Key Takeaways
- • Hempel Real Estate has launched an industrial outdoor storage (IOS) fund targeting the Midwest, capitalizing on sector momentum driven by institutional investor appetite and strong fundamentals across key US markets.
- • The IOS sector has emerged as a high-growth asset class, with rent increases of 122.8% over five years (through July 2025)—more than double the rate of bulk warehouses—and vacancy rates of 4.9% compared to 10.5% for traditional warehouse properties.
- • Major institutional partnerships are scaling the sector: Heitman and Open Industrial recapitalized a 25-property, 105-acre IOS portfolio with $200M in equity earmarked for current holdings and future acquisitions in the Mid-Atlantic and Southeast US.
- • IOS properties command premium economics due to limited supply and high demand from logistics, equipment rental, and construction tenants; sites are strategically positioned near major transportation and population hubs to support supply chain efficiency.
- • The broader IOS market is estimated at $200 billion, attracting multiple large-capital platforms including Barings ($150M venture with Brennan's), Realterm, Manulife Investment Management partnerships, and other institutional players signaling long-term confidence in IOS as a scalable alternative asset class.
Summary
Hempel Real Estate's entry into the industrial outdoor storage sector with a dedicated Midwest-focused fund reflects accelerating institutional capital deployment into what has transformed from a niche industrial subsector into a mainstream alternative real estate asset class. The IOS sector has attracted substantial investor attention driven by demonstrable economic outperformance and structural supply constraints limiting development.
The investment thesis underlying IOS expansion rests on compelling performance metrics. According to Newmark data, IOS rents grew 122.8% over the five-year period ending July 2025—more than twice the appreciation rate of bulk warehouse properties. Equally significant, IOS vacancy rates remain compressed at 4.9% compared to 10.5% for traditional warehouses, creating a favorable supply-demand dynamic that supports pricing power and tenant retention. These fundamentals have proven attractive to large institutional capital, with the broader IOS market estimated at approximately $200 billion.
Recent partnership formations underscore the sector's institutional momentum. Heitman and Open Industrial completed a recapitalization of a 25-property, 105-acre IOS portfolio and committed $200 million in equity for both current holdings and pipeline acquisitions across Virginia, Maryland, North Carolina, and South Carolina. The properties serve logistics operators, equipment rental firms, and construction companies—tenant bases with resilient, long-term demand drivers. Portfolio sites benefit from infill locations proximate to major transportation nodes and population centers. Comparable large-scale ventures include a $150 million partnership between Barings and Brennan's, and Realterm's seven-property, 74.2-acre acquisition with J.P. Morgan-advised institutional investors. Manulife Investment Management has similarly announced strategic partnerships targeting IOS asset acquisition and development, signaling the entry of major global capital allocators into the space.
The convergence of Hempel's Midwest fund launch with broader institutional platform development reflects confidence in IOS scalability and the sector's ability to absorb significant capital while maintaining yield characteristics attractive to alternative investment mandates. Investor positioning suggests IOS has transitioned from emerging opportunity to established asset class within the industrial real estate allocation framework.
The investment thesis underlying IOS expansion rests on compelling performance metrics. According to Newmark data, IOS rents grew 122.8% over the five-year period ending July 2025—more than twice the appreciation rate of bulk warehouse properties. Equally significant, IOS vacancy rates remain compressed at 4.9% compared to 10.5% for traditional warehouses, creating a favorable supply-demand dynamic that supports pricing power and tenant retention. These fundamentals have proven attractive to large institutional capital, with the broader IOS market estimated at approximately $200 billion.
Recent partnership formations underscore the sector's institutional momentum. Heitman and Open Industrial completed a recapitalization of a 25-property, 105-acre IOS portfolio and committed $200 million in equity for both current holdings and pipeline acquisitions across Virginia, Maryland, North Carolina, and South Carolina. The properties serve logistics operators, equipment rental firms, and construction companies—tenant bases with resilient, long-term demand drivers. Portfolio sites benefit from infill locations proximate to major transportation nodes and population centers. Comparable large-scale ventures include a $150 million partnership between Barings and Brennan's, and Realterm's seven-property, 74.2-acre acquisition with J.P. Morgan-advised institutional investors. Manulife Investment Management has similarly announced strategic partnerships targeting IOS asset acquisition and development, signaling the entry of major global capital allocators into the space.
The convergence of Hempel's Midwest fund launch with broader institutional platform development reflects confidence in IOS scalability and the sector's ability to absorb significant capital while maintaining yield characteristics attractive to alternative investment mandates. Investor positioning suggests IOS has transitioned from emerging opportunity to established asset class within the industrial real estate allocation framework.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.