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- [00:03]
A
Hi, I'm Mark Savatelli and welcome to Inside CRE conversations with the people developing the future of commercial real estate. On this podcast, we talk with developers, investors, owners and industry leaders about the ideas, strategies and trends shaping the built environment. The Commercial Real Estate Development association provides education, advocacy and connections to help commercial real estate professionals succeed. INSIDE CRE is proudly sponsored by Digest Equipment. Today we're discussing the rapid growth of industrial outdoor storage, or iOS as it's frequently known. A sector that has evolved from a niche corner of industrial real estate into a major area of institutional investment, fueled by infrastructure spending, logistics demand, and the ongoing transformation of industrial supply chains. Joining me is Leo Adebondo, Co founder and CEO of Alterra Property Group. Under Leo's leadership, Alterra iOS has grown into one of the largest investors in the sector, with more than 470 properties acquired across the United States. Leo, welcome to Inside cre.
- [01:21]
B
Mark, thanks for having me today. It's a pleasure.
- [01:23]
A
Well, thrilled to have you here. You know, this has become, as we said in the intro, a sector that has suddenly gained a lot more attention than I think it probably had when you began. For listeners who are probably not familiar with Altera, tell us a little bit about the company and how you got into the iOS business.
- [01:44]
B
Sure. So the company has just had its 20th anniversary, I guess about a year ago now. For the first 10, 11 years or so, it was really focused on adaptive reuse and infill mixed use development in Philadelphia, part of redeveloping old buildings and erecting new ones. We were renting a lot of construction equipment, including cranes. And along the way I became friends with a guy who ran the crane company. And lo and behold, about 10 years ago he called and said, hey, I have this problem in Boston. I'm merging two crane companies and one of the ones I'm buying is it's being evicted from its crane yard. And I said, well, okay, well, how does that involve me? He's like, well, I need you to go help me find a new crane yard. And I said, frank, I don't know, man. I don't know much about Boston real estate and I know even less about crane yards. He's like, well, you're going to have to figure it out. So I made a few trips to Boston. Again, this was 10 years ago and, and it was a really hard thing to move a crane yard, as it turns out. So we moved one and then we did a handful of other kind of relocations for this company. It's called Maxim craneworks. Still Big ten of ours. And we realized everywhere we went it was the same set of issues. You know, zoning issues, very specific user requirements, a certain amount of infrastructure that you needed to have. So we sort of stumbled, stumbled into it, but very quickly realized that this was, you know, an asset class that needed to be institutionalized. And off we went.
- [03:12]
A
Yeah. So, you know, look, a lot of pioneers in any industry, any sector of an industry, you know, they're pioneers for a reason. What did you see in the sector early on that perhaps, you know, others overlooked that really gave you the opportunity to be where you are now with 470 plus locations?
- [03:31]
B
Well, okay, so typically when you're, you're looking at a new kind of real estate, you know, you need to assess three basic things. You know, one is what are the supply and demand dynamics, like who owns it, how much of it is out there, and who are the tenants? Right. The second one is, is it, is it an asset class that can be defined like, can you put it in some sort of a box? Okay. And then third one is, is there upside growth potential? And, and that, you know, that is sort of tied to, I think the first one, which is supply and demand. So I think if know the reason why it was overlooked is one, it's, it. It never really had a name. I mean, to this day, some people call it ISF, industrial storage facilities and, and even iOS. And the origin story of iOS is interesting. I didn't like I ISF. I was like, we can't market ISF. And I said to my partner, I sent him a text on from Apple Device, Apple Device saying, hey, we should call it iOS. And it was little iOS because it was autocorrected on, on, on my iPhone. And my partner's like, I love it, but we're going to get sued by Apple. So he writes back, capital iOS. So that's how the name came from. We actually created that name, you know, eight, nine years ago, and now it's been pretty widely adopted. But even calling it industrial outdoor storage is a bit of a misnomer because it's not all industrial users. Okay. And you know, while it's, it's primarily used for the outdoor storage of capital equipment, there's also an indoor use. Okay. And there's a lot of service that goes into those machines on the property as well. So it's an imperfect name for the largest category of real estate that had not been institutionalized and frankly had been, we say, hiding in plain sight and you're driving to the airport, by the by A port, you're going, you know, approaching, you know, a metropolis, or you're near some other large industrial type part of the city or submarket. You're looking at iOS properties, you just don't know what they're called. Right. You kind of look right past them to the port, the airport, the factory, the intermodal, whatever it is that's like big and shiny, but all around it are support properties that have a very specific zoning and a myriad of uses. So the other reason why it was overlooked is because nobody knew what it was. Okay. And then the third reason is overlooked is because the properties, you know, it's very granular. There's no such thing as, you know, there are some, but there are very few, you know, 50 to $100 million iOS properties. They're mostly five or $10 million properties. And that doesn't necessarily invite institutional capital because of the small bite sizes.
