Strong baseline fundamentals and the structural undersupply of appropriate land supply have supported the growing weight of capital seeking IOS opportunities, while the investment thesis is supported by value preservation through the land value and multiple exit strategies, which support investment flexibility.
Key Findings
- The tenant profile has become much more varied, with sites now being used for a broad mix of purposes, including car parking, machinery and large fleet storage, multi-faceted storage and last-mile distribution, among others.
- The pick-up in warehouse supply over the past decade has led to the redevelopment of many IOS sites. This trend is compounded by IOS often being a temporary use on sites earmarked for alternative purposes. The supply and availability of IOS sites will remain a challenge for occupiers; however, this creates an opportunity for owners of such sites.
- IOS rental growth has outpaced the broader industrial market, led by the scarcity of land.
- IOS yields are typically on par with the broader industrial market at 5.25% to 6.25%, noting that lower capital expenditure requirements support the total return profile.
