Originally published on March 20, 2024, by Ron Nyren for UrbanLand Magazine.

Once overlooked as little more than open-air spaces for trailer parking, industrial outdoor storage (IOS) sites are emerging as a promising niche for their increasingly significant role in the e-commerce and logistics sectors and their potential to earn strong returns for investors.

“The pandemic brought shifts in demographic trends, changes in consumption, and repositioning of procurement strategies,” says Jessica Harrison, head of transactions and capital markets, real estate equity, U.S., for Manulife Investment Management. “As a result, industrial supply increased, and new submarkets became prevalent to help manage fast-growing populations, dispersion of population from urban to suburban markets, and surging e-commerce growth across the Sun Belt…creating extensions of industrial hubs.”

A prime industrial outdoor storage site is strategically located in infill areas with excellent freeway access, proximity to major trucking and shipping infrastructure, including ports and intermodal rail terminals with multiple points of ingress/egress, according to Pryse Elam, chief investment officer for Foundry Commercial. “Certain constraints make traditional warehouse use unfeasible [even though the site is zoned for industrial use], and thus industrial outdoor storage becomes the highest-and-best use for the site,” he says.