From niche to institutional: How capital is shaping industrial outdoor storage

Industrial outdoor storage (IOS) has gained significant traction with institutional investors over the past decade. A recent panel at the Bisnow National Industrial Outdoor Storage Conference in Jersey City showed just how established the asset class has become. “IOS Capital Markets: Debt, Equity and Everything In Between” brought together owners, operators, investors and lenders to trace the evolution of the asset class from skeptical credit committees to a deep pool of debt and equity providers.

Among the voices shaping that conversation was Jessica Lauerhass, Senior Vice President and Regional Executive in KeyBank’s Institutional Real Estate Group and team lead for the group’s Boston office, who advises institutional real estate clients on structuring optimal capital solutions across sectors. Her read on IOS was pragmatic: the sector is transforming from niche to institutional, and lenders that win will back the right platforms, not just the right properties.

Capital is getting more competitive

Institutional investors still control only an estimated 7% to 10% of the IOS market, ¹ leaving a highly fragmented ownership base and significant room for consolidation. Yet capital is becoming more plentiful and less expensive for established operators.

Panelists noted that spreads over the benchmark on stabilized institutional IOS product have compressed by roughly 75% since early 2025 — from around 45 basis points to closer to 10 — narrowing the gap with traditional industrial to almost nothing.

The pool of lenders is also expanding. A market once dominated by debt funds and banks has seen life-insurance companies — long anchored in big-box industrial — enter the sector, while super-regional banks are increasingly lending at institutional scale. Industry observers estimate that more than $10 billion of institutional capital has been raised for IOS strategies since 2022.²

For Lauerhass, that influx of capital is reminiscent of changes KeyBank has seen in other sectors.

 “Self-storage and manufactured housing are two sectors where we were able to get in early and establish a relationship while the sectors were institutionalizing,“ Lauerhass said.

KeyBank’s entry into IOS has followed a similar path. Lauerhass said the sector was not on her radar as a lender five years ago but began appearing more frequently through existing institutional clients and equity partners. One turning point came in 2024, when an existing client acquired an IOS portfolio, bringing the assets into a corporate credit relationship KeyBank already knew.

A deeper look revealed that other institutional partners also had IOS exposure within their portfolios. As those clients have expanded in the sector, KeyBank has developed a deeper understanding of the operators, assets, and financing needs involved.

More lenders — but not indiscriminate lending

Even with more capital competing for IOS deals, lenders are still choosy about the operators they want to back.

“There’s a lot of activity and the tailwinds are great, but folks are still trying to understand IOS and which sponsors they want to go into it with for the first time, or expand with,” Lauerhass said.

In other words, lenders are being intentional about the platform behind the properties. Lauerhass pointed to strong cash flow, experience management, institutional equity, scale, and a clear growth trajectory as characteristics that can position an IOS company for a long-term lending relationship.

“The core of our DNA and our strategy has always been to get in front of those groups, understand where they are now, how they want to grow, and how we can help them grow,” she said.

Management carries particular weight in IOS because the properties are often more complicated to acquire and operate than they appear. Panelists said newcomers often underestimate the property management, diligence, and execution involved in building an IOS portfolio.

Properties acquired from non-institutional owners may not be well documented or historically well managed. Operators can encounter everything from legal and zoning questions to flooding and geotechnical issues. And because many acquisitions are relatively small, even large platforms continue to execute the kinds of hands-on deals that require significant local knowledge and operating expertise.

For lenders, those capabilities help demonstrate that a company can do more than acquire individual properties. They show whether the management team has the infrastructure and expertise to build and operate a larger IOS platform.

Financing a growth strategy, not just a property

The same platform-oriented approach shapes how KeyBank thinks about financing.

With capital structures becoming more sophisticated and more lenders in the market, price matters — but so do speed and flexibility, particularly for operators assembling portfolios through acquisitions. Lauerhass pointed to KeyBank’s entity-level financing as a clear differentiator that can help finance broader growth strategies.

Rather than relying on first-mortgage financing secured by the underlying properties, entity-level financing leverages the borrower’s equity interests in those properties as collateral. This structure can offer sponsors greater flexibility to execute growth strategies, provided the platform has sufficient scale, a diversified portfolio, and strong sponsorship and management capabilities.