The industrial real estate market is undergoing a transformation that is creating one of the most compelling real estate opportunities of this decade. The global trade war has accelerated a seismic shift in supply chains, forcing companies to abandon the “just-in-time” model that dominated the last generation and instead stockpile inventory closer to the consumer. As Hamid Moghadam, the chief executive of the world’s largest industrial landlord, put it recently: the logistics chain has two parts, production, and consumption. Tariffs and labor costs are unpredictable, but consumption is local and enduring. That single truth is driving a powerful realignment of demand toward U.S. industrial space, particularly in the small-bay sector.
Unlike the massive distribution centers that defined the early e-commerce boom, small-bay warehouses under 100,000 square feet are now the most sought-after assets in the market. Vacancy rates have collapsed to below four and a half percent nationally, roughly half the level of the broader industrial sector. In cities like Atlanta, rents are growing at nearly nine percent a year, four times the national average. At the same time, new supply has evaporated. Only seventy-three million square feet of new space was delivered in the first quarter of this year, a staggering forty-one percent decline from the same period last year. With construction costs climbing, tenants are finding it far cheaper to renew in place than to relocate, creating extraordinary “stickiness” for landlords and stable, predictable cash flows for investors.
This is precisely the environment where small-bay assets shine. They serve essential tenants—logistics operators, manufacturers, healthcare suppliers—that cannot function without proximity to their customers. The economics are equally compelling. Fully leased buildings are already delivering cash-on-cash yields of seven percent or more. Looking ahead, the combination of rental growth, refinancing opportunities, and expected cap-rate compression as interest rates decline positions investors for internal rates of return between thirteen and fifteen percent over five years. Importantly, individual properties tend to trade below the radar of large institutions, but when aggregated into portfolios, they become attractive to institutional buyers and REITs are eager to acquire at premium pricing but not interested in chasing small buildings.
The timing could not be better. After two years of monetary tightening and capital rationing, the Federal Reserve is expected to start cutting rates early next week, in September. Lower borrowing costs will reignite positive leverage and accelerating velocity of transactions both correlate to lower cap rates which means the value of buildings escalate. At the same time, the onshoring of U.S. manufacturing has moved from rhetoric to reality. More than three trillion dollars in commitments have been pledged by private companies and foreign governments to rebuild American industrial capacity. Every new plant and every new production facility requires warehousing, distribution, and space to operate from.
Institutional capital has already begun to reposition. Global managers such as Carlyle have raised billions while deliberately steering clear of office and retail but funnelling capital into industrial and self-storage. Yet even they don’t look for the smaller buildings of around the $10 million market where the opportunity lies. This remains wide open for investors who can act decisively.
Accretiv Hybrid Portfolio Limited is seizing that opportunity with a focused strategy of acquiring high-quality small-bay buildings in growth markets across the United States. The first two assets are already secured: 1441 Branding Avenue in Chicago and 151 Allendale Road in Pennsylvania. Both are fully leased, stabilized at cap rates around eight percent, and offer long-term income streams anchored by tenants with decades of history. The plan is clear—assemble a portfolio of eight to ten such assets, deliver quarterly distributions to investors, and exit via a sale or recapitalization within five years.
This is a generational shift as America re-industrializes and consumption patterns drive demand for local, flexible, well-located industrial space. Supply is constrained, demand is overwhelming, and the window of entry is open right now. Investors who recognize the moment and position themselves today will be the ones to benefit from the extraordinary value creation that is about to unfold.