- [06:13]
A
Yeah, I mean, probably just another way that in general, this asset class has flown under the radar, know whether it's people not understanding what it is or just the capital required or the investment side on this. So let me start in a different spot here and say, you know, when you look at it, you just mentioned it. You're driving along the freeway, you see this, and, you know, it probably looks deceptively simple from the outside. You know, buy a patch of dirt, put a chain link fence around it, a couple of other small improvements, and off we go. Why do you think the. The sector was overlooked for so long, though, by these institutional investors, and what shifted?
- [06:52]
B
Well, okay, so one of it is it lacked definition. Okay, so we define iOS as it's a property that, you know, is an acre to 100 acres. It has to be less than 25% covered building to land. Most of our iOS properties, and most iOS properties in general are about 10 to 15% covered. Um, they don't all have buildings. We tend to not buy properties without buildings unless we've got, you know, entitlements in place and a tenant for us to build something, you know, to their specifications, to do a build to suit. So lack of definition is one. So then there's the zoning component. Okay, There really isn't. You know, there are 33,000 zoning codes in the U.S. give or take. We haven't touched all 33,000. We've touched several thousand of them at this point. It creates for a lot of jargon conversations in the office about H1 and L2, and they mean different things in different markets. And one thing that's universally true is there's really no zoning designation for iOS. So what ends up happening is you end up having a category or categories of industrial or manufacturing or heavy industrial zoning that allow for the not ancillary but primary use of the property for certain things like building material storage, truck parking, truck repair, truck sales, auto salvage, container stacking. And within those, sometimes they bury little provisions. Like you have to move everything every three days on the yard. Well, that's not iOS, because if you have to move it, if you have to, if you're compelled to move something from one side of your yard to the other just to maintain your zoning use of the property, that's like kryptonite for these users, because they want to put something in the corner of the yard and have it sit there as long as they want it to sit there for whatever reason their business wants it sitting there without some zoning official coming and saying, well, you know, you got to move that truck. It's like, well, why? I'm paying for my. For the yard so I can leave the truck right there if I want to leave it right there. So the lack of definition, the lack of clarity around zoning, you know, what, what institutional investors really look for is, is predictability, okay? And because the zoning can be very gray, you have lack of definition and lack of predictability, you know, on the zoning front. And. And then I think the third reason why it just flew under the radar is what I mentioned before. It's like, the properties are pretty small, but they look pretty ubiquitous. What's hiding really in plain sight is that there are some very specific criteria aside from zoning, and aside from, let's say you've got a property that's zoned properly and it's located within three to five miles of the port, the airport, the intermodal, or the interstate. Okay, so at the first two screens, it's an iOS property. Okay, fine. Well, then you have to understand, are there truck traffic weight limit restrictions coming and going from arterials to the property? Okay, can you circulate around the building? What type of vehicle can circulate around the building? Can you get left and right out of one or two entrances? Okay, what is the ground stabilization? How high is the building? How high are the. The doors? Are they at grade or are they docked? So, like, after you get through the easy screen, there's about 15 other things that you got to think about. But the beauty of it is, with the exception of auto salvage and container stacking, which have very specific zoning classifications and definitions, the rest of the of the industry the rest of the user base within Industrial Outdoor storage, as we call it, iOS, right, is looking for the same thing. They want five to seven acres. They want a 10 to 15,000 square foot building with three to five pull through at grade, garages at 14 foot high, 20 foot clear on the inside. Be able to make unprotected protected left and right hand turns, unprotected right protected left hand turns out of the property, circulate around. That's it. What I just described to you is 80% of tenant requirements across a dozen different use cases outside of container stacking and auto salvage. And because of that, when you understand that even though the users might be very different in composition and what business they're in, but they're actually at the end of the day looking for the exact same thing, then you can define what it is. You can define what the zoning is. Okay. And you can put it into a box that becomes investable. It's not just us. I mean there's lots of people who do it, but that's kind of what we're all trying to work towards is a uniform definition of it.
