items, from heavy machinery to raw materials, making them suitable for various businesses.
Defining Industrial Outdoor Storage
Ron Rohde, a seasoned commercial real estate attorney, offers a more operational perspective, defining IOS as low-coverage sites where less than 20% of the total square footage is covered by buildings or structures. This emphasis on open space serves to a set of uses, from maintenance sheds to truck terminals, highlighting the sector's adaptability. Rohde also highlights the importance of zoning compatibility and the challenges posed by factors such as flood zones and geotechnical issues, which can impact the usability of the land.
Types of Industrial Spaces
The industrial real estate landscape is diverse, with various types of spaces catering to specific operational needs:
Heavy Manufacturing: These spaces, used by companies like General Motors and DuPont, require customization for heavy machinery and power needs.
Light Assembly: Unlike heavy manufacturing, light assembly spaces focus on assembling and shipping out products, often overlapping with flex space.
Cold Storage: Essential for perishable goods, cold storage facilities have seen growth due to the rise in online grocery shopping and food delivery services.
Data Centers: Centralized facilities equipped with computer systems and networking equipment, data centers are crucial for storing and processing large amounts of data.
Industrial Showrooms: A hybrid between retail and warehousing, showrooms allow manufacturers to display their goods while also handling shipping and distribution.
Each of these spaces serves different functions within the industrial sector, from manufacturing and assembly to data processing and product showcasing.
Considerations for Investing in IOS
For those considering investments in IOS properties, several factors are paramount:
Location: Proximity to transportation hubs and major highways can significantly enhance a property's appeal.
Zoning Regulations: Compliance with local zoning codes is essential to avoid legal issues and ensure the property's intended use is permitted.
Accessibility: Easy access for trucks, vehicles, and employees is a critical factor in the property's desirability.
Infrastructure: Assessing the condition of the property, including topography, drainage, and the need for infrastructure improvements, is crucial for suitability and long-term viability.
Understanding the market demand and competitive landscape is also vital for making informed investment decisions in the IOS sector.
Navigating Challenges and Risks
Investing in IOS comes with its share of challenges and risks, from security concerns and environmental factors to compliance with zoning regulations and market volatility. Developing a comprehensive risk mitigation strategy, including robust security measures, environmental protections, and thorough market research, is essential for safeguarding investments and ensuring long-term success.
The Future of Industrial Outdoor Storage
As we look ahead, IOS is likely to continue its vital role in supporting modern supply chains and business operations. The blend of cost-effectiveness, flexibility, and strategic location advantages makes IOS an indispensable component of the commercial real estate landscape. For businesses and investors ready to capitalize on this sector, staying informed about the evolving trends and market dynamics is critical. Embracing innovation, from advanced security measures to environmentally sustainable practices, will be key in navigating the future of IOS.
For more details on our services and how we can assist with your industrial outdoor storage needs, please visit our services page here and feel free to contact us with any inquiries.
