IOS Is A Booming Market. Why Is Financing Still A Challenge?

The U.S. industrial market is showing promise for what 2026 can bring. Cushman & Wakefield reported that vacancy was steady at 7.1% and there was greater demand for industrial assets in the latter half of 2025. Leasing activity reached 165.7M SF in Q4, up 11% from the previous year.

Industrial outdoor storage is a booming subsector that is becoming its own asset class. As of 2025, IOS has an expected total market value of over $200B. Since the start of the decade, IOS rents have also risen by 123%, according to a Newmark report.

The significant supply constraints due to zoning restrictions as well as the rise of e-commerce over the past decade has fueled the demand for last-mile logistics facilities, which, in turn, has created a greater demand for truck parking, maintenance and outdoor machinery storage, said Mark Bluni, director of originations at Sapphire Industrial Lending.  

He added that traditional industrial owners who historically have shied away from IOS have noticed the strong imbalance between supply and demand, which can result in unique investment opportunities with attractive returns.

Data from real estate investment bank Eastdil Secured found that overall IOS sales volumes are up nearly three times since 2016, to around $7B today. IOS portfolio sales, a strong indication of institutional capital entering the space, has exceeded $2B annually over the previous two years, said Nick Murphy, managing director at Eastdil Secured.

"IOS has quickly become one of the most sought-after investments within the industrial real estate sector," Murphy said. 

He said the new money flowing in the space notes the strong relative performance and high barriers to entry. National occupancy levels in 2025 exceeded 96% compared to 93% to 94% for traditional industrial product, according to Eastdil Secured data.

Navigating Financing Hurdles

Financing IOS properties, however, has been challenging. Bluni said given that the rise in IOS is so recent, there are limited comps that effectively show market terms. The value of IOS derives from the land, location and, most importantly, its zoning, so it can be difficult to underwrite.

Having a comprehensive package, including environmental and zoning reports, allows lenders to get ahead of any concerns at the beginning of the process and avoid any surprises down the line, said Sapphire Industrial Lending Director of Lending Operations Chaim Friedman.

The permitted uses within different zoning classifications can vary from county to county and, in some instances, even within the same county.

“Special use permits can be obtained, but their language is often very specific and can be revoked for noncompliance or nonutilization,” Friedman said.

Price discovery, or when buyers and sellers figure out how much an asset will cost, is challenging because there aren't a lot of competing sites. Bluni said local knowledge is essential to accurately underwrite IOS transactions.

“An average IOS transaction is small, usually under $15M per site,” he said. “When you blend a small transaction with nuanced zoning and challenging price discovery, the cost of opportunity for a lender is high.”

Sapphire recently closed on a 7-acre IOS facility in Lehigh Valley with Crosswest Capital, an IOS fund owned by industry veterans Ben Andreycak and Derek Fish. 

"Sapphire has been a reliable and preferred lending partner in our IOS platform expansion," Andreycak said. “Working with Sapphire has meant engaging with a professional team that understands the nuances of niche assets, like IOS, which has made their loan process streamlined, efficient and easy to repeat."

Providing Local Knowledge For Underwriting

Sapphire Industrial Lending provides financing for industrial assets nationwide, including acquisition and construction loans, as well as refinances. One of Sapphire’s strategic advantages is having boots on the ground in major markets across the country, providing the firm with extensive market knowledge and the ability to underwrite quickly and diligently, Bluni said.

“Traditional lenders, such as banks, might either underwrite conservatively on IOS or not pursue lending because of the specific nuance involved,” Friedman said. “This creates opportunities for lenders like Sapphire to step in.

Finding The Right Financing Solutions

The firm has found continued success in IOS because it is one of the few lenders that understands its complexities and can underwrite it accordingly, Friedman said. 

For Sapphire, being a pure-play industrial lender means it has asset-specific expertise and a deeper appreciation of the intricacies within this asset class. This, in turn, allows the firm to get more creative and offer more flexibility tailored to the industrial market and its niches.

This article was produced in collaboration between Sapphire Industrial Lending and Studio B. Bisnow news staff was not involved in the production of this content. 

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.