Outdoor Storage Update Winter 2024 Open Storage 2024 Report Update

Industrial Outdoor storage UPDATE

Winter 2024/25

outlook

We expect increased activity from serviced IOS players who are now evolving products to accommodate smaller-end occupier requirements, offering them easy access to sites that meet their needs. This can be compared with the previous evolution of the serviced office market. We also expect a continued expansion of investment portfolios, and we will almost certainly see more US entrants to the UK market in 2025. Peakstone Realty Trust’s recent $490 million IOS portfolio purchase in the US provides further confidence in the sector’s appeal to the institutional/ listed market. Whilst we have seen a slowdown in the rate of rental growth in 2024, the sector’s fundamentals remain strong, given its extremely broad tenant base from startups to blue chip corporates with a strong presence in growing economic sectors. The outlook is for further growth in demand, but a major challenge will be sourcing sufficient sites in the right locations with potential for upgrading to the required specification. Against this backdrop, we expect to see further growth in rental values over the next few years. We hope that IOS will move up the agenda of local planning authorities, given the importance of the sector to economic activity, most notably fleet parking and servicing for last mile distribution chains. There is an urgent need for the planning system to enable the delivery of significant additional and upgraded IOS sites, with activity tending to get ‘crowded out’ to less efficient, lower value locations. Although IOS is attractive from a sustainability point of view compared with the built environment, we expect innovative alternatives to concrete surfacing to become more mainstream, further improving the sector’s credentials. The IOS sector’s first specialist conference, the Industrial Outdoor Storage Forum, was held recently in California, illustrating its evolution and progress. 2025 looks set to be an exciting year.

Please contact our specialist team:

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Andrew Smith Partner, Industrial Open Storage Lead +44 (0)7919 326085

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Daniel Francis Head of Research +44 (0)20 7518 3301

Welcome to our winter 2024/25 Industrial Outdoor Storage (IOS) Update. Since our last report, we have adopted Industrial Outdoor Storage in place of Open Storage as the preferred term for this rapidly evolving sector. This change aligns with the US market and, we believe, frames it more distinctly within the broader industrial market. The last decade has seen a realignment of the mainstream commercial property sectors, with industrial / logistics now firmly established as a lower yielding, higher growth sector than retail and offices. In tandem with this, IOS is now quickly establishing itself as vital industrial sub-sector.

Enquiry levels remain strong and are highly diverse. We have undertaken a detailed analysis of our enquiry database to assess demand by sector over the last year. Figure 1 shows enquiries split by sector, analysed in terms of the total acres required. Enquiries are dominated by fleet parking and servicing, which account for 48% of the total. Within fleet parking, approximately 60% is for Heavy Goods Vehicles (HGV) parking, whilst 40% is for vans, cars and other non-HGV vehicles. Strong demand should continue for operator-specific sites, and we also expect growing demand for general-use HGV parking sites, given the current shortage of HGV parking nationally. Construction material features strongly in our analysis, accounting for 8% of total demand. Whilst this may seem unsurprising given that materials such as aggregates generally require large storage sites, we see this very much as a growing sector, particularly given the government's commitment to increasing the rate of housebuilding and infrastructure delivery. In addition, large infrastructure projects often require temporary sites close to the works for use during the construction period. A growing use is renewable energy, which is the third largest sector, accounting for nearly 8% of total demand (although the figure was elevated somewhat by one particularly large requirement). EV charging sites will become an increasing requirement, and the market for Compressed Natural Gas (CNG) and Liquified Natural Gas (LNG) fuelling for HGVs is likely to grow considerably. Sites to host renewable energy systems will also be increasingly in demand, notable for Battery Energy Storage Systems (BESS). Figure 1 also demonstrates the breadth of other uses which continue to drive demand, including self-storage containers and shipping containers, as well as the traditional uses such as ‘general storage’, which includes many ‘traditional’ activities such as scrap metal and scaffolding, as well as pallet storage (a vital element in the distribution chain). It is notable that traditional uses account for only 4% of total demand, with waste / recycling at just over 5%. The figures also include an ‘other’ category, accounting for 11% of total demand. This consists of a variety of occupiers ranging from leisure (notably padel courts) to film production companies and outdoor events organisers. Providing the appropriate site quality for the type of occupier in terms of the type of surfacing, security, services, accessibility and planning restrictions, will remain highly important. Click here to see our 4-tier classification which categorises the quality of sites, and the typical requirements for key IOS sectors.

