Brookfield Asset Management, one of the world’s biggest real estate owners, is betting on the strength of warehouse and industrial outdoor storage demand as it shuffles its portfolio.
New York City–based Brookfield has acquired Peakstone Realty and its 76-property national portfolio in a $1.2 billion deal.
The move is an "opportunity to expand Brookfield’s industrial real estate platform, which will benefit from strong long-term fundamentals" for warehouse and industrial outdoor storage, Lowell Baron, CEO of Brookfield’s real estate business, said in a statement Monday.
That growth plays out against a backdrop of dispositions for Brookfield. In the past year, the firm has offloaded high-vacancy office properties across the nation, and is marketing a retail center in downtown Los Angeles and an office in San Francisco as it looks to free up capital for other investments.
Industrial outdoor storage, a property type used for storing vehicles, trailers, containers and building materials, often near expressways, ports and railroads, is outperforming traditional industrial properties, with a vacancy rate of less than 3% and “strong rent growth,” according to a study by real estate services firm CBRE in June, describing industrial outdoor storage as “a twist on a classic property type” that’s “attracting institutional capital.”
Brookfield is also capitalizing on increased deal activity helped by lower borrowing costs after the U.S. central bank in September reversed a string of rate hikes going back to 2022, industry professionals have said.
Brookfield Asset Management President Connor Teskey said in November that “market conditions” in the real estate sector “have improved meaningfully” and added at the time it was “an excellent point in the cycle” to buy in “certain segments of the market.”
Industrial portfolio acquired
Industrial outdoor storage has emerged as one of the most in-demand corners of the industrial market, drawing institutional capital as tight vacancies collide with zoning and entitlement barriers that make new supply difficult to bring online, property professionals note.
Brookfield agreed to buy Peakstone for $21 a share in cash, a 34% premium to Peakstone’s closing price on Friday, the companies said in a statement Monday.
The transaction is a "clear win" for Peakstone shareholders, who will get "an attractive price" for their shares, Truist analyst Anthony Hau said in a report Monday.
EL Segundo, California-based Peakstone owns 76 properties in 17 states, including 60 industrial outdoor storage properties, and 16 traditional industrial properties.
Major Peakstone tenants include Amazon, RH, 3M, Samsonite and PepsiCo, according to its third-quarter investor presentation.
The deal comes just over a month after Peakstone sold all of its office properties in a pivot to a full focus on industrial outdoor storage and other industrial properties.
Outdoor storage experience
Brookfield has “deep and longstanding” experience with industrial outdoor storage, a Brookfield spokeswoman told CoStar News. She said the company's logistics team was among the earliest institutional investors to “identify the favorable supply-demand dynamics underpinning" industrial outdoor storage, including “severe land constraints, zoning barriers, and durable tenant demand driven by infrastructure, construction, transportation, and energy uses.”
Demand for the existing properties comes as zoning and entitlement hurdles limit new industrial outdoor storage development, CBRE said, adding major investors are “amassing IOS portfolios, following the path of self-storage and single-family rental.”
Brookfield isn't the only investment firm snapping up industrial outdoor storage properties.
Philadelphia-based Alterra IOS, which bills itself as the largest owner in the industrial outdoor storage sector, has deployed hundreds of millions of dollars into the property type over the past year, pairing multiple large debt financings with acquisitions totaling more than 30 buildable acres across major U.S. logistics markets.
A March study by global real estate investment firm Clarion Partners found the sector has an estimated $200 billion in aggregate value, “facilitating an opportunity to invest at scale,” the report said.
For the record
BofA Securities, Inc. is serving as exclusive financial advisor, Latham & Watkins LLP is serving as legal advisor to Peakstone.
Citigroup Global Markets Inc. is serving as Brookfield’s financial advisor and Gibson, Dunn & Crutcher LLP is serving as legal advisor.