Industrial Outdoor Storage (IOS)

What is Industrial Outdoor Storage?

Industrial Outdoor Storage, commonly referred to as IOS, is a distinct category of industrial real estate defined by its land-to-building ratio. A true IOS property typically features a building covering 20% or less of the total site, with the remaining 80% or more consisting of usable outdoor yard space. Unlike a traditional warehouse, where value is driven by enclosed square footage, IOS value is driven primarily by the land itself: its size, location, zoning, access, and improvements.

The Inland Empire as an IOS Market

The Inland Empire is one of the strongest IOS markets in Southern California, and Fontana specifically has emerged as a primary hub for the asset class in the region. The reason is structural: IOS uses (trucking operations, equipment storage, container yards, fleet parking) require significant land, heavy vehicle access, and permissive zoning. Many municipalities in Southern California do not allow these uses or simply do not have the available land to support them. The IE, with its industrial zoning base, freeway infrastructure, and proximity to the Ports of Los Angeles and Long Beach, is one of the few markets where IOS can operate at scale. This scarcity, combined with growing institutional demand for the asset class, has made well-located IE IOS sites increasingly valuable and difficult to replace.

Who Uses IOS Properties?

The tenant base for IOS is broad and operationally diverse. Common users include:

• Trucking companies and logistics operators: trailer parking, tractor storage, drop-and-hook yards, and fleet staging near major freight corridors
• Contractors and construction companies: heavy equipment storage, material laydown, and vehicle staging between job sites
• Equipment rental companies: cranes, excavators, bulldozers, and other large machinery requiring secure outdoor storage
• Environmental and utility companies: pipe, cable, transformer, and infrastructure equipment staging
• Container and chassis operators: intermodal storage near logistics corridors and port-adjacent markets
• Fleet operators: regional delivery vehicles, service trucks, and specialty vehicle storage
• Storage and distribution users: overflow inventory, bulk goods, and seasonal storage needs

The diversity of the tenant base is one of IOS’s structural strengths: demand is not dependent on a single industry or economic cycle.

What Makes a Quality IOS Site?

Not all IOS properties are equal. The features that determine value, and the range within which a site will trade or lease, include:

• Zoning: the single most critical factor. IOS uses require specific industrial zoning that permits outdoor storage, trucking operations, and heavy vehicle access. Sites with proper entitlements are scarce and increasingly difficult to replicate as municipalities tighten land use regulations.
• Location and accessibility: proximity to major freeways, ports, intermodal facilities, and freight corridors directly drives tenant demand and achievable lease rates. Sites with direct freeway visibility or access command a premium.
• Surface improvements: concrete or asphalt paving significantly increases value and usability over compacted gravel or unimproved dirt. Heavy vehicles require durable surfaces, and improved yards command meaningfully higher lease rates.
• Fencing and security: perimeter fencing, security lighting, and camera systems are standard requirements for most tenants and institutional investors. An unsecured site is a significantly less competitive asset.
• Truck access and maneuverability: wide entry points, turning radius for 53-foot trailers, and clear internal circulation are operational necessities for most IOS users.
• Building quality and features: while the building is secondary to the land, its condition, office finish, dock configuration, and power all influence where the asset falls within the value range.
• Building-to-land ratio: the lower the building coverage relative to total site area, the more the asset functions as true IOS. Sites with excessive building coverage relative to yard space may not qualify as IOS in the strictest sense.

How IOS is Valued

IOS properties are valued and leased on a price per square foot of total land area, not building square footage. A five-acre site (approximately 217,800 SF of land) will have a land PSF value for both sale and lease purposes. Where a specific site falls within the land PSF range is determined by the quality factors listed above: zoning, location, surface improvements, access, security, and building features. A fully improved, well-located, properly zoned site will trade at the high end of the range. An unimproved or poorly located site will trade at a significant discount.

For investors, IOS typically leases on a triple-net basis with lease terms of five to seven years and annual rent escalations of 3–4%. The operational simplicity (minimal building systems, low capital expenditure requirements, and stable tenant demand) makes IOS an attractive income-producing asset with strong residual land value.

Why Institutional Capital Has Entered the Market

IOS was historically an overlooked and fragmented asset class dominated by local owner-users and small private investors. That has changed significantly over the past several years. Institutional investors (private equity firms, REITs, pension funds, and national aggregators) have entered the IOS market in force, drawn by several structural advantages: stable cash flow from operationally essential tenants, low capital expenditure requirements relative to traditional industrial, strong residual land value in infill markets, and a compelling supply and demand imbalance driven by zoning scarcity and municipal resistance to new entitlements. The entry of institutional capital has had a meaningful impact on pricing, particularly for well-located, improved sites in markets like the IE where supply is constrained. Owner-users and private investors who acquired IOS sites years ago at land value have seen significant appreciation as institutional buyers have competed for quality inventory.

What This Means for IE Owners and Users