The Industrial Outdoor Storage (IOS) sector entered 2026 with significant momentum, marked by elevated investment activity and continued institutional adoption. According to Clarion, the asset class is now estimated at approximately $218 billion, up from roughly $200 billion in 2025, reflecting nearly 9% year-over-year growth.

 

IOS Market Size Growth (2022-2026)

Source: Market Estimates, 2026

Transaction volume reached an estimated $14-16 billion in 2025, representing a 15-20% increase over 2024, and early 2026 activity is tracking ahead of last year’s pace. As IOS matures, it continues to demonstrate resilience relative to traditional warehouse assets, particularly as industrial fundamentals normalize and capital reallocates toward alternative real estate strategies.

 

Current IOS Activity and Investor Demand

Investor appetite remains strong, sustaining the elevated activity levels seen at the close of 2025. Approximately 35-45% of IOS acquisitions are now driven by institutional capital, up from roughly 25-30% just four years ago. However, the asset class remains highly fragmented, with an estimated 65-75% of properties still owned by private operators or long-term owner-users, creating continued aggregation and mark-to-market opportunities.

 

Stabilized institutional-quality IOS assets in primary markets are currently trading between 6.00% and 6.75% cap rates, with secondary markets ranging from 6.75% to 7.75%. Over the past 12 months, toptier markets have experienced approximately 25-50 basis points of cap rate compression, driven by strong capital inflows and portfolio sales and recaps. IOS cap rates remain 25-75 basis points higher than comparable industrial classes, offering a relative yield premium that continues to attract capital.

 

Cap Rate Comparison

Source: Market Estimates, 2026

 

 Debt Market: Expanding Lender Participation

To provide additional perspective on financing conditions in the sector, Vytas Norusis, IOS lead at Partner Valuation Advisors, offered insight into how debt markets are evolving for IOS assets.

 

While leverage remains relatively conservative, with typical loan-to-value ratios between 55-65% and debt yields ranging from 9-11%, the composition of IOS lenders has begun to shift. Historically, the asset class was financed primarily by local and regional banks, but that dynamic began to change in 2025. While traditional IOS lenders have remained active, particularly with bridge financing, debt funds and larger national lenders have increasingly entered the space through 2025 and into 2026.

 

The addition of larger financing institutions has begun to compress borrowing costs. Ownership groups are reporting spreads as low as 165 basis points over SOFR for stabilized core assets, while value-add transactions typically price between 250 and 275 basis points over SOFR. Deal structures commonly include interest-only periods with future funding for tenant improvements, capitalexpenditures, and leasing commissions, and some facilities are structured as seed portfolio loans designed to fund future acquisitions.

 

As lender participation broadens and institutions gain greater familiarity with the IOS asset class, the increased availability of debt capital is expected to further support transaction activity and pricing across the sector.

 

Primary vs. Secondary Markets

While primary markets remain the focus for aggregation strategies, strategic sites in secondary markets are increasingly targeted as investors pursue higher going-in yields supported by population growth and infrastructure expansion.

 

Expansion into secondary markets can also be driven by tenant needs, as larger investment groups are following national tenants into non-traditional IOS markets for the purpose of serving as a corporate landlord to that tenant. Serving as a de facto corporate landlord for a national tenant offers investors the opportunity to maintain a strong credit tenant across their portfolio while also having the ability to be involved in their expansion plans, by either acquiring assets vacant with the tenant in tow or developing build-to-suit projects for these tenants. As several industries within the IOS sector are made up of tenants with significant near-term expansion plans, being willing to invest in these secondary markets can offer investors an advantage in building a relationship with national tenants.

 

User Trends and Leasing Dynamics

User demand has increased year-over-year across diverse sectors, including construction and building materials (20-25% of tenant demand), logistics and trucking (20-25%), equipment rental, and utilities infrastructure. National IOS vacancy remains tight at approximately 4-6% in primary markets and 6-8% in secondary markets, with vacancy for fully improved, paved, and secured sites in top metros often falling below 4%. Supply growth remains constrained, with new deliveries estimated at less than 2% of total inventory annually, largely due to restrictive municipal zoning.

 

IOS Vacancy Rates

Source: Market Estimates, 2026

Rent growth continues to outpace traditional industrial. IOS rents grew approximately 8-10% in 2024, 7-9% in 2025, and are projected to expand another 6-8% in 2026, producing a three-year CAGR of roughly 8-9%. By comparison, warehouse rent growth has moderated into the 3-5% range. With the fragmented nature of IOS ownership, drivers to rent growth are twofold. First, broader market factors influencing supply and demand similar to the broader industrial market. Second, as properties are acquired by well-capitalized groups, investors are able to push market rents by improving the assets through capital expenditures and proper marketing.

 

While rental rates are expected to continue rising, ownership groups must remain mindful of how those increases align with tenant operating economics. Norusis noted that in sectors such as trucking and freight, companies are currently operating with relatively thin margins, which can limit their ability to absorb significant rent increases. Similarly, many local operators prefer predictable monthly occupancy costs. Converting tenants from gross or modified gross leases to triple-net structures can materially increase their total monthly expense, particularly in states like California, Florida, and Georgia, where property taxes are reassessed upon a sale. As a result, landlords must carefully balance rent growth with tenant sustainability to maintain long-term occupancy and operational stability.

