Geopolitical Events Add to IOS' Allure

As the benefits and versatility of industrial open storage (IOS) sites become more apparent, many are taking notice of these “prime sites,” particularly institutional investors.

IOSs are located near arterial motorways or ports, helping them support the supply chain.

Demand for IOS rose during the COVID-19 pandemic due to supply chain disruption and the growth of e-commerce, creating a “race for space.”

While traditional warehouses were occupiers’ first choice, an increasingly tight market, particularly in strategic locations, led many to consider IOS, according to a recent report from CBRE.

The supply of IOS sites is constrained, and recent geopolitical events such as the war in Ukraine and the Houthi rebel attacks in the Red Sea, have continued to apply pressure on supply chains and contributed to the sustained demand for IOS, CBRE said.

CBRE said there has been a noticeable trend to use these sites to support supply chain distribution networks and to offer safe resting stops along key supply chain routes to drivers.

Another benefit is to use them to store vehicle fleets and by adding EV charging infrastructure, they help companies achieve their net zero targets.

“While in the past this asset class has been associated with shorter, less formal lease terms, CBRE said, “this shift in occupier base – particularly for prime assets – has resulted in longer lease structures being agreed, creating a true, long-income product in some cases.

IOS sites’ limited infrastructure also makes them more attractive. CapEx requirements are low compared to other real estate sectors, CBRE said.

Limited infrastructure is also likely to translate to low energy consumption, which can be beneficial to investors considering their scope emissions, according to the report.