Industrial Open Storage (IOS) has become a hot topic in real estate investment circles. Once considered a niche asset class, IOS has been thrust into the spotlight, attracting institutional investors, developers, and occupiers alike. But what’s behind its recent surge in popularity, and can this momentum be sustained?
Defining Industrial Open Storage
IOS is fundamentally straightforward: open plots of land designated for storage. However, prime IOS sites have distinguishing features that elevate their value. These include:
- B8 Planning Permission: The ability to use the site for storage and distribution purposes or a clear pathway to obtain this classification.
- Infrastructure: Fully paved, levelled land equipped with integrated drainage, water, and electrical connections.
- Security Features: High-grade fencing, CCTV, and other measures to safeguard stored goods.
- Strategic Location: Proximity to arterial motorways, ports, or other transport hubs for efficient logistics.
Shifting Investor Interest
Historically dominated by private investors and owner-occupiers, IOS is now drawing significant interest from institutional players. In recent years, high-profile acquisitions have included Mileway’s 71.3-acre site at Ridham Dock and NW1 Partners’ £200m portfolio targeting IOS. Tristan Capital Partners and Roebuck have also entered the market with ambitious plans to capitalize on this growing sector.
What’s Fueling the Demand?
The IOS market owes much of its recent growth to disruptions in global supply chains and the rapid expansion of e-commerce during the COVID-19 pandemic. As traditional warehouse space reached capacity, businesses sought alternatives, and IOS emerged as a practical solution.
Supply chain uncertainties have persisted, driven by geopolitical events such as the war in Ukraine and regional instability in key shipping lanes like the Red Sea. These pressures continue to drive demand for IOS as businesses look to buffer their operations with additional storage capacity.
Expanding Applications of IOS
Initially, the construction sector was the primary user of IOS for storing equipment and materials. Today, the applications have broadened:
- Supply Chain Distribution: Supporting logistics networks with overflow storage for goods.
- Fleet Storage: Housing vehicle fleets, particularly electric vehicles (EVs), with integrated charging infrastructure.
- Driver Welfare Facilities: Providing rest stops with essential amenities along key supply routes.
This shift toward supply chain usage has also transformed lease structures. While IOS sites historically operated on shorter, less formal leases, prime sites are now commanding longer lease terms, attracting investors seeking stable, long-income opportunities.
The Supply Challenge
While demand for IOS surges, supply remains constrained. Many investors view IOS as a transitional asset, acquiring sites with plans to redevelop them into warehouses or residential properties. However, during the planning phase, these sites can continue generating income as IOS, making them an attractive interim investment.
In key markets like the South East and Greater London, constrained supply has driven significant rental growth. These areas are seeing particularly strong returns, bolstered by additional benefits such as 100% rating relief for vacant IOS sites.
Cost and Sustainability Benefits
Another compelling aspect of IOS is its limited infrastructure. Although creating a prime IOS site requires some upfront investment, ongoing maintenance costs are relatively low compared to other real estate asset classes. This minimal infrastructure translates to lower energy consumption, aligning with sustainability goals for investors looking to reduce scope emissions.
Looking Ahead: The Future of IOS
The growing interest in IOS is no fluke. As businesses and investors adapt to evolving supply chain dynamics and real estate trends, IOS is likely to remain a valuable part of the industrial landscape. Its low CapEx requirements, strategic flexibility, and rental growth potential make it a compelling option for a broad range of stakeholders.
For those seeking to dive deeper into this emerging sector, VidTech.com offers industry-leading insights and innovative tools to help you visualize and analyze IOS opportunities. From 4K drone footage to data-driven overlays, our advanced solutions empower investors to make informed decisions in this dynamic market. Visit VidTech.com to learn how we can help you stay ahead of the curve.