 

Primary market rents now average approximately $5,000-$15,000 per acre per month, with core markets like Dallas-Fort Worth approaching the upper end of that range. Secondary markets typically range between $3,000-$6,000 per acre per month, though certain high-growth nodes are closing that gap.

 

As institutional ownership increases, lease structures are evolving. Average lease terms have expanded from 2-3 years in 2023 to 4-6 years in 2026, with build-to-suit projects often securing 7-10 year commitments. Annual rent escalations of 3-4% have become standard. Institutional portfolios have seen weighted average lease terms (WALTs) expand from roughly 2.5 years in 2022 to over 4.5 years today, contributing to improved valuation stability. With the growth of institutional interest, aggregators are becoming increasingly focused on portfolio composition and diversity. Groups have begun constructing core, core plus, and value-add strategies, with specific funds for each strategy. Core portfolios are well located, leased to predominantly credit tenants with staggered rollover schedules, and are currently pricing on par with traditional industrial portfolios. Large portfolios have not been frequently traded, but when they are on the market, there is significant interest from a wide variety of investors.

 

Structural Supply Constraints

Supply remains artificially constrained due to zoning restrictions and entitlement hurdles. In many major metros, an estimated 30-50% of industrial-zoned land restricts IOS by-right use, and entitlement timelines commonly range from 9 to 18 months, extending beyond 24 months in more restrictive jurisdictions.

 

Approximately 60% of existing IOS inventory was developed prior to 2000, with a meaningful portion consisting of unpaved or functionally obsolete sites. As users increasingly require stabilized surfaces, drainage infrastructure, lighting, and secure fencing, older inventory is becoming less competitive without capital improvements.

 

The Rise of IOS Development

Historically reliant on legacy supply, IOS is now entering a more formalized development cycle. The national development pipeline is estimated at approximately 3-5% of total inventory, still modest relative to the warehouse sector but materially higher than prior years.

 

Development yields in primary markets generally range between 7.5% and 9.5%, with secondary markets achieving 8.5% to 10.5% yield-on-cost, offering attractive spreads to stabilized cap rates. Replacement costs for improved, stabilized sites typically range between $250,000 and $400,000 per usable acre, with land accounting for 40-60% of total project cost in primary markets.

 

Lease-up timelines typically range from 6-12 months, with pre-leasing often reaching 30-50% in highgrowth corridors. As institutional capital seeks scalable product, standardized and replicable IOS park designs are becoming more common.

 

Development Yield vs Stabilized Cap Rate

Source: Market Estimates, 2026

 

 

DFW: A Leading Market Indicator

The Dallas-Fort Worth metroplex continues to serve as a bellwether for IOS performance. Vacancy in North DFW submarkets remains tight at approximately 4-5%, while South Dallas sits slightly higher at 5-7%, driven largely by logistics-focused tenancy near intermodal hubs.

 

Core DFW IOS rents range between $6,500 and $13,000/acre/month, with high-growth secondary markets like Melissa and Sherman achieving $5,000$8,5000/acre, approaching core pricing levels due to limited supply.

 

Population growth across DFW continues at approximately 2.0-2.5% annually, with Collin and Grayson Counties outpacing the broader metro. Residential permitting in northern growth corridors has increased 8-12% year-over-year, further supporting construction and infrastructure-driven IOS demand.

 

Although the ATA Truck Tonnage Index remains roughly 5-8% below its 2022 peak, freight activity is expected to normalize by late 2026 or early 2027, which should further support leasing momentum.

 

The DFW metro benefits from a unique combination of demand drivers that are not present in most IOS markets across the country. As a major gateway industrial hub, DFW generates significant logisticsrelated demand that requires proximate IOS sites to support trucking, freight, and distribution operations. At the same time, the metro’s strong population growth drives demand from population-serving users, such as building materials suppliers, equipment rental companies, and infrastructure-related businesses. While many logistics markets benefit primarily from freight-related demand and high-growth population centers support local service users, few markets offer the combination of both logistics-oriented and population-serving IOS demand that DFW provides, making it one of the most fundamentally supported IOS markets in the country. Norusis highlighted this view, noting that the breadth of demand drivers and long-term growth fundamentals place DFW among the top IOS markets nationally.

 

Outlook

The IOS market remains highly fragmented and structurally supply-constrained, with less than 2% annual inventory growth and a majority of assets still privately owned. Institutionalization is driving longer lease terms, improved documentation standards, and greater pricing transparency.

 

With projected freight normalization, continued population growth in key Sunbelt markets, and sustained rental growth in the 6-8% range, IOS appears well-positioned for continued expansion through the remainder of 2026 and into 2027.

 

As lease terms lengthen, WALTs extend, and development pipelines remain disciplined, the asset class is transitioning from a niche alternative to an institutional necessity that is supported by durable cash flows, yield premiums to warehouse, and persistent structural barriers to entry.