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More Investors Park Dollars in Industrial Outdoor Storage

April 21, 2023

Industrial outdoor storage facilities, considered critical in the shipping of goods to U.S. consumers, are attracting more investment as buyers turn to a property type that’s in short supply to hedge against higher interest rates and economic uncertainty.

In the past month, several firms have announced new ventures targeting these sites used for parking trucks, containers and equipment. That’s spotlighting a wider bet by investors on this niche commercial real estate sector that provides some protection from economic volatility because of its limited supply and the need for storage space in good times or bad.

New partnerships and strategies emerging include Dalfen Industrial teaming up with Centerbridge Partners, GreenPoint Partners working with GCM Grosvenor, and initiatives from H.I.G. Realty Partners and Turnbridge Equities. Dalfen is one of the nation’s biggest owners of so-called last-mile industrial real estate that houses trucks that bring goods increasingly ordered online to customers' doorsteps.

Alan Pontius, senior vice president and national director for office, industrial and healthcare at real estate firm Marcus & Millichap, said investors are drawn to industrial outdoor storage as zoning regulations keep its availability scant.

“You’re not going to see an ever-increasing supply of this space,” Pontius told CoStar News in an interview.

Industrial outdoor storage facilities are usually built close to large airports, ports, railroads and major highways, and typically are mostly concrete, with less than 20% of the property covered by a building. Tenants use the space to store and sort products, equipment, building materials, containers, trailers and trucks, making the properties an important link in the supply chain.

“Cities and communities ... don’t necessarily like to see the expansion of this kind of space,” Pontius said. “It’s not terribly attractive. It’s also not densely utilized. Zoning creates some limitations. Land costs create some limitations. Consequently, it’s not a product type that we would anticipate heavy inflation of supply.”
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