Success on the internet continues to be determined by how many eyeballs are attracted to your content. My mission is to produce quality original content related to commercial real estate. I try to post my thoughts in cyberspace on a monthly basis. I post them on my blog, distribute them to my social media followers and email them to a list of around 1,000 clients, colleagues and friends.
But what generates clicks on the internet? My most popular post appeared online on April 20, 2020. I gave emphasis to the 4/20 date which seems to have some significance. The article was entitled CBD vs. CBD – A new definition for a key term in Commercial Real Estate. People may be interested in my posts about Sales Tax on Rent, The Top 10 Kens, and Frightening Lease Clauses, but what really gets their attention? CBD. Not Central Business District which was the original use of the abbreviation, but the medicinal ingredient in marijuana.
So are my readers more interested in good weed than a good read? Or are they simply fascinated by articles about the changing meanings of common real estate abbreviations? To find out, I decided to focus on the new meaning of IOS. But I am posting just in time for 4/20.
iOS (lower case i), is the iPhone operating system developed by Apple in 2007 to power the iPhone. IOS (upper case I) is a term I only recently began to see in commercial real estate marketing material.
IOS stands for industrial outdoor storage, the practice of storing materials, equipment or products in outdoor spaces. My company, Levy Realty Advisors is marketing a 1-acre IOS site in Delray Beach.
In South Florida in particular, available industrial sites are becoming harder and harder to find. South Florida is a narrow strip of land wedged between the Atlantic Ocean and the Everglades. You can still buy swampland in Florida, but it’s environmentally protected, so you can’t use it. That’s why we are seeing industrial land selling at $2 million or more per acre. We are even seeing companies specializing in IOS as an investment vehicle.
Outdoor storage can be a cost effective solution compared to constructing a building and is good for weather-resistant items and other products that are too bulky to store inside. It also can generate significant revenue.
To illustrate, let’s say we acquire an IOS site for $2 million per acre, equal to $45.91 per sf. To achieve a reasonable 7-10 percent return, we need to lease it for $3.21 to $ 4.59 per sf. IOS rents are typically in the $3-5 per sf range in South Florida and can go higher.
In addition, while excess land was often a throw-in on warehouse lease deals, owners are now building it into their rental rates. Let’s take a case of a 5,000 sf building on a 1-acre site. We typically see a 1/3 coverage ratio, which would use 15,000 sf of land. So there would be an additional 28,560 sf of IOS. Let’s say the building leased at a market rate of $20 per sf or $100,000 per year. If the land leased for an additional $3.50 per sf, that would be an additional $100,000. So the rent per sf posted online would double to an astounding $40 per sf. That may be hard to swallow for industrial tenants, but it is the reality based on the rising value of IOS.
So IOS is can be major cause of stress for today’s industrial tenants. Just the kind of thing that can send them to their friendly local dispensary for some CBD… But to keep a clear head and find the best deal on your ideal space please call, text (in a little blue iOS message box) or email me!
