The industrial sector has undergone remarkable shifts in recent years. Once dominated by the rise of bulk warehouses and expansive distribution centers, today’s narrative is increasingly shaped by small-bay industrial assets. These under-the-radar properties are becoming more sought after for their sustained demand, resilient fundamentals, and compelling investment potential.

While national vacancy rates for large-scale industrial properties have climbed significantly, now hovering around 7.4%, small-bay vacancy remains notably lower at approximately 4.2%. Further, Corebridge Financial reports that small-bay industrial rents have jumped more than 40% since 2020, significantly outpacing broader industrial rent growth.

That growth is no accident. It’s powered by reshoring, supply chain decentralization, and growing demand for local, last-mile logistics. These smaller-profile operators are helping leasing activity remain steady, even as big-box absorption slows.

Unlike large logistics users that chase national footprints and cost efficiencies, small-bay tenants operate close to their customer bases. That proximity gives them staying power. It also gives landlords dependable occupancy. Small-bay leases also tend to be operationally sticky: tenants often expand or contract within a park rather than relocate, reducing turnover costs and enhancing retention.

Operationally, these assets offer stable tenant profiles, shorter lease terms that allow for more frequent rent adjustments, and relatively low maintenance costs. Compared to larger single-tenant facilities, small-bay portfolios are easier to scale, quicker to reposition, and better insulated from tenant turnover, making them increasingly attractive in a market that values flexibility and risk diversification.

Small-bay industrial’s most powerful advantage is right in its name: small spaces, small leases, small tenants. These local and regional businesses—ranging from HVAC and electrical contractors to niche manufacturers and e-commerce startups—represent a massive but fragmented segment of the U.S. economy. According to the Office of Advocacy, there are over 36 million small businesses in the U.S., responsible for nearly half of private-sector employment.

These tenants aren’t just surviving; they’re aligned with secular trends: domestic production, regional distribution, and urban logistics. Together, they help provide owners with durable, diversified income streams and a buffer against macro volatility.

And what do many of these users look for in their spaces? While specifics can vary based on location and use case, Lee experts broadly report high demand for suites in the 2,000- to 10,000-square-foot range with standard TI packages including robust power, modern lighting, refreshed storefronts, and shared amenities. Functional spaces with good clear heights, ample electrical capacity, dual dock-high and ramp-to-grade access, and outdoor storage are particularly valuable given rising construction costs.

And with operational costs in warehousing and fulfillment, such as minimum monthly spends, storage fees, and fulfillment expenses, on the rise, disciplined, cost-effective TI strategies emphasizing operational efficiency and location over extensive amenities are crucial. The Fulfillment Advisor’s 2025 Warehousing and Fulfillment Costs Survey points out that these escalating costs are driving tenants toward flexible industrial solutions that offer lower overhead and improved operational efficiency, making right-sized footprints even more valuable.

As the spotlight on the sector grows, strategically positioned markets across North America are emerging as small-bay hotspots. READ THE FULL ARTICLE>