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- IOS Deep Dive: Truck Parking with Semi-Stow
IOS Deep Dive: Truck Parking with Semi-Stow
BREAKING DOWN THE TRUCK PARKING MARKET WITH SEMI-STOW
What is the current state of play in the truck parking market as we kick off 2024? How have rates moved in the last year?
In spite of macroeconomic headwinds and ongoing softness in the freight market, we saw activity remain strong throughout the year.
In general, rates remained fairly stable in most markets. There were some increases in higher-demand markets and those introducing new restrictions. For example, increased trucking restrictions in California have led to higher rates in parts of Nevada and western Arizona.
Some of the hottest markets over the last year include Los Angeles, Las Vegas, Phoenix, Salt Lake City, South Florida, and port markets in general. Interestingly, some municipalities like Chicago and Minneapolis are heating their markets by raising the barrier to entry on parking.
The other trend we saw this year is the increasing number of large (10+ acre) yards, typically lacking a building, that are sitting vacant. Many of these were acquired by investors over the last few years. It’s an interesting dynamic given the acute shortage in semi-truck parking.
What’s causing the lower occupancy in these larger yards?
One of the challenges with truck parking investments is that there’s a limited pool of national-credit tenants to occupy large tranches of yard space. More than 97% of all trucking companies operate fewer than 20 trucks (source: ATA), and as a result, there's almost always a need to subdivide yards and rent by the space rather than the acre.
This creates operational burden for investors who need to source these tenants—often more than a hundred for a large yard—and then manage the relationships, customer service, collections, and churn. Because of this, we’ve seen a shift in activity from traditional leases to AMAs, where our team manages the yard. Because we rent by the space, our unit economics are stronger, we can more easily fill the yards, and we run a revenue split with the investor.
How has the freight market slump affected demand for truck parking over the last year?
The freight market has seen one of its most volatile periods in history over the last few years—tightening to record levels at the start of the pandemic, then softening to near-record lows in 2022 and 2023.
The truck parking market hasn’t followed with the same degree of whiplash. There are a couple of reasons for this.
First, the need for semi-truck parking isn’t tied as much to freight volume as it is to the number of trucks in operation. This figure has increased steadily over the last two decades (source: BTS). Whether these trucks are fully utilized during tight markets or idle for longer periods during soft markets, there’s still a baseline demand to park them between shipments and during mandatory hours of service (HOS) downtime.
The second reason this market is more resilient during freight swings is because the potential tenant base for these yards is quite diverse. Beyond trucking fleets, the space can be used by bus and heavy equipment manufacturers, dealerships, public transport, and moving companies.
Describe your market analysis process and your strategy around expansion.
We typically start by looking across the top 50 MSAs for opportunities near ports, rail intermodal sites, large distribution hubs, and major interstates. We take into account heavy industrial zoning considerations, which differ city to city. We’ve also built proprietary tools that leverage various data sources to determine where truck parking and trailer relays are most needed. This has allowed us to remain laser focused on the assets we step into and has been a large contributor to our high occupancy rates.
Over the last year, we’ve gained a lot of traction with the asset management model, which provides a win-win for Semi-Stow and the investor. This strategy is already proven in the car parking industry, where operational experts marry technology and operations to manage the lots on a rev share basis that allows them to outperform traditional NNN lease rates. This creates a win-win where we mitigate our downside and allow the real estate owners to participate in the upside. It’s a shift in our space that we believe is going to become the norm for truck parking in the years ahead.
What are the big operational hurdles you’re facing as you look to expand and upgrade yards?
We’ve more than doubled the number of yards we manage in the last year and we expect that growth to accelerate in 2024. So building our on-the-ground operations team to support the expanding portfolio has been an admittedly high-class challenge.
The other evergreen operational challenge in our space is working within the constraints of varying land use and zoning regulations across different municipalities. For example, you can have a heavy industrial zone that doesn’t explicitly allow for truck parking, which then requires a city hearing and a special use permit. Understanding the patchwork of regulations and associated risk is one of the big things our real estate team focuses on.
What recommendations would you make to local economic development staff to better attract logistics users?
During the pandemic, we all came to understand the critical role that the supply chain plays in our daily lives. It’s therefore in the best interests of federal, state and local governments to help logistics companies operate as efficiently as possible.
Specifically, local governments need to prioritize zoning that accommodates large vehicle parking. This will not only help improve the efficiency of transportation networks, but also the retention of truck drivers, which is an ongoing issue for logistics companies.
At the state level, governments should be identifying places to have safe, regionalized parking hubs that make their state an attractive location for growth in commercial operations and jobs.
And the federal government needs to recognize truck parking as an essential service that is as vital to our nation’s supply chain and economic growth as roads and bridges. Adequate truck parking also impacts the safety of everyone on our roadways.
What will the required amenity packages for truck yards be in the next few years?
When we talk to our customers, regardless of the size of their fleet, three things always stand out. First, they want the peace of mind in knowing that they’re safe and that their assets and cargo are secure when they’re in our yards. Second, they want a consistent experience going from yard to yard—for example, the same access control system, the same standards for quality and security, and a consistent billing mechanism. Finally, they want customer service that’s available 24/7.
What is the tenant mix between national users versus local SMBs?
It varies from yard to yard, but across our network, we’ve got a healthy mix of large trucking companies who need a nationwide yard network to support their existing business, midsize fleets who use our yards to expand their geographic footprint and on-property office space as terminals, owner-operators who use us as a home base and for stopovers on longer hauls, and other types of companies like truck and trailer manufacturers, dealerships, and bus companies.
Any notable transactions that you would like to share?
Our team has recently closed deals in:
Denver: Roughly 20 acres of outdoor storage.
Houston: Approximately 19 acres of outdoor storage with 38,000 SF of buildings.
Ft. Worth: Roughly 42 acres of land. We've got immediate plans to operate 16 acres of truck parking while developing the remaining acreage.
Laredo: Approximately 11 acres of outdoor storage. We have a short-term leaseback with the seller before we begin implementing operations.
Indianapolis: Roughly 12 acres of outdoor storage with 11,000 SF of building space.
And with our $500 million joint venture with GreenPoint, we’re looking to significantly accelerate our growth in the truck parking industry in 2024.