Thanks in part to the wave of new data centers being built around the country, one of the industrial sector’s hottest new investments is outdoor storage sites.

Industrial outdoor storage (IOS) properties are used to store vehicles, shipping containers, large earth-moving equipment and just about anything else contractors would need to construct a building or finish a data center. The properties tend to be low maintenance and cost little in upkeep.

In recent years, this little-known niche market has been mainly used by companies wanting to store semitractor-trailers and large trucks that have played a major role in hauling consumer goods across the country. More recently, demand for such properties has been on the rise due to the growth in data centers.

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The Wall Street Journal writes that “for every gigawatt of data center capacity built, some 100,000 truckloads of steel, concrete, generators and equipment are required.” That is a lot of truck hauling, which is one reason why IOS sites tend to be located near the projects.

Most outdoor storage sites are still held by small operators, local trucking companies or equipment rental businesses, resulting in a flurry of recent consolidation deals. The Journal reports that major players such as Brookfield, J.P Morgan Asset Management and Starwood Property Trust have invested large sums to acquire or partner with IOS owners.

One reason for these acquisitions is that rents for IOS properties are rising faster than most other industrial sectors. IOS rents have climbed 32% since 2021, according to CBRE and the Journal. But prices for those facilities near U.S. ports have risen much faster.

Land near data center construction is also becoming more expensive, and in some cases industrial outdoor storage space has been acquired to become data centers. Rents are quoted by the acre, not the square foot, with CBRE estimating that average rents for IOS properties are above $9,000 per acre.

Globe St. reports that the value for these properties is in the permitted use. The properties are typically zoned for buildings to be placed on no more than 25% of the site. The properties are usually required to be located near the projects, but municipalities often restrict expansion and location of these sites. As Globe St. notes, “Buying vacant land nearby does not necessarily give an investor the ability to offer a competing use.”

The demand for industrial outdoor storage sites is expected to continue for some time, with more consolidation on the way. Max Heiden, co-founder of IOS owner Catalyst Investment Partners, told The Wall Street Journal there are about $300 billion worth of IOS properties scattered around the country.