Considering Industrial Outdoor Storage? Here’s What You Need to Know

Recently, Eric Fleps, Principal at ARCO/Murray, spoke at BISNOW’s national event regarding Industrial Outdoor Storage. Here are some insights about this emerging asset class.

With an increased demand for last-mile logistics facilities and an overall increase in industrial development, Industrial Outdoor Storage (IOS) or Industrial Service Facilities (ISF) are an extremely hot topic amongst the broader Industrial asset class.

IOS facilities are largely paved or unpaved land parcels with a small on-site facility or security structure in what seems like a sizeable sprawling parking lot. The floor-to-area ratio (FAR) in these assets is typically less than 20% of the overall site. These facilities are diverse, ranging from trucking terminals and container yards to construction material and fleet vehicle storage. With low-vacancy rates and short-term leases key characteristics, there is a lot to learn about this industrial subset. 

So why are people so excited about it?

It’s simple; supply and demand. In the last few years, there has been an incredible boom of primary industrial products, from light manufacturing to last-mile logistics. Local industrial users and their day-to-day businesses are driving the need for increased outdoor storage. 

On top of that, a sector previously of interest to only end-users and private equity groups is catching the attention of institutional developers and owners. IOS is being used as a way to lock-up hard-to-find real estate that maybe isn’t prime for development today but could be soon. As long as zoning allows, developers can get a cash-flowing asset in a short time frame to continuously reduce their basis and prep for future development. 

What are the key details to know ahead of time?

Location is everything. IOS/ISF facilities are best suited for infill locations with immediate access to logistics corridors. Additionally, placing near intermodal transportation options such as railways and airports helps alleviate ongoing supply-chain issues. 

Primary and secondary markets are emerging for this product type, mainly in line with existing industrial/logistical hubs with robust intermodal transportation options like Atlanta, D/FW, Charlotte, Chicago, and Columbus. Cities with port access (Houston, Jacksonville, Charleston) and general locations within the Southeastern part of the U.S. are of most interest.

Know your zoning. Having an underlying use by right is critical because this is not an asset class that gets local municipalities particularly excited. Applying to rezone a site can be challenging, time-consuming, and costly. Knowing the site’s zoning restrictions in advance can help you plan your development. 

Understand your pre-development timeline. These projects are majority site work, with the potential need for a small truck service or security facility on-site. Therefore the timeframe to complete these facilities is much quicker than your standard industrial product. The more building coverage, the more that gap begins to close. 

From a timing perspective, understanding your pre-development timeline is the most significant hurdle for IOS/ISF. We’re in an environment today where permitting, and entitlements are continuing to become more complex and prolonged. With the added pain of municipalities not being thrilled about this product, you could face hurdles to get permitting in place.

The dirt drives the risk. The risks and challenges associated with IOS/ISF development are similar to standard industrial sites: it’s primarily all in the dirt. With little-to-no physical buildings on-site, the risk is related to geotechnical characteristics, topography, and environmental issues that have the potential to move costs of the project in a much more significant way when comparing to total development costs.

Offsite infrastructure associated with the development can also be a risk. For example, an increase in vehicular traffic may cause the municipality to require upgrades to streets and roads adjacent to your facility. 

Understanding where and what physical risk exists in the real estate is essential to a successful project.

How should I move forward?

Having an expert firm on your team that can help move across the finish line is key to getting operational faster, so as a developer, you can start to benefit from those short-term leases and higher rental rates.

Engaging a design-builder like ARCO/Murray can take out the guesswork from a relatively unfamiliar asset class. Our process allows us to help our clients understand their specific sites and the risks within before significant time or dollars are out the window.

ARCO/Murray’s in-house civil engineers can assess site work needs and risks, help paint a clear picture of the development, and determine best-use solutions. 

As a national firm, our extensive reach means access to nationwide databases for pricing, vendors, and subcontractors. Meaning we can give accurate real-time pricing reflective of site nuances, physical location, and compounding factors such as permitting time frames in local communities. 

And as ENR’s #1 National Builder of Industrial facilities, we have in-depth knowledge of this product type and its subsets; allowing us to anticipate challenges and help provide value-driven solutions for our clients that don’t compromise timeline and schedule. 

Learn more about IOS/ISF or ARCO/Murray’s industrial experience.

Industrial Outdoor Storage: Contact Us

  • This field is for validation purposes and should be left unchanged.