Rental trends

Following exceptionally strong performance over the last decade, rental growth has seen a pause over the last year. Figure 4 illustrates the annual rate of rental growth for Class 1 sites over the last year, three years, and since 2016. London/the inner South East saw growth of 3.8% in the year to Winter 2024/25, compared with the rest of the UK which saw growth of 2%. Since 2016, both geographies have seen growth average more than 15% per annum, due to strong increases from relatively low base rents (particularly in the regional markets). Whilst the rate of rental growth has slowed this year, the fundamentals of a broad tenant base, increasingly focused on growing economic sectors and larger firms with stronger covenants, plus limited Class 1 supply in many locations, will continue to support the basis of expansion of this asset class.

Source: Carter Jonas

Read more about our research on how open storage is the new asset class in the industrial sector

Figure 1: Enquiries by use (% of total acres required)

Source: Carter Jonas

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Stated ERVs assume a 1.5 acre (net useable) average Class 1 site scoring a minimum of 85 on the Carter Jonas classification scoring system. The site is assumed to be serviced and fenced, with a concrete surface, broadly unrestricted B8 use and available on a lease length of 3-5 years.

Table 1: Class 1 IOS rents, winter 2024/25

London/Inner South East

Rest of UK

Figure 2: IOS rents, winter 2024/25London/Inner South East, £psf

Figure 3: Class IOS rents, winter 2024/25Regional markets, £psf

Investment trends

Although the sector is still maturing, the healthy underlying supply/demand dynamics, long-term structural growth drivers, and high-quality sites with longer lease terms required by many occupiers have continued to prove attractive to institutional investors. Appetite to enter the UK market remains strong, particularly from US private equity firms who can build on their US experience and are aiming to follow a similar growth trajectory. This has been demonstrated by the entry of several major players, especially US based ones such as Mileway (Blackstone), Cerberus and NW1 Investors, who now feature heavily. Our confidence in the sector’s appeal to the institutional/listed market was recently demonstrated by the entry of US-based REIT Peakstone Realty Trust, who purchased a substantial portfolio of 51 IOS assets across the US from Alterra for $490 million at a yield of circa 5.2%. Several funds made significant acquisitions in 2024, and we estimate over £1 billion has been transacted in the last 2.5 years from the first wave of IOS investors. We estimate that there is at least another £3-4 billion of committed funds available to invest over the next 3-5 years, underlining the significance of the sector. Investment yields have not yet stabilised to a consistent level. Net initial yields for IOS are circa 5.25% in Greater London, 5.75-6.0% in the rest of the south east, and 6.75-7.0% in the rest of the UK. There is an argument to suggest that the yield profile could level (or better) against traditional industrial built stock given the lower capex required and lower holding costs of IOS, together with zero empty business rates, and the ease of divisibility of IOS assets. Whilst we expect an increasing number of investors to see the value in IOS in 2025, a key challenge is the assembly of well-balanced, high-quality portfolios, given the fragmented nature of ownership and the competition to acquire sites for both IOS and competing uses. In addition, the criteria needed to achieve a Class 1 site can be difficult to satisfy. Whilst some features, such as the type of surface, are within the landlord’s control, issues such as accessibility or planning conditions can be challenging to overcome.

Trucks parked in the parking lot. Directely above.

