If you drive down I-85, you'll see millions of square feet of concrete tilt-wall going up. These are 200,000 SF "Big Box" distribution centers designed for Amazon, Walmart, and Michelin.
But if you are a local HVAC contractor with 5 vans and $2M in revenue, you can't lease 200,000 SF. You need 5,000 SF. You need a small office, two bathrooms, and a warehouse with a drive-in door.
Here is the problem: Nobody is building for you.
The Construction Paradox
To build a new small-bay industrial park today, construction costs (land, steel, concrete) often push the required rent to $14 - $16 PSF just to break even.
However, existing Class B/C small-bay units are renting for $9 - $11 PSF.
The Result:
Developers cannot build new supply at competitive rates. They are forced to build Big Box to get economies of scale. This leaves the small-bay market structurally supply-constrained.
The "Sticky" Tenant
Big Box tenants are credit-rated, but they are fickle. A logistics giant will move a million square feet of inventory to a new facility 5 miles away to save $0.10 PSF. They are loyal to the spreadsheet, not the building.
The Small Business Tenant is different.
- Proximity matters. The owner usually lives nearby. They want a short commute.
- Customer base. Their service radius is local. Moving disrupts their operations.
- Moving costs. For a small business, the disruption of moving machinery, racking, and inventory is a massive headache they will pay to avoid.
This creates incredible retention. We have tenants who have been in the same 3,000 SF unit for 15 years. They pay rent like clockwork because the space is the lifeblood of their livelihood.
The Spearhead Strategy
We buy the 1980s and 1990s vintage small-bay parks that institutional capital ignores.
We buy them at a basis ($80-$100 PSF) that is well below replacement cost ($150+ PSF). This gives us an unbreakable moat. Even if a developer wanted to compete with us, they couldn't build a product cheap enough to beat our rents.
We aren't betting on a new trend. We are betting on the plumber, the electrician, and the cabinet maker. And that's a bet we will take every day.
