Under-the-radar asset class extracts 'surge in demand' from Baltimore investors

TECHNOLOGY

Ornate beachfront office towers, well-equipped apartments and massive Class A distribution centers aren’t the real estate types that are garnering the attention of investors and tenants in the Baltimore area.

More and more investors are turning to odd-shaped parcels of industrial land that have been improved enough for trucks to come and go, an asset class known as industrial outdoor warehouses. increase.

“Demand from investors is pouring in,” said Rob Maddux, vice president of brokerage at JLL in Baltimore, of the asset class.


offered by Industrial Outdoor Ventures

Industrial site at 3501 East Biddle St. in Baltimore.

Essentially, an outdoor industrial warehouse is land where businesses can safely store items such as recently imported cars, fleets of last-mile delivery vans, or stacks of PVC pipe. They can be separate plots of land, but they are often unused plots of land next to old industrial buildings.

In recent years, institutional capital has flocked to this industry subclass. Much of that demand is driven by the fact that there is very little industrial land left undeveloped. However, demand continues to grow from a variety of potential users, from car importers to construction companies.

“It’s very limited. We have a very land-constrained market here,” Maddux said.

The growing local interest in this product type is due to the port of Baltimore and its status as the world’s top port for importing automobiles, Maddux said.

The Port of Baltimore ranks second in North America and first in the United States in terms of the number of passenger cars and light trucks that pass through the port each year. Light truck and motor vehicle freight passing through the port increased nearly 27% between 2011 and 2021, according to Maryland Port Authority data.

Cars, unlike video game systems, pet food, and shoes, cannot be stored or shipped from warehouses or distribution centers. They should generally be stored in an outdoor space secure enough to protect against damage or theft, but only need sufficient infrastructure for car carriers to come and go.

Industrial Outdoor Ventures bills itself as one of the nation’s leading owners of low-coverage industrial real estate and is one of the most recent investors to enter the Baltimore market. Last month, the Illinois-based company purchased the city’s first property, his 3501 East Biddle St., for an undisclosed price.

Baltimore is one of about 15 US markets that IOV monitors for acquisition opportunities. With two fully leased industrial buildings and two acres of yard space that can be used as an outdoor industrial warehouse, the Biddle Street estate fits like a glove into IOV’s acquisition profile.

Eric Johnson, Senior Vice President of Development and Acquisitions at IOV, said:

However, as with other markets IOV monitors, over the past 12 to 18 months, more and more investors have started competing for space with potential for outdoor industrial storage. I’m here. These investors are primarily attracted by a combination of limited supply and low development risk, Johnson said.

Nonetheless, factors such as rising interest rates have already pushed investors away from the real estate competition. Johnson said it is mainly the buyers who finance acquisitions on a transaction-by-deal basis.

“A lot of people are being pushed out of space,” he said.

While there is evidence of increased interest from institutional investors and private equity firms in the last year, there is little data on the scale of that interest.

Local brokerage reports on the industrial market do not track these property sales as their own asset category. This is primarily because these deals often involve existing industrial sites. So any industrial building deal with excess land can be at least partially a deal for outdoor industrial space.

1788 Holdings last year acquired two industrial properties in Baltimore, including outdoor storage sites. 6901 Rolling Mill Road and 1601 Wicomico Street. Given the scarcity of that type of land in cities and the continuing need for it.


Bisnow/John Bannister

Larry Goodwin of 1788 Holdings, photographed in 2016.

Goodwin is still buying industrial properties, he said Bissnow He is skeptical about trends in broad investor interest in Baltimore’s industrial market. And he worries that the hot market is pushing out too many potential tenants.

About 80% of the people interested in these properties are still local businesses, he said. The star of Baltimore’s industrial market isn’t the e-commerce behemoth that multinationals sign huge lease deals for, or that he pays eight-figure sums to buy Class A buildings.

“It’s a very thin piece of the market,” Goodwin said.

When Goodwin acquires industrial land, he said, he is looking for properties with vacant lots on site. The land can be used as an outdoor industrial warehouse, giving it an advantage when competing with other properties that only have warehouses inside the building. This is because the rent for storing products outdoors can be significantly reduced. This gives the end user more space at a lower cost.

“I win every bake-off,” he said.

Tags