A diversifying occupier base

Source: Carter Jonas

Industrial Outdoor Storage (IOS) is rapidly gaining traction as an acceptable and legitimate asset class. With increased demand for storage of trailers and vehicles, materials and equipment, coupled with the proven “stickiness” of tenancies, the sector offers a compelling investment opportunity for capital looking to diversify their portfolios, mainly due to the restricted zoning in the US and limited options within this sub-asset profile within the broader industrial zoning classification. Whether for trailer and/or container storage, truck parking, freight-forwarding, cross-docking, fleet maintenance and repair, or simply for industrial uses requiring surface area for exposed material storage around a building, IOS has a multitude of applicable uses – all relying on this coveted zoning classification. The decade-long surge of institutional capital into industrial investment has triggered this frenzy into IOS. Seen as less capital-intensive than investing in bulk industrial distribution assets, family offices, and private equity, significant funds have entered this asset classification for perceived higher returns and geographic diversification. IOS assets are present and critical in every market. At ARCO/Murray National Construction Company (ARCO/Murray), a North American Design-Build general contractor and the #1 Warehouse and Distribution Builder (2024 ENR), we have successfully completed numerous IOS projects across the US and currently have multiple IOS projects under construction. Through our experience designing and constructing these unique facilities, we’ve collected six critical lessons learned that can help stakeholders optimise these assets for functionality and maximum return on investment.

Maximising the Value of Industrial Outdoor Storage

Source: Carter Jonas

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Archie Dupree Lettings +44 (0)7393 259922

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Andrew Mitchell Investment +44 (0)7901 518749

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Tom Bradley Reviews & Renewals +44 (0)7393 259913

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Ruobei Ding Database Management & Assistant +44 (0)7890 943482

Rental trends

Investment trends

Jump straight to a section

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Tyler Smith Surveyor +44 (0) 7799 348165

Maximising value

Occupier Base

Garry Weiss of ARCO/Murray gives his views on the design and construction of IOS sites from a US perspective

Figure 4: Classifcation system

We have continued to evolve our unique open storage classification index. This allows us to grade sites from Class 1 to 4 (with 1 being a ‘prime’ site), based on 16 parameters across four broad categories (surfacing, services & security, accessibility, and planning). The classification is illustrated in Figure 4.

Classifying open storage sites

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We have separated the quality of the location from this classification (for example the proximity to a motorway or urban market), as this is highly occupier specific. The broad location quality of each site is classified as Primary, Secondary, or Tertiary.

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Quality of site versus type of occupier – finding the perfect match

The rising importance of sustainability

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Although open storage does not have many of the sustainability challenges inherent in the built environment, we believe it is a key factor to consider. An obvious challenge is the concrete surfacing associated with Class 1 sites.

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For investors, open storage provides an opportunity to add assets with relatively low environmental impact to their portfolios. Sustainability impacts can be further mitigated through specific actions such as undertaking a BREEAM Infrastructure Assessment, Embodied Carbon Assessment, or enhancing a site by providing a Sustainable Urban Drainage System.

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2024 has seen Biodiversity Net Gain (BNG) become a central part of the planning process, with most new developments in England now required to demonstrate and deliver a mandatory 10% net gain in biodiversity. This can be achieved either onsite or by purchasing BNG units offsite from third parties.

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Our classification index will continue to evolve to incorporate sustainability metrics.

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A rising proportion of occupiers require Class 1 sites, and many are prepared to pay a premium to achieve this. However, there is a structural shortage of open storage sites, which is most acute for these higher quality sites, and the higher rental values for Class 1 open storage mean occupiers are being priced out in some locations. In addition, occupiers should consider whether they want the dilapidation and sustainability implications associated with the concrete surfacing of a Class 1 site.

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Opting for a higher specification than necessary could result in higher rents and a narrower choice of location, but opting for a lower specification than necessary may result in problems at the operational level. It is therefore important for occupiers to consider carefully what specification of site they really need.

Surfacing - for certain occupier types, notably crane storage and those stacking containers more than two containers high, concrete (and therefore a Class 1 site) is essential. However, for most uses, hardcore surfacing is usually sufficient. In the regional markets, especially in areas that have low rental values, occupiers are less willing to pay higher rents for concrete and tarmac surfacing.

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Services - almost all occupiers require power and water, for example to service a portable cabin used as a welfare/office unit.

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Fencing - is essential for most occupiers, with a minimum of Class 2 (paladin) needed. Alternatively, if the site is not fully fenced then a natural barrier such as a river would be acceptable.

