Institutional buyers are rapidly increasing their presence in the small-bay industrial sector. In just two years, their market share jumped from 16% to 23%, signaling a significant shift in this space.
Institutional Activity
Institutional buyers are making big moves. For example, BKM Capital recently crossed 100 properties. And Brennan? They acquired a massive 1.3 million square feet in a single month. Even Prologis got in on the action, buying a 14 million square foot portfolio at a 4% cap rate.
Market Dynamics
Here's the thing: the market conditions for small-bay industrial are incredibly tight. Vacancy for small-bay properties currently sits at a mere 3-4%. Compare that to big-box industrial, which is pushing 10% or more. What's more, less than 0.5% of small-bay stock is even under construction. And if you've been watching rents, you'll know they're up over 40% since 2020.
Look, the rapid increase in institutional buyer market share, coupled with aggressive acquisitions by major players like BKM Capital, Brennan, and Prologis, highlights a critical moment in small-bay industrial. With vacancy rates extremely low and rents surging, it's clear why this sector is attracting so much attention.
The market dynamics are undeniable: limited new construction and robust demand are creating a highly competitive environment. This situation suggests that the window for entry or significant expansion in small-bay industrial might be closing fast.
If you're in the small-bay industrial space, or thinking about getting in, I've put together a deep dive on why this is happening, who's acquiring, and why that window is narrowing.