The Industrial Outdoor Storage Market: Fragmented, Underserved, and Poised for Growth—An Interview Breakdown

KEY TAKEAWAYS

1️⃣ A Highly Fragmented Market = Big Opportunity

Unlike traditional industrial real estate, IOS is primarily owned by independent operators and small landlords, making it difficult to aggregate and institutionalize.

“The supply-demand disconnect… it’s mostly owner-user.”

Why It Matters:
✅ Most IOS owners aren’t institutional—this creates an opportunity for consolidation.
✅ Investors looking to scale must source off-market deals and unlock value through business plan execution.

2️⃣ Zoning & Supply Constraints = Pricing Power

The challenge in IOS isn’t just finding land—it’s finding land with the right zoning.
Most municipalities allow IOS in only one or two zoning designations, making available supply extremely limited.

“There’s usually only 1 or 2 zones in any jurisdiction that allow these types of uses. And they’re not making any more of it.”

Why It Matters:
✅ Scarcity = long-term pricing power for well-located IOS sites.
✅ Zoning complexity makes IOS harder to replicate—giving an advantage to those who navigate it well.

3️⃣ IOS Tenants Are Critical to the Supply Chain

IOS properties serve as mission-critical infrastructure for logistics, construction, and transportation companies. During COVID, many IOS tenants were deemed essential businesses, reinforcing the sector’s durability.

“Think of them as the supply chain of the supply chain.”

Why It Matters:
✅ IOS tenants are sticky, high-retention businesses that rely on well-located yards.
✅ Demand for IOS is driven by logistics and infrastructure growth—not just economic cycles.

4️⃣ High-Volume, Small-Ticket Investing

Unlike traditional industrial real estate, IOS deals aren’t massive single transactions—they are often small, fast-moving deals.

“It’s truly a high-volume, small check size kind of strategy.”

Why It Matters:
✅ Typical deal sizes are $1M - $10M and investors must move quickly.
✅ Aggregating multiple small properties is key to creating scale and efficiency.

5️⃣ Institutionalization is Changing the Game

As more institutional capital enters the space, IOS valuations are rising.
Greater investor interest = cap rate compression and market maturation.

“If it does get institutionalized and people start to understand it better… you could see cap rate compression.”

But there’s still work to do…
🔍 The market needs better lease comparables, financing structures, and data transparency.

“We need a little bit more transparency on lease comparables… The outdoor storage world needs to work on that to fully be institutionalized. Data is very important to us.”

Why It Matters:
✅ IOS appears to be following the path of self-storage and manufactured housing, both of which transitioned from niche real estate to more mainstream investments.
✅ The firms that bring transparency, structure, and scale to the market are positioned well to be the biggest winners.

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Blake Potolicchio-Profitable Outdoor Storage Investing (#126) - Icons of DC Area Real Estate links to podcast:

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