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Unrestricted B8 - use is required for many occupier types. Haulage companies will generally need this as they operate outside of normal business hours.

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We have assessed the typical site quality required for key types of open storage user, summarised in Table 1.

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Table 1: Site quality by sector*

*The class specified is the one most appropriate for each occupier type. Most occupiers will want Class 1 if they can but are often priced out.

**Class 1 is required if stacking more than two containers high

***Class 1 is required for crane storage and exceptionally heavy HGVs

London/Inner South East

Rest of UK

We have already seen the evolution of IOS into a two-tier market. For traditional local users, the priority is likely to be low rental costs rather than quality, location, or security of tenure. However, the growing use of IOS for parking to service the logistics and last mile delivery fleets has meant that mid-cap and blue-chip occupiers are increasingly operating from IOS sites. Many of these occupiers require strong security of tenure of five years or more (typically with a three-yearly rent review pattern) and are prepared to pay higher rents to obtain this. Indeed, the need for security of tenure has enabled landlords to increase rental levels, as the costs for occupiers to relocate are now relatively high and rental costs are minimal compared to the huge spend that many tenants are making on site. We are now seeing an exciting new trend, with the emergence of operators such as Get Yards setting up ‘ready to occupy’ IOS sites. In many ways, this is a similar principle to the serviced office sector, where the end user deals with the service provider rather than the landlord. This model creates an opportunity for the service provider to roll out a recognised brand and standard of delivery, for example in terms of the level of security provision, services, and maintenance. Although a nascent trend currently, we see significant potential for this model, particularly to service the smaller-occupier end of the market.

An evolving structure

Although IOS generates fewer sustainability concerns than the built environment, it is not without its challenges. In particular, the concrete surfacing required of Class 1 sites is not environmentally friendly. We are aware of various experimental surface alternatives currently being evaluated, and we are hopeful that a combination of technology and market demand for a high quality, sustainable product will lead to improvements. In addition, a greater use of recycled materials can also help to reduce the environmental impact. A further sustainability concern is around the drainage of surface water, as a standard concrete surface will not normally allow water to filter through. The use of pervious concrete is one potential option to overcome this issue.

Scratching the surface

London/Inner South East

Rest of UK

Figure 4: IOS rental growth to winter 2024/25

Source: Carter Jonas

Glossary

Automotive testing facilities

Material handling yard

Container yard An area designated for the storage and handling of shipping containers. It is typically located near ports or intermodal terminals and serves as a temporary storage space for containers awaiting loading onto ships, trucks, or trains.

Vehicle storage compound

Container yard

Heavy equipment storage yard

Industrial gas storage facility

Industrial Outdoor Storage (IOS)

Industrial service facilities (ISF)

Laydown yard

Open storage

Outdoor storage

Pallet yard

Rail terminal

Secure storage facility

Vehicle operating centre (VOC)

Automotive testing facilities Dedicated sites where vehicles undergo tests and evaluations for performance, safety, and compliance. They include test tracks, equipment, and storage areas for test vehicles and prototypes.

Heavy equipment storage yard A dedicated space for storing large machinery and equipment, such as construction vehicles, agricultural machinery, or industrial equipment. These yards provide secure storage and often offer maintenance and repair services.

Industrial gas storage facility A specialised facility for storing gases used in industrial processes, such as oxygen, nitrogen, or liquefied petroleum gas (LPG). These facilities maintain appropriate storage conditions and safety measures to handle volatile or pressurised gases.

Industrial outdoor storage (IOS) Land and sites used for outdoor storage, distribution, processing, servicing, and parking.

Industrial service facilities (ISF) Industrial service facilities are dedicated spaces where industrial service providers operate. These facilities offer specialised services, such as equipment maintenance, repair, calibration, or testing, to support industrial operations.

Laydown yard A laydown yard is an open area used for temporary storage of materials, equipment, or supplies during construction or industrial projects. It provides a designated space for organised storage and easy access to necessary items.

