Pillar · IOS

IOS Underwriting (Industrial Outdoor Storage)

How to underwrite industrial outdoor storage the way it actually trades — on rent per acre and land yield, not price per square foot. Zoning, surface, and a covered-land thesis decide the deal; the cap rate is the last thing you trust. The guides, calculator, and definitions, in one place.

IOS underwriting values an industrial outdoor storage site on its land yield — gross rent per usable acre, less the costs the landlord actually carries, divided by price — rather than on price per square foot. Because the improvements are cheap, zoning, surface, and rent durability decide the deal, not the building.

IOS is priced on the yard, not the building

Industrial outdoor storage (IOS) — truck and trailer parking, container yards, equipment and material storage — is a low-coverage use where the land does the earning. So you underwrite rent per acre, not per square foot, and the going-in yield is really a land yield: net rent ÷ price. The cheap-improvements profile is the whole point — and the reason the true (post-cost) yield matters more than the headline.

Three numbers decide it

Rent per acre sets value: confirm it against in-place, defensible comps, not a broker's stabilized number. Zoning and surface set risk: a legal, paved, fenced, powered yard is a different asset than a gravel lot operating on a conditional use that could lapse. The covered-land thesis sets the hold: IOS is often a covered-land play where storage income funds the wait for a higher-and-better use — so the rent only has to cover carry, not justify the whole basis.

The honest-yield trap

"NNN" rarely means zero landlord cost on a yard. Taxes you cover rather than pass through, site maintenance, regrading and drainage, fencing, insurance, and management all sit between the broker yield (gross rent ÷ price) and the true yield. On gross or partially-covered leases that gap is real — and ignoring it is the most common way an IOS land yield gets overstated.

IOS covered-land: rent per acre → value

Usable yard 5.0 acres

Rent $8,000 / acre / month

Gross annual rent (5.0 × $8,000 × 12) $480,000

Broker yield at $6.86M price 7.0% (gross rent ÷ price)

– Landlord opex (taxes, insurance, mgmt ≈ 15%) –$72,000

True NOI (post-cost) $408,000

What you actually earn True land yield 5.95% — the broker said 7.0%

A 105-basis-point gap on a yard you thought was a 7% deal. Run your own site in the IOS Land Yield calculator, and pressure-test the NNN side in the NNN Lease Analyzer.

When the income is a single-tenant NNN ground or yard lease, you also underwrite the tenant the way you would any net-lease deal — coverage first, cap rate last.

IOS value at a target land yield

Usable acres 4.0

Rent per acre / year $60,000

Gross annual rent $240,000

– Landlord carry (≈ 12%) –$28,800

Net operating income $211,200

Target land yield 7.5%

Value = NOI ÷ land yield ≈ $2,816,000 value (NOI ÷ 7.5%)

The right benchmark is your own cost of capital and hold thesis, not a universal cap rate — which is why the IOS calculator's gauge spans 4%–12% rather than flagging one 'correct' number.

See a sample underwriting report A complete, honestly-graded industrial report PDF — broker vs. true cap, full pro forma to cash-on-cash, and AI analysis. View the sample →

How are these numbers computed? See how UpsideIQ underwrites →