Rising rents draw Wall Street to bet on outdoor storage lots across US

Nondescript lots holding idle bulldozers, trucks and other industrial equipment are a common sight in local real estate markets across the U.S., and increasingly, a focus for Wall Street private investment giants.

If you haven’t noticed them, it’s probably because they so easily fade into the landscape, just another non-branded bit of land in the miasma of suburbia. But Brookfield and Blackstone, two of the world’s largest alternative asset managers, are among the institutional investors moving in on what the industry calls industrial outdoor storage, or IOS. Investors are eyeing these lots as the AI build-out increases the demand for heavy equipment. 

“We have strong conviction in industrial outdoor storage, which plays a critical role in our supply chain,” said Devin Barnwell, a managing partner and co-leader of Brookfield’s logistics business.

He says that up until now, the segment has been fragmented, but Brookfield sees that changing. 

“We see significant opportunity to bring institutional capital and operating expertise to this fragmented sector, improving the quality and efficiency of these assets while strengthening the resilience of our industrial supply chains,” Barnwell said. 

Brookfield spent $1.2 billion earlier this year to take Peakstone Realty Trust private, a deal completed in May that gave it a portfolio of more than 70 industrial properties, most of them outdoor storage yards. 

Blackstone is also ramping up in the sector, mainly as a lender. Its real estate debt arm has made six loans to outdoor storage owners totaling more than $1.1 billion, including a $244 million loan in June to Alterra IOS to buy 37 properties.

Despite the billions being bet on the market by Wall Street, there is still opportunity in the market for individual investors and local entrepreneurs looking to park their money where others park their equipment. 

“1,000 percent yes,” said Adam Petrillo, an executive managing director at Newmark, a commercial real estate advisory firm, who co-leads its industrial outdoor storage practice.

Petrillo said smaller, non-institutional investors, still control a significant amount of well-placed storage in secondary markets. “The good news for smaller investors and mom and pops is that a good individual IOS site isn’t necessarily 50 acres,” Petrillo said.

Lots as small as three to five acres in primary or secondary markets can still yield a robust return, he said.  “At that bite size, an individual can step in. We are not talking about tens of millions … a three-acre, well-located IOS with multiple use cases can be found, marketed, leased,  and stabilized,” he added. 

Hottest outdoor storage property markets

The numbers help explain the appetite.

Rents for industrial outdoor storage roughly doubled across eight major markets between 2020 and the third quarter of this…