- [11:13]
A
Yeah, to a degree. It almost sounds like you're living the developer's dream where there's just not a ton of change orders involved here and a lot of specifications, you know, custom design here, that it seems to be a pretty tried and true formula.
- [11:28]
B
We've signed well over a billion dollars of lease obligations over the past 10 years. And I want to say that we've spent less than $40 million in tenant improvements and leasing commissions. So it's a very, the frictional leasing costs are very low and the carry costs are very low too, when you're, when you're vacant. Also, little known fact is a very climate resilient type of real estate because if you think about it, it's improved ground, which sometimes just means it's, it's heavily compacted, you know, with some sort of aggregate base on top and a relatively simple metal building. So if you recall, we had in the fall of 2024, we had two hurricanes go through that kind of like Virginia, down to Florida route. I think one went from the Gulf and one came from the Atlantic. Right. And we had about 75 properties in the path of one or both of those hurricanes. We didn't have a single insurance claim. Okay. So it's, it's pretty, you know, yard floods when there's, you know, six inches of rain in 12 hours. Well, water eventually recedes and the buildings are shop buildings largely, so you don't really have a lot of repairs to do inside. And most of the equipment is pretty resilient to the weather as it is. Right. So that's something that we were surprised to see. Sort of the general kind of climate resiliency and insurance overhang. Even though we're dealing with mostly triple net leases, like tenants ultimately look at their total cost of occupancy. And so every other category of real estate that I know of has really been hurt by insurance premiums over the past, you know, five to seven years. Particularly multifamily, particularly urban stick built multifamily. Okay. Not to mention everything down, you know, in the hurricane path, our premiums have gone down. We've doubled our portfolio in the last couple of years and our premiums have gone down by 50%. So speaks to the climate resiliency of the category.
- [13:26]
A
Certainly does. In, you know, in relation to the climate resiliency. Are there a typical type of industry or tenant groups that are really driving iOS demand right now?
- [13:38]
B
It's a good question. Yes. So if you'd asked me the question three or four years ago, I would have told you it was, you know, 2/3 to 3/4 logistics and transportation related tenancy. And let me just kind of give you some stats as to kind of where that comes from. I think it's useful and then I'll kind of get. I'll fast forward to today. So this is a print prolonges, okay. Hopefully a NAAP member. Very much so at the very top line, the economy, right? 25 to 30 trillion. Okay. About 60% services, 40% goods. So on the good side of the economy, right, that's 10 plus trillion dollars of commerce.
- [14:14]
A
All right.