Industrial service site (ISS)

Industrial service site (ISS) An industrial service site is a location or area specifically designated for providing various services to industrial businesses. It may include maintenance, repair, storage, or other support services necessary for efficient industrial operations.

Material handling yard A material handling yard is a designated area where materials, such as raw materials or finished goods, are stored and managed. It often involves the use of specialised equipment, such as forklifts or cranes, for efficient loading, unloading, and movement of materials.

Open storage See Industrial Outdoor Storage and Outdoor storage

Outdoor storage The storage of goods, materials, or equipment in open-air spaces within an industrial setting, providing temporary or long-term storage options for items that can withstand exposure to the elements.

Pallet yard An outdoor area dedicated to storing pallets, which are wooden or plastic platforms used for stacking and transporting goods. These yards provide organised storage and easy access to pallets for efficient logistics operations.

Rail terminal An area where trains are assembled, disassembled, and serviced. It serves as a hub for sorting and transferring freight between different train lines or modes of transportation.

Secure storage facility A specialised warehouse or facility designed to store valuable or sensitive goods that require enhanced security measures. These facilities may have advanced security systems, surveillance cameras, access controls, and restricted entry to protect the stored items.

Vehicle operating centre (VOC) A facility dedicated to managing and maintaining a fleet of vehicles, such as trucks, buses, or delivery vans. It provides services like fuelling, vehicle inspection, maintenance, and dispatching.

Vehicle storage compounds Designated areas for storing vehicles, such as cars, trucks, or equipment. They are often used for long-term storage, vehicle maintenance, or temporary parking solutions.

Other

1. Engage Early in Preconstruction to Tackle Zoning and Site Requirement Challenges

One of the most important lessons learned in developing IOS facilities is the value of early and proactive preconstruction planning. Due to the relatively niche product type in many regions, zoning and permitting processes can often be unpredictable, leading to confusion and/or triggering unnecessary approvals due to improper project descriptions. This makes it essential to engage city authorities early in the project lifecycle to build relationships, clarify scopes, and address unique site requirements. “A proactive approach to preconstruction isn’t just beneficial—it’s crucial,” explains Paul Wagner, Vice President of the Austin operations at ARCO/Murray. “A thorough understanding and review of local zoning codes, particularly site adjacencies, is critical. This involves identifying requirements for screening, fencing, and walls and implementing effective landscape buffers within community expectations.” Building relationships can help anticipate and resolve potential issues with stormwater management, security requirements, or site access points before they become roadblocks. This allows us to make informed decisions on site layout, drainage solutions, and other design elements, ultimately streamlining approvals and avoiding costly rework.

Site layout and design are key to achieving operational efficiency and long-term adaptability when developing IOS facilities. Early decisions about truck circulation patterns, parking angles, stall dimensions, or accommodating multiple tenants can impact the site's usability. Thoughtful planning ensures that trucks can move through the site without congestion while making the most of the available space for storage or parking. Additionally, adapting for various trailer sizes and planning for future expansions or reconfigurations can ensure the site remains flexible to changing market demands. One key insight ARCO has gathered from experience is that using a maximum stall dimension of 70’ provides versatility for larger trucks and trailers while allowing smaller users to operate efficiently. Intermingling 70’ stalls with a ratio of 55’ stalls or smaller helps to diversify the site, making it more appealing to various tenants. These approaches balance the needs of various users while maintaining efficient drive aisle dimensions, allowing developers to maximise the value of their investment.

2. Optimise Site Layout and Design for Maximum Flexibility and Functionality

Stormwater management is a crucial component of IOS site development, as failing to address it early in the design phase can lead to increased costs and flooding issues later. Strategically planning drainage systems, surface grading, and water management solutions help mitigate runoff, prevent flooding, and ensure the facility remains operational even in adverse weather conditions. “Our Civil Engineering team at AME evaluates all possibilities for designing the right stormwater management solution. Where possible, we sheet flow our stormwater runoff to reduce the reliance on costly underground storm sewer systems,” explains Ryan Feeney, Vice President of Civil Engineering, AME, a trusted engineering partner of ARCO/Murray. Considering the natural site topography and integrating sustainable water management solutions from the outset can help reduce costs and ensure the site’s usability during and after rainfall events.

