Smaller U.S. industrial spaces outshine bulk sector amid inventory shortages and evolving tenant preferences

While the oversupply of bigger box product in many markets has been well publicized, vacancy in industrial assets below 100,000 square feet (sf) is outperforming the modern bulk segment.
A dramatic pullback in speculative groundbreakings could push vacancy in the sub-100,000-sf segment of the market even lower into 2025.
Entrepreneurial tenants’ preference for turnkey, move-in ready spaces is driving absorption, as there’s a consensus that smaller tenants are often focused on speed to market for their new facility.
With the average size of U.S. warehouses or distribution buildings currently being built hovering at 235,000 sf, not all developers are willing or able to split these large speculative buildings into more than two or three units. Because of this, smaller bay tenants will continue to face inventory shortages and rising rental rates, with little to no relief in the foreseeable future.
To dive deeper into this topic, explore the importance of class B and C industrial properties.

July 23, 2024