There is a growing need for outdoor storage in Northeast Ohio. However, the amount of viable land in the area suitable for this use is limited. That’s creating challenges for buyers and lessees, but also presenting significant opportunities for landowners who, often with minimal improvements, could see their properties sell or lease at a premium.
“There’s a huge lack of available land for outdoor storage,” says Cole Sorenson, an Associate with Cushman & Wakefield | CRESCO Real Estate. “That means that, on a per-square-foot basis, deals are fetching a premium. But there are zoning codes across municipalities that can make it a challenge to find viable outdoor storage land for a company’s specific use.”
Smart Business spoke with Sorenson about outdoor storage in Northeast Ohio, and the challenges and opportunities that exist for landlords and tenants.
How is the value of outdoor storage real estate determined?
Outdoor storage is primarily used as a place to store materials or vehicles — lumber, cables, trailers, trucks, etc. Over the past few years, rates have increased substantially for outdoor storage. For property owners looking to sell or find a tenant for the asset, the primary challenge is determining what the land is worth and identifying the best lease rate or sale price. Owners can determine the sale value of their land and use a conversion to figure out a lease rate.
The most significant driver of value is the surface composition of the land — grass, compacted gravel, asphalt or concrete — whether or not the property is fenced and screened, and its proximity to an interstate. To a lesser extent, exterior lighting and the general condition of the site are considerations. The most valuable sites are fenced, paved with concrete, and include exterior lighting.
There is healthy demand from buyers who want to own and operate their own outdoor storage sites. From an investment standpoint, property owners can achieve higher yields for industrial outdoor storage today than they could on a per-square-foot basis for indoor warehouse space. As a result, from an investment standpoint, there has been a significant increase in investors’ interest in owning land because the margins are higher.
What are some of the roadblocks to unlocking value?
It’s critical, before deciding to lease a property for outdoor storage, that the owner ensures such use is approved by the municipality. Owners don’t want to find a tenant and sign a lease only to have the municipality rule that the land can’t be used for outdoor storage.
However, certain improvements can make the land eligible for outdoor storage use, depending on the municipality where the land is located. Elements such as fencing or landscaping that hide what’s on the property could be required and are relatively inexpensive to install. Land owners should approach their councilperson or planning department and discuss the planned use of the land. They can help navigate the approval process for alternative uses of the land.
For those looking to lease, one challenge is determining who, between the owner and the lessee, will be responsible for yard maintenance. Tenants should review the lease language carefully to understand who is responsible for maintenance, repairs, and cleanup once the lease ends.
Who can help owners and lessees navigate this market?
Cleveland is an old industrial market. There isn’t much usable, flat land improved with asphalt, gravel or concrete that’s also zoned for outdoor storage, yet, demand for such land is strong. Those who own it have a distinct opportunity, but need to understand how to maximize its value and connect with the right users. For those looking to lease, finding the right properties can be challenging and there are many details to consider. In both cases, there are often questions that people don’t know to ask. That’s why it’s beneficial to call a commercial real estate professional who understands the local market and can provide a full and clear picture of the opportunity. ●
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