Institutional Investors Parking Money In Atlanta's Outdoor Storage Market

WPM Commercial founder Price Muir got a Christmas bonus this year he couldn't have fathomed in his years buying and selling land around Atlanta.

Three days before Christmas, JPMorgan Chase and Realterm Logistics paid Muir $53.5M for 40 acres of industrial land 11 miles south of Downtown Atlanta. A year earlier, Muir, along with other local partners, assembled the site — a vast sea of truck parking called Transport City — and paid just under $10M. 

“Basically, we began buying industrial outside storage four years ago at around $200K to $250K an acre,” Muir said. "It's now selling for five times that."

Metro Atlanta has become one of the hottest markets for industrial outdoor storage investors, Stan Johnson Co. Director Zach Harris said during a Bisnow webinar last week, listing Georgia's capital alongside other in-demand markets like Chicago, Dallas, Houston, Kansas City, Philadelphia, New York, Orlando and Phoenix.

Industrial outdoor storage can be any number of property types, but it is largely undeveloped land for truck and trailer parking, maintenance facilities, construction materials storage and other mainly open-air industrial properties. The investors in these properties are evolving from small, often local real estate players to major institutional funds as the subsector of industrial real estate gains popularity across the country.

“That used to be a kind of a cowboy type of investment group, where it was maybe a mom-and-pop and privately owned,” Cushman & Wakefield Senior Director Gordon Benedict said in an interview. "That whole industry has kind of got institutionalized."

By definition, industrial outdoor storage, or IOS, is when actual buildings take up 20% or less of a property's total acreage — the excess land is the main attraction. These sites have long been popular with logistics companies, including shipping giants FedEx and UPS, as outdoor truck terminals to augment their distribution centers. Construction companies often use IOS properties to store building materials.

Transport City started life as a retail truck stop and hotel, Muir said. WPM tore down the old structures, refurbished a 40K SF maintenance facility and converted individual short-term truck spot leases into three bigger leases to FedEx, Werner Enterprises and Crowley Maritime, Muir said.  

Muir said the main attraction for JPMorgan and Realterm wasn't the maintenance facility, but the paved parking, which has enough space for 1,000 trucks.

IOS has benefited from an overall demand among investors for anything industrial. In Metro Atlanta, some $5.4B worth of industrial properties traded hands in 2021, according to Colliers Atlanta, more than twice the previous volume record of $2.69B, set in 2019. And many of those investors were big names in the real estate investment world: names like Blackstone, Goldman Sachs and KKR.

But institutional investors are also buying into IOS, especially when the properties are part of larger industrial portfolios. In 2020, Brookfield shelled out nearly $25M for a portfolio of outdoor storage properties in states like Arizona, Nevada and Texas. Last year, Rexford Industrial Realty paid $16.8M for a nearly 5-acre outdoor storage property in Anaheim, California. Imperium Capital announced in September that it planned to invest more than $250M over the coming year in IOS properties, and in November, Alterra Property Group paid $25.4M for two outdoor storage facilities in Florida. 

“It's the hottest thing going in industrial, which is the hottest thing going,” Muir said.

Experts say there are numerous reasons why the IOS sector has grabbed institutional investor attention. IOS properties typically command higher rents for the actual facilities, if structures are on the properties. They can often be found close to major metropolitan areas and the renewal rates from tenants, which are more likely to stay put than go elsewhere, are higher than for average industrial properties, according to a recent report by Stan Johnson Co.

Three years ago, Chicago-based Dayton Street Partners began investing in IOS with institutional investors and has since purchased $300M across the country. This past month, DSP purchased 3275 Moreland Ave., a 37K SF truck maintenance facility that sits on 14 acres in Clayton County. The firm paid $7M for the site, according to a source familiar with the transaction.

The site has enough space for more than 130 trucks, according to DSP marketing materials.

“Truck terminals and related industrial facilities which transfer cargo between nodes of transportation are experiencing a structural shift of highly increased user demand and in turn rent growth, due to changes in supply chains,” DSP founder Howard Wedren told Bisnow in an email. “Logistics-related real estate possess a variety of qualities that make them an attractive investment opportunity, including high barriers to entry, higher yields to traditional warehouse space and lower vacancy rates than conventional industrial properties.”

Despite the demand for IOS, the supply isn't growing. Even though they are fairly cheap to build and maintain, industrial sites close in to major metro areas are often snapped up for more traditional commercial developments.

“If you're going to build and you got good infill industrial [land] … you're probably going to put up Class-A space,” said Romit Cheema, the CEO of CanTex Capital in Dallas, during the Jan. 20 Bisnow industrial webinar. “The guys who are building Class-A are always going to push the square footage of the building. You're not going to leave a lot of room for trailer parking on the site."

Muir said new supply is also constrained by community NIMBYism and municipalities reluctant to approve projects that focus on large numbers of trucks on local roads.

“The lack of the supply of this zoning that allows for truck parking, you can't just buy a warehouse and park trucks there. You have to have special zoning,” Muir said. “Very few places have the zoning. You got this massive increase in demand and the supply is incapable of growing. It's going in the opposite direction.”