Industrial Real Estate Trends 2026: Small Bay Performance, Co-Warehousing & Owner Strategies

Industrial real estate has been the top-performing commercial property sector for several years running, but the story beneath the headlines is more nuanced than “warehouses are hot.” The big-box distribution market that drives most of the media coverage operates under different dynamics than the small bay, flex, and multi-tenant segment where most independent owners and regional investors actually operate.

This page is written for that audience — the owners, operators, and investors working in the sub-50,000 SF industrial segment. The trends that matter to you aren’t the same ones covered in institutional research reports. Small bay vacancy behaves differently than bulk distribution. Tenant acquisition for a 20-unit multi-tenant property looks nothing like leasing a 500,000 SF build-to-suit. And the rise of co-warehousing and flexible space models is creating repositioning opportunities that didn’t exist five years ago.

Below you’ll find WareCRE’s current thinking on where the small bay industrial market is heading, along with practical resources for attracting tenants, marketing your property, and evaluating new operating models. We’ll continue adding to this page as we publish new research and analysis.

The Small Bay Advantage

While big-box industrial markets in many metros are working through oversupply from the 2021-2023 construction boom, the small bay segment tells a different story. Very little new small bay product has been built in the last decade — developers have favored large-format distribution centers where the per-square-foot economics of ground-up construction make more sense. The result is a structural supply shortage in the under-10,000 SF segment that’s kept vacancy tight and pushed rents higher even as the broader industrial market softens in some metros.

For owners of existing small bay and multi-tenant industrial properties, this supply constraint is a significant tailwind. Demand from small businesses, e-commerce operators, contractors, and light manufacturers continues to grow, while the competitive supply pipeline remains thin. The properties that perform best are the ones that recognize this advantage and invest accordingly — in tenant experience, property presentation, and flexible lease structures that reduce vacancy between tenants.

Our small bay industrial guide provides a comprehensive look at what makes this segment unique, including how it’s priced, who the tenants are, and why institutional capital is beginning to take notice.

Attracting and Retaining Quality Tenants

In a tight small bay market, the challenge for most owners isn’t finding any tenant — it’s finding the right tenant and keeping them. High-turnover tenants cost more in vacancy loss, turnover prep, and leasing commissions than the rent premium you might capture by constantly re-marketing a unit. The owners who build the most stable cash flow are the ones focused on tenant quality and retention, not just occupancy.

What drives tenant quality? It starts before they ever tour the property. Your online listing is the first impression for the majority of prospective tenants today, and the properties that present well online attract a different caliber of inquiry than the ones with a single exterior photo and a phone number. Beyond the listing, the factors that keep tenants renewing are operational: responsiveness to maintenance issues, clear communication on CAM charges, and a sense that the property is professionally managed.

Marketing Your Industrial Property

The gap between a well-marketed industrial listing and a poorly marketed one is enormous — and measurable. Properties with professional photos, complete specifications, and accurate availability information consistently generate more qualified inquiries and lease faster than comparable properties with minimal listing effort.

This isn’t just about aesthetics. A complete listing with clear photos of the interior, dock access, office finish, and surrounding area answers the questions tenants and brokers have before they pick up the phone. It filters out unqualified leads and attracts the tenants who’ve already done their homework. In a market where most small bay listings still rely on a single exterior shot and a paragraph of text, investing in listing quality is one of the highest-ROI moves an owner can make.

The Co-Warehousing Model

Co-warehousing — the shared, flexible warehouse model that applies coworking principles to industrial space — has emerged as one of the most significant shifts in how small bay industrial properties are operated and occupied. Instead of leasing entire buildings or large bays to single tenants on long-term leases, co-warehousing operators subdivide multi-tenant properties into smaller units (often 500-5,000 SF) and offer them on flexible, month-to-month terms.

For property owners, the model represents both an opportunity and a question. On the opportunity side, co-warehousing operators can fill space faster, reduce vacancy between tenants, and often achieve higher effective rents per square foot through the flexibility premium. For owners with older multi-tenant properties that struggle to compete with newer product, partnering with or converting to a co-warehousing model can be a viable repositioning strategy.

The question is whether the model fits your property, market, and investment strategy. Our case study on the ReadySpaces-WareCRE partnership shows how one operator approaches tenant acquisition and lead generation in the co-warehousing segment, and our co-warehousing brand comparison helps owners and tenants evaluate the different models available.

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