Why Industrial Outdoor Storage Is the Asset Class Big Capital Cannot Easily Buy: Lessons From Ronald Rohde
Why Smart Investors Are Buying Dirt With Ron Rohde – RFP 106 (Transcript)
Industrial outdoor storage (IOS) has been one of the hottest corners of commercial real estate for five years running, and yet most Chicagoland investors still cannot underwrite it, finance it, or explain to a skeptical neighbor why a gravel yard full of shipping containers is worth more per acre than the building sitting on it. On the latest episode of The Real Finds Podcast, Van Vlissingen and Co. sat down with Ronald Rohde, a Texas-based commercial real estate attorney, investor, and broker who has spent the better part of a decade turning funky-shaped lots and functionally broken buildings into income-producing IOS assets. His central argument is contrarian in the best way: the very features that make IOS hard (re-tenanting risk, hostile zoning boards, the absence of institutional comps) are exactly what keep the national aggregators out and leave room for disciplined local operators to win. For owners and investors across Lake County, the O’Hare industrial corridor, and southern Wisconsin, the lessons translate directly.
The Case for IOS: Buying the Dirt, Not the Building
IOS is a sub-niche of industrial that flips the usual math. Instead of paying for building square footage, you pay for usable land, with the structure typically covering twenty percent or less of the parcel. Rohde was drawn to it early for a blunt reason: a four-acre industrial parcel with a 100,000 square foot building might trade at $100 to $110 a foot, while the same four acres with a 30,000 square foot building could be bought for a third or a quarter of that price. For an investor without institutional capital, the entry point is simply lower, and the land gives you room to watch how tenants actually use the yard.
The income, not the dirt, is what matters. Rohde prices IOS off rent, not price-per-foot on the land, and in his Texas markets that rent runs roughly $5,000 to $6,000 per usable acre on a triple net basis, plus taxes and insurance. That per-acre framing trips up newcomers, but it is the correct lens: everything in IOS is income-derived, and the first question on any deal is what the market rent is today and what it will be in the future.
1. Why Funky Lots Are a Feature, Not a Bug
Conventional big-box industrial wants a perfect rectangle with frontage, because every setback, fire lane, drainage easement, and landscaping buffer eats into buildable square footage. Change that rectangle to a trapezoid and a big-box developer loses a huge chunk of usable building area. In IOS, that same trapezoid retains nearly all of its functionality, because you are storing trailers and containers, not maximizing a building footprint. The lots that penalize traditional industrial developers are the ones where IOS operators find their edge.
The Three Classes of Yard, and Why the Building Suddenly Matters
Rohde breaks IOS surfaces into three tiers. Class C is raw dirt that ruts and turns to mud in the rain, the cheapest possible storage. Class B is an improved surface, usually crushed rock or stabilized gravel, which covers most of what the market considers a real yard. Class A is concrete or asphalt, a non-permeable, secure surface where tenants can operate and service vehicles even in a downpour. In the Chicagoland context, where snow and freeze-thaw cycles complicate everything, surface quality carries even more weight than it does in Texas.
The bigger shift Rohde flags is that the building is no longer an afterthought. For years, IOS tenants would pay almost anything for a pure yard. Now, with rents having doubled or tripled in five years, the calculus has changed. Rent used to represent three or four percent of a tenant’s operating expenses; in some cases it now approaches ten percent, and tenants have become genuinely picky. They want clear heights, drive-through doors, wash bays, dock wells, automated doors, and climate control. The decision has become close to binary: is there a functional, utilitarian building worth this rent, yes or no? Increasingly, tenants are answering no if the building is not close to new.
2. Low Vacancy Cuts Both Ways
In tight Chicagoland corridors like Elk Grove Village, IOS vacancy is extremely low, and once a tenant builds out a customer base and workforce in a location, leaving is painful because there is nowhere else nearby to go. That stickiness supports rents. Rohde’s caution is that transportation-enabled users (tire shops, wheel repair, anyone whose customers ship product in and out) are less location-sensitive and will eventually chase cheaper rent when their leases naturally roll. As with the office overhang after 2020, the disruption arrives slowly, working through lease expirations over years rather than months.
