Why Industrial Outdoor Storage (IOS) Has Become a Popular Asset Class for Investors

Industrial Outdoor Storage (IOS) has become a popular asset class for Wall Street investors. In November 2024, Peakstone Realty Trust, a large publicly traded REIT, acquired Alterra IOS’s 51-property portfolio for nearly $500M. The portfolio spans 14 states, with operating sites leased to various national and regional tenants. Over the past seven years, Alterra IOS has raised $1.45 billion in equity from institutional investors.

Closely following this deal was the $163 million sale of an 18-property IOS portfolio by Catalyst Investment Partners in March 2025. Over the past four years, Catalyst raised over $400 million in equity investments.

So what is IOS?  Broadly speaking, IOS refers to any piece of real estate that is predominantly unimproved or improved only with surface parking areas or other similar graded pieces of land that is used for storage of industrial equipment, shipping containers, truck cab parking, equipment rental yards, heavy truck or trailer storage, vehicle storage, or any other type of similar outdoor storage of industrial products or materials.  While these uses are broadly disparate, they all share similar appealing characteristics for investors.

The surge in interest by investors is primarily due to (1) high barriers to entry to competitive users due to restrictive zoning and land use codes and NIMBYism and (2) low supply. However, before investors jump into the IOS market, they should consider the potential impact of these two factors.

Considerations for Buyers and Sellers of IOS Properties

• Zoning restrictions and zoning classifications create barriers to entry to competition and increase diligence requirements. When buyers of IOS real estate purchase these properties, a significant amount of due diligence focuses on the applicable zoning code. They must understand what uses are allowed, whether conditional use permits or variances are required, and what the code says about re-buildability following a casualty event. 

• Consolidating adjacent markets will result in additional consolidation in the already low-supply market. Given the zoning challenges and local resistance to new IOS development, the IOS market has experienced limited supply growth despite growing demand. Additionally, existing IOS sites are often redeveloped for other uses. One factor working in the opposite direction is acquisitions and consolidation among users of IOS – such as the equipment rental industry – which could result in consolidation of locations. Herc Rental recently acquired H&E Equipment Services after a bidding war with its chief competitor, United Rentals, and Herc could seek to create efficiencies in more saturated markets. 

• The IOS market involves unique issues for real estate deals. Because of the unique business models, tenant profiles, and zoning, land use and environmental legal issues involved with the IOS market, investors – even experienced real estate investors – should rely on the advice of industry experts when entering the market.

Due to high barriers to entry and supply constraints, IOS properties have become a highly sought-after investment asset class. However, as with all asset classes, investors should go into the investment with a practical, business-focused understanding of the legal issues involved so they can navigate potential challenges that might arise.

LP Partner Dan Crowley will share information on how and where IOS deals are getting done during a panel discussion at the Real Estate Investment Association’s breakfast meeting on May 15, 2025 in Chicago, IL. Register here.