- [14:15]
B
Every billion dollars of brick and mortar commerce on the good side of the economy is 1 million square feet of warehouse. These are averages. Okay. That same billion dollars of e commerce is 3 million square feet of warehouse. Okay. So there's a multiplier effect as you, you know, economy grows, right? Goods, commerce grows, some of that evolve, you know, shifts to E commerce. So both the growth and the transition to E commerce create additional warehouse demand. Every million square feet of warehouse needs about 25 acres of iOS properties to support the development, maintenance and operation of it on a long term basis. So supply is capped, demand rises with the economy in a pretty linear fashion with a little bit of accelerant with E commerce. Okay, that's great. Now you get a little interest rate, you know, run up and some political geopolitical turmoil and some tariffs and all of a sudden I wouldn't say that the logistics business has come to a screeching halt, but it's definitely fallen on hard times. Okay. And you can just look at the spot price of trucking, for example. Okay. Ltl trucking by the mile. You know, what is that? That's like the oil market for logistics and transportation. Okay. So when that thing falls below $2, trucking becomes an unprofitable for most small operators. Okay. So it got as high as like three something during COVID All right, so now what's happening? Where's the demand coming from today? Well, it's mostly coming from infrastructure. The two demand drivers from our, from the two kind of tailwinds that we, that we look at are the growth of the economy on the good side of the commerce and all the logistics and transportation demand that creates with e commerce being a little bit of an extra accelerant. And infrastructure, it used to be 2/3 logistics, transportation, 1/3 infrastructure. Now it's 2/3 infrastructure, 1/3 logistics. Why? Well, while you don't have a ton of population growth in the country, you do have population growth in certain parts of the country. Okay. And so housing starts and just general population growth creates the need for homes, roads, bridges, shopping centers. Plus plus plus plus plus all of that creates the need to both upgrade our nation's aging infrastructure in some locales and build new infrastructure. Great. So huge infrastructure wave. And it started, you know, during COVID when they appropriated all this. It's like $6 trillion went, went towards infrastructure. And this is a broad definition of infrastructure. Okay? Then you have this thing called a data center. Boom. Okay? So data centers themselves. The actual building a data center is a tremendously large construction project. Now, a lot of it is, you know, GPUs and stuff inside that doesn't really involve our tenants. But every data center requires a huge amount of power, water and teledata fiber. Okay? And so getting the power, water and fiber to the data center is a major, major project. Those tenants are swallowing real estate right now like never before. It's unprecedented. And it's not just for the building the data centers. It's the long term maintenance of the infrastructure required for the data centers to operate. So we're not chasing properties just to get data center related tenants to. To lease them. We're seeing them come to us and want to lease the exact same property that the logistics tenants were trying to lease. Okay. Logistics folks are kind of not growing right now, and the infrastructure folks are growing. So that's where the demand comes from. Right now, it's from infrastructure.
- [17:52]
A
We talk a little bit about demand. Let's. Let's talk about location. I mean, you know, real estate is always got. Location is part of its core. How important is location strategy in iOS today?
- [18:05]
B
It's important. If you look at the P and L of a typical iOS tenant, okay, on the cost side of their ledger, 50% of their costs are transportation related. Okay. The next one is labor. Okay. Kind of down the list is total cost of occupancy. It's generally around 5%. Okay. So when your transport costs are 50% of your cost base and your rent costs are 5%, how location sensitive are you going to be? Very location sensitive. So part of why the supply and demand story is what it is with iOS is not because you can't go 10 miles further west of Atlanta, or actually in Atlanta, east of Atlanta and find relatively cheap land that you might be able to get zoning to do. IOS probably can't, but you might be able to, right? It's because the transportation differential between that 10 miles out further and paying the freight for an existing location or one that's more well located, to keep your transportation costs in check, to make your overall P and L balance. You know that that's the game. Okay? The game is location relative to where the. Where their customers are and how far it takes them, how long it takes them to get that whatever machines or services are providing from the yard to their customer and where their employees live. Okay? Because if their employees live north side of Atlanta, they. Even if. Let's say that the. Let's say that the middle of Atlanta was, you know, like the. The nucleus, the nexus of demand for their product. Okay? Right now they're 10 miles north of Atlanta. Okay, well, could they move 10 miles south of Atlanta from. And let's assume traffic's the same going both directions, which is not. Okay, sure, they can move 10 miles south cheaper, right? But what if their employees all live 10 miles north of their current location? They're not going to drive 30 miles. They're going to lose their drivers, their technicians, their dispatchers. So they're incredibly locationally sensitive. It's not just their customers, but also their employee base.
