Ted Peters Is the ‘Go-To Guy’ for Industrial Outdoor Storage

When Ted Peters started at CBRE’s Toronto West office in 2017, industrial outdoor storage (IOS) wasn’t on his radar. People usually focus on buildings, not blank spaces. But now IOS has become a substantial part of his business.

IOS refers to land that’s zoned for the outside storage of goods such as vehicles, equipment and containers. It is primarily used by trucking and bus companies, as well as equipment rental and yard supply businesses. It’s been one of the more under-appreciated alternative asset classes; but that’s been starting to change lately, thanks in part to the work Peters is doing.

For his first year at CBRE, Peters focused on industrial sales and leasing in Mississauga, ON with his senior partner, Themy Koutrakos. One day he joined Toronto West colleague Fraser McKenna for a meeting with a transport company. They identified a gap in the market when it came to assisting the trucking industry with its industrial real estate requirements. “I became the trucking guy for a few years,” says Peters.

He eventually gained a greater understanding and appreciation for the broader world of IOS, which had been picking up steam in the U.S., and saw an opportunity to expand his client base beyond trucking.

“I had been leaving out a huge segment of the market,” Peter says. “IOS still flies under the radar in Canada, especially within the institutional investor community, so there’s definitely room for growth.

“These days I brand myself as the go-to IOS guy for Ontario with aspirations of scaling across the country with a team and strategic partners.”

Terrain Trinity

There are three categories of IOS sites: unimproved land, improved land and low coverage properties. Peters has been doing deals across all three.

Unimproved land, also known as raw land or greenfield land, are sites that have never been developed or improved with grading, gravel or paving. This land is often wedged between buildings and covered with grass. It is also the rarest of the three types, given the tight land constraints across Ontario and since most of these types of properties have already been developed. In January Peters closed a deal for 5.20 acres of unimproved land at 1377 Commerce Way in Woodstock, ON. He represented the buyer, a heavy equipment sales business.

The second category is improved land – which is a property that has been graded and compacted with gravel or paved. An example of this is 11 Hwy 50, a 10.14-acre property that Peters is currently listing in Brampton, ON. “These types of sites don’t include permanent structures but could have mobile offices or other temporary structures,” he explains.

Finally, low coverage properties are IOS sites with a building that covers less than 25% of the lot. It is the most expensive of the three categories and properties with a higher coverage ratio tend to be pricier due to the value of the building.

Sites with lower coverage ratios tend to be priced similarly to improved land. “These types of sites are used as industrial service or maintenance facilities or even as cross-docking operations (which transfer goods from suppliers or manufacturers to customers, with minimal storage in between),” says Peters. “They can also handle heavier uses such as recycling facilities, concrete batching or wrecking yards, for which zoning is even further restricted.”

Peters represented the landlord in a lease transaction for a low coverage property at 400 Annagem Blvd. in Mississauga in March. The site is 10.00 acres and has a 22,029 sq. ft. building on it, representing 5.06% coverage. It will be used by a car and truck rental company.

Market Constraints

Canada’s IOS market is undersupplied and obtaining proper zoning designations is difficult as municipalities seek to densify and convert industrial areas to transit-oriented residential areas. Much of the existing IOS inventory is old and purchasing suitable land is challenging. “Buyers in Canada get lower returns than in the U.S. since local IOS lease rates have yet to catch up to land sale prices,” says Peters.

There might be some relief as receivership opportunities are coming to the market, according to Peters. While the transportation industry has historically driven the sales pricing of IOS properties, it has faced challenges since 2023 due to lower freight rates (the cost of transporting goods), high interest rates and lower consumer spending. This created a freight recession.

Peters doesn’t expect that to translate into major discounts, however, as sellers have remained bullish on their pricing in recent months. But buyers should be able to get well-located sites at reasonable prices. IOS land lease rates have been more volatile than sale prices, with low coverage properties seeing a slight decline in Ontario. This can be attributed to elasticity in the leasing market due to the impact of political and economic uncertainty.

Growth Prospects

Companies looking for discounted rates should consider options in Midwestern and Southwestern Ontario, where sites are 60% to 70% less expensive than in the core IOS markets of the Greater Toronto Area. “People pay a premium to be closer to labour and clients,” says Peters. “But they can get great deals by looking a bit farther out.”

Peters also expects to see companies explore sale-leaseback deals, especially steel and raw material storage businesses. This creates an opportunity for investors to purchase buildings and lease them back to users, who can reinvest the sale proceeds into their businesses.

Since the U.S. IOS market is already starting to mature and see a competitive landscape within the institutional community, Peters is encouraging American companies to expand their portfolios in Canada.

“Toronto is a similar performing market to major U.S. markets so it’s a safe choice,” he says. “IOS is seeing momentum as an alternative asset class in Canada. The sector should see a steady year ahead and high demand and low supply bodes well for the future.”