Industrial outdoor storage – identifying an emerging asset class
ALMCOR investment associate Rupert Downes shares how and why the team has identified IOS as an emerging asset class in the UK and continental Europe.
On Thursday 25th April, ALMCOR investment associate Rupert Downes spoke to the Society of Industrial and Office Realtors (SIOR) at their latest ‘Mind Your Own Business’ event in London.
Rupert shared how the ALMCOR team is identifying opportunities in industrial open storage (IOS) – and why brokers and agents need to be up to speed with the newest emerging asset class in the UK and Europe.
He said: “The IOS market is at a more mature stage in the US than in Europe – although an IOS portfolio of true scale (at ~$250m+) has yet to trade in the US market, the value-growth potential of the sector has been identified there and better understood at an institutional level for much longer. While the majority of capital deployment there still comes from value-add aggregators, portfolios of true scale and quality have now been assembled. In the UK and across Europe, IOS is still in its infancy as an investment grade sector, with relatively few known players.
“The fundamentals underpinning the IOS sector are a simple equation of rental growth being the product of increasing occupier demand against a backdrop of either limited or reducing supply. Demand for IOS broadly correlates to demand for sheds – it’s part of the same ecosystem – but where do local authorities prefer to see shed development? The brownfield sites that also constitute a sizeable chunk of current IOS supply.
“With factors like the pandemic driving retailers and manufacturers to secure their supply chains via onshoring and nearshoring, it was logical that IOS would benefit from the same tailwinds as the broader industrial and logistics sector. This trend is particularly true in locations constrained by topography, infrastructure, or high population density – in parts of Iberia, for example, with dense conurbations on mountainous coastlines, or the UK and the Netherlands with limited land supply and constraints on grid capacity.
“Looking ahead, as we and others increasingly institutionalise the asset class by aggregating scale portfolios of quality real estate in an increasingly under-supplied sector, we expect to see more investors enter the IOS market at a lower point on the risk curve.
“ALMCOR has benefitted from first mover advantage in its European IOS platform but we are encouraged by the increase in competition as it supports our view that there’s a pathway to IOS becoming an established asset class on this side of the Atlantic.”
In March, ALMCOR and joint venture partner Cerberus Capital Management announced the latest acquisition to its UK IOS platform – deploying £20m into a 30-acre multi-let industrial and open storage site at Bridgwater, South West England. Speaking to React News in April, ALMCOR CEO Jony Whittingham also discussed plans to build a £1bn+ open storage platform.