- [20:06]
A
When we started recording this podcast, you talked a little bit about institutional capital. Industrial outdoor storage, you know, been largely overlooked. Has institutional capital fully embraced the sector yet? Or do you think we're still relatively early?
- [20:24]
B
We're still relatively early, and I'll tell you why. The asset class is so granular almost by definition, okay. That we're. We're just now, getting to the point where there are portfolios that have been aggregated. We own a couple of them, okay, that are large enough where the ticket size for an investor coming into the space and not having to spend 10 years buying 500 properties one at a time, like we did, is large enough where you'll get the full participation of the broadest audience and largest, you know, sector of alternative assets. And that's the sovereign wealth funds, the large aggregators of. Of alternative assets like, you know, the Blackstones, the kkrs, the Apollos, the Brookfields of the world, all of those groups. I don't know about KKR, but all those groups have either exposure to iOS or are trying to find an entry point to get exposure to iOS. Okay, we've talked to a lot of them. They've announced some joint ventures and it's just a very. It's a very operationally granular. It's not the easiest thing to stand up a platform. If you want to go out and buy apartments or buy industrial properties, okay, you have capital from the equity side, capital from the debt side. You can have third party brokers like CBR angel do your leasing for you and you can go on COSTAR and figure out what the rents are. Okay, none of that exists in iOS. There's no scale. You have to build scale, Lego by Lego, which is what we've done. So now that we've done it, we sold a big portfolio to a public REIT 18 months ago. Now that public REIT is now being taken private by Brookfield. Okay, so they're going to have a bunch more iOS than they already have. And then the next leg is. That was a half a billion dollar portfolio. The next leg is a billion or $2 billion portfolio trading. And then I think once you get a few of those and you get some more public market participation, public REIT participation in the iOS sector deliberately, then I think you get into like the middle innings. Right now the only public REIT that talks about iOS and breaks it out separately is Torino. I suspect the Prologis is the largest owner of iOS in the country. But, you know, it's such a small thing relative to the behemoth that's Prologis, that they don't talk about it, at least not to my knowledge. So I still think we're in the early innings.
- [22:43]
A
I would tend to agree with you. I actually mentioned industrial outdoor storage to a reporter not too long ago, and I felt like I had just tried to, you know, explain nuclear physics to him.
- [22:54]
B
Well, think about this like, 10 years ago, we were trying to get an appraisal, okay, for a bank loan for the first property that was in Boston, 777 North Shore Drive, okay? That was the address. It's just off of Route 1A, north of Logan Airport in Revere, Mass. And I got a call from the appraiser the bank had hired. And the appraiser's like, you know, I can't comp this out. You know, it's like $150 a square foot for the building. I'm like, no, no, no, no, no, no, no. The building is free, okay? It's 6,000 an acre for the ground, the renting the ground, okay? And I must have had 50 conversations like that in the first two years with appraisers where, you know, there's no data set. There's no. Like, they're not even talking about, like. I'm talking about dollars and they're talking about yen, okay? Like. And there's no. There's no. There's no, like, foreign exchange market, you know, to sort of clear what. What one and the other, you know, what. What the relative value is. So, you know, one of the things we did is we built a data set, you know, 10 years back. Now we've got tens of thousands of data points that are all. You know, they're all indexed to per usable acre. Per usable acre is the only metric that matters in iOS. Okay?
- [24:00]
A
Look, you've had to trail raise this and figure a lot of it out for yourself. And now, as you see some other parties get involved in iOS, what are some of the biggest misconceptions or mistakes that you're seeing from some of the new entrants into the sector?
