Triten, TPG Angelo Gordon Target $1B for IOS Deals
Investors are consolidating scrap yards and dirt lots into valuable IOS assets to address a commercial parking shortage.
Intending to acquire more than $1 billion in additional industrial outdoor storage (IOS) assets over the next 5 years, Triten Real Estate Partners and TPG Angelo Gordon significantly upsized an initial joint venture they formed in 2020 to build an IOS portfolio.
Since its inception, the joint venture has purchased an average of 18 properties each year, accumulating more than $500 million of IOS assets across 16 markets. The new commitment demonstrates the pair’s long-term view of IOS as an asset class, said Matt Lazar, managing director for TPG Angelo Gordon, a diversified credit and real estate investing platform within global alternative asset management firm TPG.
The IOS market historically has been fragmented, which signaled an opportunity to transform the asset class into a compelling portfolio with limited capital expenditure requirements and an attractive yield, said Scott Arnoldy, founding partner at Triten, which manages more than 3 million square feet of property through acquisitions and development.
According to a recent industrial investment forecast published by Marcus & Millichap, consolidation is accelerating in the IOS market with institutions raising more than $2 billion to acquire IOS properties as of March 2024. These assets have emerged as a top target for investors amid high interest rates, the report said.
One of the factors driving growth of the IOS market is a shortfall in commercial parking availability with an estimated 900 light-duty trucks registered per commercial parking spot in 2019. Online retail sales have surged 85 percent, which has pressed an increasing number of delivery vehicles into service that need a place to park. The financial loss created by trucking congestion reached a record $95 billion in 2021, driving managers to seek out more cost-effective parking solutions, said Marcus & Millichap.
Supply constraints have encouraged opportunistic investors and industrial property managers to repurpose dirt lots into sophisticated commercial parking and storage solutions.
“Many industrial outdoor storage (IOS) facilities, which were typically viewed as rudimentary scrap yards and infill lots prior to the pandemic, are being transitioned into multifaceted service properties to satiate demand from a wide variety of commercial fleet operators for consistent parking,” the report noted.
Despite its value proposition for tenants, IOS supply remains constrained and new IOS properties are scarce, according to the report. The most strategic location for an IOS site tends to be along residential, commercial and heavy industrial corridors, where the development of more traditional property types is often deemed more applicable by zoning authorities.