By Peter Hillenbrand, Senior Consultant at Blue & Co.
Across the Midwest, Industrial Outdoor Storage (IOS) properties are rewriting the rules of commercial real estate. Vacancy rates are averaging near two percent in that region. And as for rates, a recent renewal for a midwestern property went from $13.50 to $22.00 per square foot, triple-net! A jump of nearly 63 percent in five years! Plus, three percent escalations moving forward.
It may be extreme; however, a recent report from Newmark indicates that rent growth in this sector has been a whopping 123 percent since 2020.
According to Jeff Kroeger, SIOR, CCIM, Senior VP at Colliers Cincinnati and industrial property specialist, the most sought-after sites are in urban cores of major metros — close to air, rail, and interstate access, or along the beltway. But those prime spots don’t come around often. With supply running thin, opportunity has started pushing outward, into the corridors between major markets. For investors looking to add industrial property to their portfolio, those secondary locations may be exactly the entry point they’ve been waiting for.
Take Evansville, Indiana as a prime example. It sits at the center of a six-city spoke: Indianapolis, St. Louis, Louisville, Lexington, Cincinnati, and Nashville, with US 41, I-69, and I-64 all within reach. Greg Folz, industrial real estate specialist with Woodward Commercial Realty, puts it simply: demand is climbing, but prices haven’t followed yet. For investors paying attention, this might just be the cue you’re looking for. Evansville and markets like it across the Midwest may be exactly where the opportunity is hiding.
Kroeger reports the sweet spot he sees is a 10,000 to 15,000 square foot warehouse on two to 10 acres, ideally asphalt or concrete, fenced, and lit. Though checking all those boxes isn’t necessarily mandatory. A building-to-land ratio of 20 percent or less, with sites of up to 40 acres, also fits the model well. But the key is ready access to interstates.
And that demand isn’t letting up anytime soon. The industrial market draws from a wide and growing base of users, led by logistics, trucking, and transportation companies, but extending well into e-commerce and last-mile delivery, construction, infrastructure, heavy equipment, data centers, AI infrastructure, utilities, energy, and renewable energy operators. In short, just about every sector driving today’s economy needs industrial space.
What the market is showing us is that IOS is not a short-term spike but a structural shift. The convergence of logistics, infrastructure investment, e-commerce, and transportation has reshaped how value is created in commercial real estate. The challenge is not whether IOS works, but where and when to enter.
Markets like these don’t wait, and neither should you. If industrial real estate has your attention, Blue & Co.’s Real Estate team can help you make sense of the opportunity. From evaluating your next investment to monitoring the value of your existing portfolio, we are here to guide you every step of the way. Reach out to Peter Hillenbrand or your local Blue & Co. advisor and let’s start the conversation.
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