- [24:16]
B
Biggest misconception from a lender perspective and from an uneducated provider of capital, is the environmental risk. The environmental risk is not even the biggest risk in the sector. It's actually zoning. I'll get to that in a sec. It's the same environmental risk as buying traditional industrial. And if you're developing industrial properties, you're dealing with the same stuff, old underground storage tanks and potentially some residual pollution from whatever was there before. And you're going through act twos. Less than two thirds of our properties ever even had had to get a phase two. Okay? So it's actually pretty. Pretty clean in a lot of cases. And most of the Phase Twos are confirming that the removal of underground storage tanks, which happened before the protocols have been put in place, were done to the. To the current specification, which requires you to like do some, you know, poke some holes, grab some soil and just make sure that you've, that the pollution was in fact removed, you know, 30 years ago when the statute was put on the books 25 years ago. All right. The biggest mistake that people make when they come into the sector, two big mistakes. One, zoning. They don't really understand just how frictional the zoning can be if you don't buy the right thing and you buy the wrong thing in the wrong zoning jurisdiction and they really turn the screws to you. Secondly, a lot of folks underestimate just how different the tenant base is in iOS versus traditional industrial. There's been a lot of announcements of traditional industrial developers and investors who are like, oh, I can just pivot into iOS for a portion of, of my capital deployment. And I know all the tenants. You know, I know Target, I know FedEx, I know Walmart, I know DHL, I know UPS, I know Ryder, I know Penske. Great. Well, that's about 15% of the iOS universe. The other 85% don't own a warehouse. They don't, they don't use a warehouse, they don't need a warehouse. And so you don't know, you don't know them because you're in the warehouse business. And so they, this idea, you could just like, you know, call the same people and try to fill some of their like, lower level real estate needs ends up not being, doesn't play out that way. So zoning, biggest risk tenant. The tenant universe is very different between
- [26:24]
A
zoning and just perhaps individual market peculiarities. It sounds like a real important part to iOS is the knowledge, the local market knowledge and community engagement to make these projects successful. Would you agree with that?
- [26:41]
B
Yes and no. I think the community engagement and local market knowledge are really important when you're trying to get entitlements for development. 95% of the iOS business is not a development business. It's buying an existing property that's already functioning as iOS. You might be doing things to it, but you're not trying to create a new use for a new user on a property. So, so zoning is really important. We take the approach that if we need to go and get a zoning variance, we shouldn't be buying the property. Because, because the think about it, municipalities, townships, communities, they like iOS only a tiny bit less than they like having a transfer station or a landfill. Okay, because it's low far, which means it's low tax rateable, it's low job density relative to anything else, particularly if it's like a 10 acre yard. If you were to put like a 50,000 square foot last mile distribution center, you'd have a couple hundred employees. We might have one of our tents, might have 50 employees. Okay. @, at most it creates the same amount of wear and tear on the local road infrastructure, you know, as a much more, a much higher far use or a much higher job density use. So like the bang for the buck, like the money you got to invest in your roads, you, you don't get out in tax, taxes and jobs and doesn't look very pretty. Like no one's, no one's going to get reelected county manager or you know, mayor for bringing more Amazon trucks or cranes into their jurisdiction. Like you get paid to bring businesses, housing, retail. Right. Not cranes and things associated with construction. Yet everybody wants their roads fixed and everybody wants their Amazon packages the next day, but they can't have those things without this property type kind of supporting the ecosystem. So I don't know if I answered your question or not, but, but local knowledge is important, but the, you know, it's important that you know what the zoning code allows for and that you get verification of that if it's gray from the municipality. But being on the ground, every community is less important because we're not really in the, in the job of developing properties.
- [28:53]
A
So we were talking a little bit of the weeds. I want to take it up here for a moment. You know, when we began the conversation, we talked a little bit particularly about how the current economic and geopolitical environment is really impacting the logistics industry. Are those same two factors having any impact at all on iOS fundamentals right now?
- [29:14]
B
Sure. I mean, anything that creates uncertainty in business investment, which those things do. Okay. Will have an impact on iOS. I think that the beauty of the business as we understand it is there are multiple things that drive demand and they tend to be sort of countercyclical to each other. Traditional sort of like Keynesian economics. You're investing in public spending when the economy is soft. So then the economy gets strong again and then the public sector kind of dies down a little bit. Well, that's like the whole logistics, transportation versus infrastructure. Right. So anything that creates uncertainty and creates a difficult kind of business investment environment is going to have economic effects. I just think they're more muted within iOS because of the, the, the breadth of different tenants that we can service given the kind of the ubiquitous nature of the use cases for the properties, provided you buy the right property at the right zoning.
