Investment Thesis
Why Small Bay Industrial
The most supply-constrained, demand-rich asset class in commercial real estate. Here is the data behind our conviction.
Market Fundamentals
The Numbers Behind the Thesis
Small bay industrial outperforms on the metrics that matter most to investors: vacancy, supply dynamics, tenant quality, and cash flow.
National Vacancy
Small bay industrial vacancy is near historic lows nationally. In our target markets, functional vacancy is even lower. Demand from contractors, e-commerce, and small businesses continues to outpace supply.
Tenants Per Property
Multi-tenant properties spread risk across dozens of leases. No single tenant departure threatens the asset. Compare that to a single-tenant NNN retail deal.
New Supply
Zoning restrictions, construction costs, and land scarcity make new small bay development uneconomic in most markets. Existing assets benefit from a structural, permanent supply shortage.
Rent Per SF
Small bay tenants pay premium rents per square foot relative to bulk industrial. Short lease terms allow frequent mark-to-market rent increases that compound over time.
Market Position
The Middle-Market Sweet Spot
Small bay industrial occupies a transaction range that larger institutional funds walk past and smaller private investors cannot efficiently access. Properties in the $300K-$15M range are too small for major institutional capital but too large for individual investors without operational infrastructure.
This creates a persistent pricing inefficiency. Many properties remain under-managed by owners who lack the knowledge, team, or capital to maximize their potential. We acquire these assets and apply institutional-quality operations at a scale that larger players cannot.
Why This Niche Works
Asset Class Comparison
How Small Bay Industrial Stacks Up
A side-by-side comparison of the asset classes most commonly used by accredited investors and 1031 exchange participants.
| Metric | Small Bay Industrial | NNN Retail | Multifamily | DSTs |
|---|---|---|---|---|
| National Vacancy | ~2-3% | 5-7% | 6-8% | Varies |
| New Supply Risk | Very Low | Low | High | N/A |
| Tenant Diversification | 50+ tenants | 1 tenant | 50-300 units | Varies |
| Lease Duration | 1-3 years | 10-25 years | 12 months | Varies |
| Rent Growth Opportunity | Strong (frequent mark-to-market) | Limited (fixed escalations) | Moderate | Limited |
| Investor Control | Direct ownership / LP | Direct ownership | Direct ownership | None |
| Upfront Fee Load | Minimal | Minimal | Minimal | 10-15% |
| E-Commerce Headwind | Tailwind | Headwind | Neutral | Varies |
Demand Drivers
What Is Fueling Growth
Three macro trends are driving sustained demand for small bay industrial space across the U.S.
E-Commerce & Last-Mile
Online retail growth is driving demand for local distribution and fulfillment space. Small bay properties serve the last-mile delivery chain that big-box warehouses cannot.
Trades & Contractor Growth
Residential construction, infrastructure spending, and aging housing stock are fueling demand from electricians, plumbers, HVAC techs, and other trades who need workspace.
Small Business Formation
Small business creation is at record levels. These businesses need affordable, functional space — exactly what small bay industrial provides.
Supply Dynamics
Why New Supply Cannot Compete
The structural supply shortage in small bay industrial is not cyclical. It is permanent. Four factors ensure existing assets continue to appreciate.
Cost Per SF to Build New
New small bay construction costs $200+ per SF in most markets. At current rents, new development does not pencil without substantial rent premiums.
Land Scarcity
Most metro areas have rezoned former industrial land for residential or mixed-use. The land base for new small bay development shrinks every year.
Legacy Stock Disappearing
Older small bay properties are being demolished for higher-density development. Every demolition reduces supply permanently and benefits remaining assets.
Development Timeline
Even where development is feasible, entitlement and construction timelines exceed 18 months. The supply response is slow while demand moves fast.
Portfolio Characteristics
What Our Assets Look Like
We target a specific profile of small bay industrial property that maximizes cash flow stability and value-add potential.
- Multi-tenant buildings with 20-80+ units
- 1,000-5,000 SF units with roll-up doors
- Grade-level access for contractors and trades
- Markets with strong employment and population growth
- Below-market rents with mark-to-market upside
- Deferred maintenance or repositioning opportunity