THOUGHT OF THE WEEK

Do IOS Portfolios Command a Premium Over One-Off Asset Sales?

Institutional investors and private equity groups have been scooping up Industrial Outdoor Storage (IOS) properties at an accelerating pace. But a key question for owners, brokers, and investors is whether assembling a portfolio of IOS sites can command a pricing premium compared to selling individual assets one by one.

The short answer? Yes, in many cases. Here’s why:

1. The Portfolio Premium Effect

Institutional buyers typically pay more for portfolios than for individual assets. Why? A well-curated IOS portfolio offers immediate scale, operational efficiencies, and diversification—factors that reduce risk and justify tighter cap rates.

🔹Scale Matters – A portfolio provides an investor with an instant foothold in the IOS market, rather than having to piece together properties over time.
🔹Easier Capital Deployment – Large funds prefer to place capital in bulk rather than through time-consuming, one-off deals.
🔹Diversification – A multi-location portfolio spreads tenant and market risk, making it a more attractive investment.
🔹Operational Efficiency – Managing a group of IOS properties under one platform allows for streamlined leasing, maintenance, and expense control.

2. Recent Portfolio Trades vs. Single-Asset Sales

Take a look at recent portfolio transactions in the IOS space:

✅ Peakstone Realty Trust’s (NYSE: PKST) $490M acquisition of a 51-property IOS portfolio from Alterra IOS & J.P. Morgan in Q4 2024
✅ RealTerm’s $277M acquisition of a 13-property IOS portfolio from Brookfield in Q4 2024

A large, well-leased portfolio (such as the transactions noted above) might trade somewhere around the 5%-6% cap rate range today. A lone IOS site, which tend to see fewer bidders and less aggressive pricing, might trade around a 6.5%-7.5% cap rate. Note that, of course, actual pricing varies based on location, tenant credit, lease terms, debt markets, asset quality, amongst other factors.

3. Who’s Paying the Premium?

The most active buyers of IOS portfolios today include:

🏗 Private Equity Groups – With a mandate to deploy capital efficiently and minimum equity deployment targets, they favor buying in bulk.
🏢 Public REITs & Institutions – They have recently entered the game, and seek stabilized portfolios to add to their balance sheets and prefer instant scale.
📦 Logistics Operators & Owner-Users – In some cases, IOS users (truck parking and equipment storage companies) will pay a premium for a ready-made footprint.

4. What Factors Increase Portfolio Value?

Not every collection of IOS sites commands a premium. For a portfolio to attract a premium, it typically needs:

✔ Geographic Diversification – Spreading properties across multiple high-demand markets helps reduce risk from local downturns.
✔ Strong & Diverse Tenant Mix – A blend of national and regional credit tenants across varying end-markets makes the portfolio more attractive.
✔ Balanced Lease Terms (WALT) – Buyers often prefer a mix of long-term leases for stability and near-term expirations for value-add opportunities.

5. When Do Individual Asset Sales Make More Sense?

Despite the advantages of portfolios, some IOS owners may still benefit from selling properties one by one, especially if:

❗ The asset is in an A+ location where multiple buyers will compete aggressively.
❗ The property has a unique, high-credit tenant that attracts institutional demand.
❗ The owner wants faster speed to market and a faster closing timeline.
❗ A motivated end-user is in the market and can pay more than investors.

Final Thought: Where Is the Opportunity?

Buyers are paying premiums for scale, but not every IOS property belongs in a portfolio. Owners with multiple well-leased sites may benefit from bundling, while prime locations or user-driven demand may justify single-asset sales. For investors, the biggest upside could be in assembling fragmented sites and maintaining optionality for a portfolio sale vs. one-off dispositions.

What do you think? Do portfolios justify premium pricing? Reply to this email—we’d love to hear your take.

RECS
Want to explore IOS Cap Rates further?

Check out this newsletter where we questioned if IOS should trade at lower cap rates than Class A industrial: