Inside the Buy Box

A Look at IOS Acquisitions Criteria

By: Vytas Norusis, MAI, National Practice Lead for IOS Valuation

The Industrial Outdoor Storage (IOS) market has burst onto the institutional investment radar in recent years, with institutions such as Stockbridge, J.P. Morgan, TPG Angelo Gordon, among others making significant investments in IOS operators since 2021. The institutional interest in IOS has crowded the playing field in core industrial markets, as portfolio aggregators are considering the exit opportunities from day one, building portfolios to maximize flexibility and marketability upon exit of the portfolio.

The current state of the market sees the primary method of exit for an aggregator as a recapitalization as opposed to an asset sale, which leads to more disciplined investment decisions, as the aggregator will remain in the deal for a longer timeframe. In this piece, we will explore the most common acquisitions criteria across different aggregators active in IOS, key portfolio construction considerations, and where we see the IOS market heading in 2026.

What is an IOS Property?

In order to understand the acquisitions criteria for IOS assets, the important first step is to define what is considered an IOS property. IOS is defined at a high level as follows:

Low Coverage – A typical IOS property will have a site coverage of 30% of less, with the bulk of the functional utility of the site being driven by the site improvements/ability to store materials, vehicles, or products outside.
Outdoor Storage Allowed by Right – Zoning is the most critical component of an IOS site, with many municipalities limiting the storage of vehicles, materials, or products outside.
Location near Transportation Linkages – As with traditional industrial, locations near logistics nodes is paramount for most IOS uses.

Typical IOS properties will have non-specialized building improvements, allowing a multitude of users to use both the building and site with minimal capital expenditures necessary to renovate the building. While truck terminals are considered to be an IOS use, the terminal market is more mature than the broader IOS market, and is better understood by investors and users alike. The focus of this piece will be on the less traditional IOS assets.

Most Common Criteria

While most IOS investors agree on the general definition of IOS, each investor has distinct criteria that they use to filter properties when looking for acquisitions opportunities. In reviewing the acquisitions criteria available on several of the top IOS aggregators’ websites, a few common themes shape their investment decisions. The most common criteria are as follows:

Zoning – As previously noted, the base level criteria to be considered a viable IOS site is to have zoning that allows for outdoor storage of vehicles, materials, or products. With that said, having a single allowable use within these criteria is typically considered significantly riskier than a zoning classification that allows for a multitude of outdoor storage uses. The local municipalities and zoning administrators play a large role in the value of an IOS site, as the more flexible the zoning and wider the range of allowable uses, as well as the likelihood of continued approval for IOS uses. Typically zoning suitable for IOS sites will be the heaviest industrial zoning in any particular jurisdiction. For this reason, having flexible IOS uses with several potential uses as permitted by right is a common criteria for investors.
Location – Across the spectrum of IOS aggregators, the emphasis on location proximate to transportation linkages is a common theme; however, several aggregators are focused on the top 20/30/40 markets within the US. The differentiation between transportation linkages and logistics nodes is an important one, as a location in Oklahoma City has great access to transportation but is not considered to be a comparable logistics node to the nearby Dallas-Fort Worth market. Likewise, investors are looking for areas that have stable to growing population bases, as several IOS subsectors are focused on the construction and building materials supply industries. Having access to both logistics nodes and population growth increases the depth of the prospective tenant pool, which helps drive rental rate growth.
Clean Environmental – Zoning and environmental contamination are the two items that can cause even the best-looking deals to end before they’ve even begun. Few of the top investors in the IOS sector have an appetite for environmentally contaminated sites, as buying a site that is contaminated can bring costly remediation efforts, increased liability, use constraints, and difficulty obtaining financing and insurance. While many sites that have the requisite zoning for IOS are in historically heavy industrial areas, those with contamination issues prove to be challenging for investors as they require additional due diligence to fully understand the risks associated with the purchase.

Note that the most common criteria do not include any factors regarding in-place tenancy. At this stage of the maturation of the IOS market, aggregators are primarily looking for value-add acquisitions, meaning that the investors are more readily willing to take on leasing/vacancy risk than the risks associated with zoning, location, or environmental components.

While a long term, triple net leased IOS site such as a 10-year term equipment rental facility would be attractive for most investors, the value-add nature of most aggregators’ portfolios tends to shy away from these sites as pricing on these assets does not leave sufficient upside to add value.

IOS Portfolio Construction

With the basic acquisition criteria identified, we will now explore some of the factors that aggregators are considering in building their portfolios with an eye on maximizing returns.

Portfolio Diversification – Portfolio diversification is an important risk mitigation tool that aggregators use to separate their portfolios from the competition. Diversification does not necessarily mean geographic diversity, as evidenced by groups like CanTex Cap i tal, a fundamentally sound and diverse portfolio can be built in a single market. When aggregators are building with an eye towards portfolio diversification, they’re trying to account for the ebbs and flows in demand for different user groups within the IOS space. A portfolio that only has truck terminals in port markets will be far more susceptible to shifts in the global economy than a portfolio of similar assets that includes non-port markets such as Dallas and Chicago. Likewise, a portfolio of building material supply yards in the Sunbelt can be detrimentally impacted to a higher degree by rising material prices than a portfolio in the Sunbelt that includes logistics or equipment rental users. By providing a diversity in locations, use types, and flexibility in uses, aggregators are able to mitigate downsides that are driven by broader market forces.
Tenant Credit – As aggregators are building portfolios of value-add assets, some have targeted specific investment grade credit-rated tenants even if they do not fit in the general locations that would be considered target markets. Becoming the de-facto “corporate landlord” for large corporate tenants can lead to additional opportunities for build-to-suit locations and give the aggregator a leg up on any site selection searches that the tenant may be embarking on in the future. Additionally, the focus on corporately backed leases increases the durability of the income stream, making it more attractive to institutions that serve as the exit strategy for the aggregators.
Deep focus on Fewer Markets – In conjunction with the diversification strategy, some aggregators have opted to eschew broader national expansions for a deeper dive into markets that they are already active in. With an opaque market like IOS, investing in markets that have already been vetted and researched allows for a greater speed of execution, as properly vetting an expansion market typically takes several months if not a year for an aggregator’s initial investment. Buying in a new market is not as simple as having a broker present an attractive investment opportunity; it takes time to understand the local zoning landscape, users present in the market, users that are interested in expanding in the market, local regulations, etc. Even with a deep focus on a market, challenges still arise, but by being focused on markets that they are active in, aggregators can mitigate the unknown risks that can come from expanding too far too fast.

For portfolios to be attractive to the most aggressive capital groups looking to invest in IOS, risk mitigation is key to maximize returns.

What We Expect in 2026

With an understanding of how aggregators are approaching buying individual assets and constructing portfolios, we now shift gears to talk about what we are expecting in 2026.

The IOS space still has a significant amount of runway to continue to grow, as despite the aggregation by the current players, the market is still highly fragmented. The fragmentation of the sector will continue to provide accretive investment opportunities for those that can dig deep, move fast, and execute consistently. When IOS first became its own niche asset class, early movers were able to learn on the job, with mistakes being made at fairly low stakes given the average deal size was less than $5 million; however, with the growth of the sector and capital influx, the room for error has gotten significantly lower. The combination of more eyes on the sector and higher purchase prices will lead to a continued focus on the fundamentals approach that aggregators have taken in 2025.
The coming year is expected to bring several new capital entrants into the space, through asset purchase, recapitalization, or lending. 2024 saw Peakstone enter the space with their acquisition of a portfolio from Alterra, while 2025 included several recapitalizations from pension funds and institutional investors. We expect 2026 to bring several recapitalizations from well-known institutions, as well as the entrance of foreign capital into the IOS space.
The increased lender mix will continue to drive down the cost of debt, as institutional lenders can provide more aggressive terms than the regional/local banks that have historically been the lifeblood of IOS, which will allow for pricing to continue to compress. Over the past several years, one of the top questions with IOS has been how do you price it on a capitalization rate and IRR basis. While limited price discovery in the space has occurred for stabilized assets, in 2026, we believe that IOS will continue its move towards pricing on par with comparable industrial class, with Class A IOS assets and portfolios trading on par with Class A industrial.
From a rent growth standpoint, several of the mature markets have seen rental rate growth take a step back, as the institutionalization of the space has taken much of the locally owned inventory off the market. Mature markets include many of the largest markets in the country, such as Chicago, Los Angeles, Northern New Jersey, Atlanta, and Dallas, among others. While historically IOS has shown outsized rent growth, this was partially due to the historical underpricing of the rental rates by local ownership, allowing for aggregators to get significant rental rate increases when legacy leases expired. In mature markets, we expect rental rates to normalize, albeit at higher growth rates than traditional industrial due to the scarcity of the product type and barriers to entry for new competition. Several of the secondary IOS markets have more runway for outsized rental rate growth, though even these markets are not immune to broader trends in the industrial sector, which will mitigate some of the ability to push rents higher. Secondary IOS markets would include Salt Lake City, Seattle, Portland, Boston, and Orlando. With the potential of slowing economic growth, tenants are becoming more price sensitive, mitigating rental rate growth in all markets.
In conjunction with the growth of small bay industrial as a popular investment class, we expect to see an increase in firms that are focused on what they consider irreplaceable assets, combining IOS and small bay industrial into investment vehicles. The flexibility in investment criteria will allow these investors to avoid having to classify investments into distinct categories based on what their capital expects, and outsized returns can be captured in some “tweener” assets that are too high coverage to be considered IOS, but don’t fit into any of the other traditional industrial categories. Several investment groups are already employing such a strategy, and we expect this trend to expand and continue.

The IOS sector has tremendous momentum heading into 2026, with most aggregators that we spoke with indicating that 4Q 2025 will be a banner quarter. Despite the potential headwinds, the fragmentation and higher returns than traditional industrial will continue to propel the niche to follow a similar trajectory as self-storage, mobile home communities, and build-to-rent housing as an investment sector outside of its broader asset class.

About Partner Valuation Advisors

Partner Valuation Advisors, LLC is a national commercial real estate valuation advisory firm that ranks as a top 10 appraisal firm. Partner Valuation Advisors has more than 100 valuation professionals nationally. Partner Valuation Advisors is led by Brandon Nunnink, CFA, and Eric L. En l oe, MAI, CRE, FRICS. Team members hold appraisal licenses in all 50 states and the firm has offices in Austin, Baltimore, Boise, Boston, Buffalo, Charlotte, Chicago, Cincinnati, Cleveland, Dallas, Denver, Gainesville, Grand Rapids, Houston, Indianapolis, Jacksonville, Kansas City, Knoxville, Los Angeles, Miami, Milwaukee, Mobile, Myrtle Beach, Naples, New York, Northern New Jersey, Philadelphia, Phoenix, Portland, Raleigh, San Diego, Seattle, St. George, St. Louis, Tulsa, and Washington, D.C. Partner Valuation Advisors performs commercial real estate valuations nationally for investors, lenders, and real estate occupiers and is an affiliate company of Partner Engineering and Science, Inc. Please visit us online at www.PartnerVal.com.

Beyond the Anchor: How Experiential Retail is Rewriting the Rules

By: Joe Miller, MAI, MRICS, National Practice Lead for Retail Valuation

In an era where traditional retail anchors are losing their gravitational pull, a new wave of lifestyle-driven concepts is stepping into the spotlight. Shuffleboard clubs, pickleball venues, and food halls tucked inside casinos are no longer fringe experiments. They’re becoming the heartbeat of retail revitalization. Casinos themselves are increasingly serving as multi-dimensional anchors, blending gaming, dining, shopping, and entertainment experiences that draw diverse audiences

These concepts are more than just novelties. They represent a strategic pivot toward experiential retail, a segment that continues to show resilience even as regional malls face mounting pressure from store closures and shifting consumer habits. While grocery-anchored centers and long-term net lease properties remain investor favorites, it's the unexpected rise of entertainment-infused retail that’s capturing attention in both media and client conversations.

Why They Work: Foot Traffic Without the Spend

One of the most compelling aspects of these new retail formats is their ability to drive foot traffic and increase dwell time. Shuffleboard clubs and pickleball courts offer social engagement and physical activity, while casinos drive consistent traffic and extend dwell time, creating a halo effect for adjacent tenants. These venues are targeted destinations, drawing visitors who may not be there to shop, but who linger, explore, and share their experiences online.

Although a surge in foot traffic doesn’t always translate into proportional spending, many of these concepts are designed to enhance the overall property experience, not necessarily to boost direct retail sales. That said, their presence can elevate the value of adjacent tenants and contribute to a more vibrant ecosystem.

Filling the Gaps: Dead Space Gets a Second Life

Rather than replacing traditional anchors, landlords are increasingly backfilling long-vacant spaces with high-engagement concepts, especially in secondary markets where retail demand has softened. Successful conversions include casinos, medical offices, entertainment venues, logistics hubs, and select educational uses. While educational tenants can be hit or miss, others have proven effective in stabilizing occupancy and driving traffic.

In contrast, top-tier markets continue to favor more generalized retail tenants for backfilling, maintaining a conservative approach to tenant mix. In places where risk tolerance is higher and innovation is welcomed, these lifestyle concepts are thriving.

Measuring the Impact: ROI Beyond the Register

For landlords, evaluating the return on investment for these concepts requires a broader lens. It’s not just about rent per square foot, it’s about activation, engagement, and long-term viability. These venues often serve as anchors of experience, drawing consistent traffic and creating a halo effect that benefits surrounding tenants.

These concepts also generate indirect returns, enhancing brand visibility, driving social media engagement, and creating a differentiated identity for the property. Their presence often lifts the performance of nearby tenants, creating a synergistic effect that supports long-term viability.

The Fine Print: Zoning, Clauses & Cash Flow Risk

As store closures reshape occupancy and valuation across the sector, landlords are turning to high-engagement concepts to stabilize assets. Zoning is generally flexible in large retail developments, with many adaptive uses, casinos excluded, already permitted.

Anchor transitions can trigger significant legal and financial ripple effects. Many tenants have co-tenancy clauses, and new experiential anchors like casinos or entertainment venues may not meet those terms. If other anchors are also vacant, tenants may opt to vacate or shift to reduced rent or percent-in-lieu arrangements, impacting property cash flow. These clauses often include sunset provisions, allowing tenants to exit entirely after a set period.

As retail evolves, unconventional tenants that bring energy, differentiation, and a sense of place will play a growing role in shaping the next chapter of mall performance.