3. Implement Effective Stormwater Management Strategies Early to Reduce Costs

In contrast to traditional indoor facilities, IOS sites do not have a "dried-in" phase – a period in construction when the facility is waterproof enough to install weather-sensitive materials. Proper scheduling of activities, such as drainage installation, concrete pours, and infrastructure setups, can prevent delays and ensure all teams can access the site. Overlapping certain activities and coordinating sub-trades efficiently helps reduce downtime, maintain momentum, and deliver the project on schedule and within budget. Early planning and communication among project teams are essential to keep everything running smoothly.

4. Strategically Sequence Construction Activities to Minimise Delays and Maximise Efficiency

Prioritising security and access control is crucial when creating a safe and functional IOS facility. Effective planning of site security features, such as perimeter fencing, guard shacks, and automated gate systems, ensures protection from unauthorised access and operational disruptions. Optimising truck queuing areas and circulation paths is essential for preventing traffic congestion and ensuring smooth, safe movement throughout the site. Designing for security and access control early in the planning process helps reduce potential risks and creates a more effective site layout. This includes carefully planning the entry and exit points to avoid blocks and ensure drivers can navigate the facility without unnecessary delays or hazards.

5. Prioritise Security and Access Control to Enhance Site Safety

As technology and market demands evolve, building IOS sites with flexibility and scalability is essential. Future-proofing sites for emerging market needs, such as electric vehicle (EV) infrastructure, can increase the site’s value over time. Installing future conduits or providing spare panel capacity during the initial construction phase can easily accommodate future technological upgrades without major disruptions and minimise retrofit costs. “Futureproofing isn’t just about anticipating what’s next; it’s about creating infrastructure that allows for seamless upgrades when market demands shift,” explains Buster Sheridan, Vice President of the Miami operations at ARCO/Murray. “By incorporating scalable solutions, we can ensure our sites remain competitive for years to come, positioning them to meet diverse tenant needs and accommodate technological advances with minimal changes.” This forward-thinking approach makes the site more attractive to tenants and increases its long-term profitability.

6. Future-Proof Your Site with Flexible Infrastructure for Emerging Trends

At ARCO, we understand that every IOS project is unique. Our design-build approach allows us to collaborate closely with owners and developers to create facilities that maximise functionality, efficiency, and long-term value. IOS is rapidly becoming a vital asset class in the industrial real estate market as logistics and e-commerce drive demand. IOS facilities provide flexible, scalable solutions for a wide range of storage and operational needs. By applying these lessons learned in preconstruction, site design, stormwater management, security, and futureproofing, developers, end users, and investors can capitalise on the growing demand for this unique property type.

Conclusion

Fleet parking

Construction materials

EV charging / fuelling / renewable energy

Self storage

Waste / Recyling

Engineering

Containers

General storage

Plant / equipment hire

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ARCO Murray are a global contractor and one of the largest in the USA, building many acres of IOS. For further information on IOS please contact Garry Weiss gweiss@arcomurray.com

BESS (Battery Energy Storage System)

BESS (Battery Energy Storage System) A BESS is a technology that allows the storage of electrical energy for later use, typically through rechargeable batteries. It is commonly used to store renewable energy from sources like solar or wind, balance grid supply and demand, and provide backup power.

Aggregate

Aggregate Aggregate refers to materials like sand, gravel, crushed stone, or slag used in construction. It is a key component in creating concrete, asphalt, and other building materials, providing strength and stability to the finished product.

Mineral

Mineral A mineral is a naturally occurring, inorganic solid with a defined chemical composition and crystalline structure. Minerals are the building blocks of rocks and are used in various applications, from construction and manufacturing to technology and jewellery.

EV Charging

EV Charging Electric Vehicle (EV) charging refers to the process of replenishing the energy in the battery of an electric vehicle. This is done by connecting the EV to a charging station or charger.

These are commonly accepted definitions sourced across the industry