Financing IOS: The Underwriting Finally Caught Up
A decade ago, financing IOS was the hard part. Banks kept trying to underwrite the building and could not reconcile the land’s development value with the income the yard produced. Rohde says that has largely resolved: most lenders in 2026 understand IOS and will underwrite the yard income. The real hurdle is no longer capital, it is sourcing a good deal in a field crowded with well-funded national aggregators paying the lowest cap rates and the highest net prices. If you own an occupied, stabilized IOS asset and want to sell, you will probably sell to a large shop. The opportunity for a smaller operator is precisely where the big buyers will not go.
3. The Vacant, Broken Property Is the Opening
Rohde’s sharpest strategic point: a vacant property with something functionally wrong that is preventing a new tenant from signing is the best opportunity in the market. National aggregators want clean, tenanted assets. A local operator willing to take re-tenanting risk, or to buy in a metro of 100,000 people that the big funds ignore, has a genuine competitive edge. In his framing, willingness to do the uncomfortable thing others avoid is your superpower. This mirrors the small-market, relationship-driven thesis we explored with Kurt and Stewart Jensen on regional brokers beating the national flags.
The Red Flags That Can Wreck the Deal and Your Pocketbook
Zoning is the number one risk, and IOS carries a specific vulnerability that indoor industrial does not. A building’s use is grandfathered by its four walls; neighbors cannot see or object to what happens inside. Outdoor storage is visible by definition, so neighbors see the rusting containers stacked two and three high, and they show up to hearings, sometimes with a two-month-old baby, to plead against semi-trucks and used tires next door. If your zoning is not one hundred percent by right, a sympathetic objector plus a discretionary board can deny your appeal and the city can shut you down for unsightly storage. If your neighbors are residential, apartments, or schools, Rohde walks away.
The pocketbook risk hides in the fix. Even when a site is zoned by right, screening, landscaping, setback, and buffer requirements can run to $200,000 in improvements. Landscaping codes often require the highest-visibility plantings, and mature specimens are shockingly expensive, sometimes $5,000 for a single six-foot plant, times forty-plus plants, plus irrigation and a separate water meter because the city does not want them to die. Fighting City Hall gets costly fast. These are the same entitlement and site-plan risks that Daniel North detailed in our conversation on the industrial real estate risk playbook.
Retail, Irreplaceability, and the Discipline of the Risk-Free Rate
Rohde also invests passively in large-format retail as a limited partner, betting on the lack of new big-box supply and the survival of legacy anchors that made it through both Amazon and COVID. His filter is irreplaceability: assets in dense infill locations where new competition simply cannot be built and where replacement rents would not pencil for a tenant to relocate. It is the same irreplaceability logic that underpins the best IOS sites. For a broader take on where industrial demand is heading, our episode with Chad Griffiths on industrial real estate’s next decade is a useful companion.
The most underdiscussed idea Rohde raised is the discipline of the risk-free rate. Investors pour money into real estate for a four or five percent return without accounting for the T-bill yield they could earn with no risk at all. In a world where the risk-free return sits near three to three and a half percent, that spread deserves scrutiny before anyone celebrates an IOS or retail yield. It is a sobering reminder that opportunity cost, not gross return, is the real scoreboard.
What Comes Next
Rohde’s outlook rests on two forces. First, IOS will keep professionalizing: lenders now underwrite it, tenants now demand real buildings, and the surface-and-structure quality bar will keep rising, which rewards operators who buy broken assets and fix them intelligently. Second, artificial intelligence will quietly reshape diligence, pulling remaining loan balances, amortization, and ownership context on any address in seconds, so that the human’s job narrows to judgment and advocacy that a neutral model will never provide. For Chicagoland and southern Wisconsin owners, the practical takeaways are concrete: price to usable acre and to the risk-free rate, treat zoning as a go/no-go gate before anything else, budget realistically for screening and landscaping, and hunt for the functionally broken, vacant sites that national capital will not touch. For a market-wide view of where these dynamics sit today, see our State of the Chicagoland Commercial Real Estate Market for Q2 2026, and if you are actively hunting sites, our guide to the key criteria for an industrial space search pairs well with Rohde’s framework.
If you own, manage, or are looking to acquire industrial outdoor storage or infill industrial across Lake County, the North Shore, the Northwest and O’Hare corridors, DuPage and the I-88 corridor, Will County, or southern Wisconsin’s Pleasant Prairie, Kenosha, and Racine markets, the team at Van Vlissingen and Co. can help you underwrite the yard, navigate the zoning gate, and position the asset.