The State of IOS In Charleston

Lee and Associates - Charleston, SC | The State of IOS in Charleston

The Industrial (Outdoor Storage) Revolution

For years, industrial real estate has been an attractive product type for investors throughout the U.S. Historically, Class A warehouses, large distribution centers, and flex spaces have dominated the space, until now. Over the past few years, industrial outdoor storage (IOS) has emerged as a front-runner in the market. Institutional and private capital have started investing into the asset class within top MSAs across the country. In demand from coast to coast and estimated as a $200 billion asset class, Industrial outdoor storage is here to stay.

Industrial outdoor storage facilities are usually built close to large port terminals, airports, 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.

Historically, cities have viewed IOS as an eyesore, implementing zoning restrictions to limit its spread. However, the exponential growth of e-commerce and the subsequent surge in distribution demands have forced a viewpoint shift. The need for IOS sites has become undeniable, creating a perfect storm of high demand and limited supply.

This scarcity has led to remarkably low tenant turnover. Unlike other commercial real estate sectors, where tenants have unfettered customization options, IOS sites are essential for business on their own. The operational disruption and supply chain reconfiguration costs associated with relocation far outweigh rent increases, resulting in exceptionally sticky tenancies. Given that transportation costs are one of the largest expenses for certain tenants, strategically located IOS properties can significantly enhance operational efficiency and reduce distribution costs for these users. Because of this stickiness, coupled with low tenant improvement costs (which are basically nothing), IOS properties have been penciling out nicely for investors.

Lee and Associates - Charleston, SC | The State of IOS in Charleston
* Source: Green Street Advisors, LLC

Charleston: An IOS Beacon

Charleston has become a hotbed for IOS activity over the past several years. If we could pinpoint a starting point for the buzz, it’d have to be Alterra’s North Charleston land acquisition in 2021.

Alterra was the first to close on a large site in Charleston at $1M per acre. This was at a time when rents were starting to get to the $7,000 to $10,000 per acre mark, and IOS was becoming a legitimate category. The cash-flow basis for these deals began to make more sense, and Alterra pulling the trigger displayed the interest of institutional-grade investors into the IOS category.

Before this, many in the Charleston industrial real estate community had different perceptions of IOS/laydown yards. Industrial properties with excess land were never considered as value-add opportunities. The excess land just happened to be there in case the warehouse tenant needed it. But now it’s an entirely different conversation, and the concept of utilizing that excess land as IOS space to boost lease rates is mainstream.

Prime Location & Sought-After Tenants

In Charleston, proximity to the port is paramount for IOS sites. Any location within a 15-minute drive of the Charleston port terminals is considered prime real estate. This includes areas like North Charleston, Hanahan, and the Clements Ferry corridor, all offering excellent access to both the port and Interstate 26.

While IOS remains an emerging asset class, deals involving corporate-guaranteed tenants with substantial financial backing tend to move more quickly.

The most coveted tenants in Charleston’s IOS market fall into three main categories:

3PL & Trucking Companies

Equipment Rental Groups

Building Materials & Construction

Ready to Capitalize?

Ready to take advantage of the booming industrial outdoor storage market in Charleston? Explore our current listings below. These listings include a variety of secure and conveniently located IOS facilities to meet specific tenant needs. Whether it’s short-term storage for seasonal inventory or a long-term solution for overflow equipment, we can help you find the perfect fit.

Get in touch with the IOS specialists on our APEX IPG team today to discuss your requirements and learn more about our comprehensive IOS solutions.