- [30:11]
A
I want to look ahead here. We're going to Wrap this up with a few quick questions. Kind of looking out into the future on this. What are you watching close most closely over the next 12 to 24 months that you think will shape the iOS sector?
- [30:25]
B
I'm watching, I would say the very aggressive stance that some locales are taking on zoning, changing zoning, putting in different, I would say, questionably legal, questionably constitutional requirements that sort of have a backdoor way of subverting your property rights. And, you know, you could sort of guess which, you know, which geographies you might have that more activist type of, you know, activity going on in city councils. So we watch that closely. We have to because, you know, if the rules of the game change, then we got to be playing a different game. So we're watching that. The second thing I'm watching is the cost of energy. Okay. And I'm watching that for two reasons. One, because it's still not clear to me, even though we're now a net, you know, exporter of fossil fuels in this country, it's still not clear to me how much in the way of high oil prices our economy can sustain and what, what the implication of that will be on iOS tenant demand. Second reason I'm looking at it is because of the alternative energy space. There's a lot of conversations around alternative energy uses users and how the real estate support infrastructure needed for those industries to really grow and become a meaningful substitute for fossil fuels. I'm looking at the price of oil. A lot of sort of thinking about, you know, how does that impact Today, tomorrow and 10 years from now, iOS tenant demand, both total demand and the composition of demand.
- [31:57]
A
So are there any trends today that you think the broader commercial real estate industry may still be underestimating?
- [32:04]
B
Yeah, I think that. I think that inflation is something that needs to be dealt with. Generally, if you're a rent collector, inflation is, you know, is more positive than negative. But, you know, inflation is the ultimate regressive tax. And I think ultimately, if you, if you don't want to turn into a social estate, you have to deal with, deal with inflation because you got to deal with the cost of housing, the cost of rent, the cost of food, the cost of everything goes up. And I think it becomes a little bit more a divided society of haves and have nots. I mean, to get political here, statement, it's more like. But inflation is, I think, where it all kind of where it all comes to roost, in my opinion. So I'm watching inflation, definitely.
- [32:52]
A
Yeah. I don't think you'd find many developers, if any, that would say inflation is, is not something in terms of a trend that they're watching and watching closely. Want to wrap it up with this? You've been doing this now, as you said, for about 10 years. Let's look way out. Let's look 10 years out from now. Where do you think the iOS sector is headed in the next 10 years?
- [33:13]
B
I think it'll be even more institutionalized. It'll be no different than self storage or, you know, manufactured housing, student housing, you know, single family rentals. I think rents will continue to rise disproportionate to other asset classes because I think it is the single most supply and demand dislocated sector within real estate. I've been saying it for 10 years. I'm going to keep saying it. I think it's more than a thesis at this point in time. It's proven to be true. And I don't think we're talking about it as being the new shiny object. It was the new shiny object. Now data centers are, and I don't know what's next, but I think that the snowballs are going down the hill. It's going to get to the bottom.
- [33:54]
A
Well, it certainly sounds like you found that snowball before it started rolling down the hill, but I want to thank you for joining us. I really appreciate your insights on the evolution of iOS. There are not a lot of fol out there that possess the level of expertise that you do, and your insights today were exceptionally valuable. So thanks again for joining us, Leo. I'm sure our listeners are going to find this to be a very interesting, valuable use of their time. Thanks again. Thanks for listening to Inside CRE conversations with the people developing the future of commercial real estate, and thanks to our podcast sponsor, Majestic Realty, for supporting the show. If you enjoyed today's conversation, please share it with a colleague and subscribe so you will never miss an episode. To Learn more about NEOP and connect with more than 22,000 commercial real estate professionals, visit NAIOP.org.