March 23, 2026
Is Small Bay Industrial Making a Comeback?
In this episode of Commercial Real Estate Secrets, Aviva Sonenreich sits down with Sean Flanagan to break down what’s actually happening in the industrial real estate market and why small-bay industrial may be making a comeback.
If you’re investing in, developing, or leasing industrial real estate, this episode gives you a real-time pulse on where the market is heading.
In This Episode, We Discuss:
- Why small-bay industrial is leasing strongly
- What’s happening with Class A big-box industrial
- The rise and saturation risk of IOS (industrial outdoor storage)
- How institutional capital is influencing industrial trends
- Why rents are resetting after years of rapid growth
- Colorado’s unique industrial market dynamics
- How to think about market cycles, supply, and demand
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1
00:00:00,040 --> 00:00:02,320
It's a it's a bloodbath,
absolute bloodbath.
2
00:00:02,320 --> 00:00:05,880
I've seen prices come down back
to those 2016 prices.
3
00:00:07,160 --> 00:00:09,600
So Speaking of industrial, what
are you seeing right now?
4
00:00:09,600 --> 00:00:14,240
What's the What's the hot app
class size location?
5
00:00:14,440 --> 00:00:19,680
OK, what's struggling today?
Obviously you're a class big box
6
00:00:19,680 --> 00:00:23,320
that maybe I don't want to say
the word overdeveloped because I
7
00:00:23,320 --> 00:00:27,600
think the long term outlook for
it is totally fine good.
8
00:00:27,600 --> 00:00:33,800
But you know that a class
product 20,000 feet plus they're
9
00:00:33,800 --> 00:00:35,720
struggling.
You know, I filled a lot of
10
00:00:35,720 --> 00:00:37,400
vote.
I can, I can speak about
11
00:00:37,400 --> 00:00:40,240
industrial, that's where I speak
and I can get into some land,
12
00:00:40,240 --> 00:00:44,240
but it's industrial land, so.
Well, that's great.
13
00:00:44,240 --> 00:00:45,560
I'm happy to hear about
industrial.
14
00:00:45,560 --> 00:00:47,920
I've been playing in this water
world a little bit.
15
00:00:47,920 --> 00:00:50,560
Industrial is was my bread and
butter.
16
00:00:50,560 --> 00:00:53,200
So I'm excited to hear the
nuance of what you've learned
17
00:00:53,200 --> 00:00:55,320
recently because I've been
distracted by waterfalls.
18
00:00:55,680 --> 00:00:56,720
OK, good.
I got you.
19
00:00:56,960 --> 00:01:00,800
I like to see what people are
saying on the phone to me.
20
00:01:00,800 --> 00:01:03,720
I get the calls and I'm always
just like collecting mental
21
00:01:03,720 --> 00:01:07,960
data.
So I would say, OK, it's 2026.
22
00:01:07,960 --> 00:01:14,640
Between 2016 to 2021, we'll say
every phone call was I want
23
00:01:14,640 --> 00:01:17,880
small Bay industrial multi
tenant warehouses.
24
00:01:18,240 --> 00:01:20,160
OK, great.
So does everybody else.
25
00:01:20,280 --> 00:01:25,600
You know, mazel tov and Supply
and Demand has it right And the
26
00:01:26,000 --> 00:01:29,960
they say in investing
terminology, right, you got to
27
00:01:29,960 --> 00:01:32,360
zig when people zag, right?
If the secret's out, you're
28
00:01:32,360 --> 00:01:36,720
already too late.
So I found between 2016 to 2021,
29
00:01:36,840 --> 00:01:38,720
everybody was calling on small
Bay industrial.
30
00:01:39,520 --> 00:01:46,360
Then between 2021 to 20252026
and and this is still existing,
31
00:01:46,640 --> 00:01:50,640
but it became the the phone
calls shifted from small Bay
32
00:01:50,640 --> 00:01:57,400
multi tenant industrial to iOS.
Everybody wants iOS, you know I3
33
00:01:58,200 --> 00:02:02,200
low coverage.
Outdoor storage, superior Bunsen
34
00:02:02,200 --> 00:02:05,440
lighting, all the things.
And I get it and I love the
35
00:02:05,440 --> 00:02:09,199
product type, but again, when
I'm noticing the inventory of
36
00:02:09,199 --> 00:02:11,920
the phone call over and over and
over and everybody's looking for
37
00:02:11,920 --> 00:02:14,720
the same thing, it kind of sets
off the alarm.
38
00:02:15,080 --> 00:02:19,600
And it's no secret that there
are these multibillion dollar
39
00:02:19,600 --> 00:02:22,560
funds buying up all the iOS in
the country right now.
40
00:02:22,640 --> 00:02:27,200
And what the impact of that will
be, you know, is a discussion
41
00:02:27,200 --> 00:02:30,600
for another time.
But I noticed recently my phone
42
00:02:30,600 --> 00:02:35,480
calls started changing back to I
want small Bay, multi tenant,
43
00:02:35,480 --> 00:02:40,240
industrial and even the biggest,
I'm talking to big developers
44
00:02:40,520 --> 00:02:43,800
who are saying, you know what
we're modifying what we're doing
45
00:02:43,800 --> 00:02:45,400
right now.
You know, maybe we built
46
00:02:45,400 --> 00:02:49,840
something in Dove Valley and
we're sitting vacant or in DIA
47
00:02:49,840 --> 00:02:53,320
and we're still vacant or up by
25 and we're, you know, we want
48
00:02:53,320 --> 00:02:59,280
small Bay.
What I'm seeing is a big shift
49
00:02:59,280 --> 00:03:01,600
back to small Bay.
Now on the leasing side, we do a
50
00:03:01,600 --> 00:03:05,440
lot of leasing.
Thankfully everything in the
51
00:03:05,440 --> 00:03:10,800
small Bay, up to five, I'd say 0
to 5000 feet is leasing well.
52
00:03:11,240 --> 00:03:12,240
Really.
Really.
53
00:03:12,640 --> 00:03:18,200
Strong leasing across the Front
Range, those bigger suite sizes,
54
00:03:18,360 --> 00:03:22,840
10,000 feet, it's a it's a
bloodbath, absolute bloodbath.
55
00:03:22,840 --> 00:03:29,120
I've seen prices come down back
to those 2016 prices, a very
56
00:03:29,120 --> 00:03:33,960
humbling variance for landlords
to no, Colorado is an anomaly
57
00:03:33,960 --> 00:03:36,200
market.
Like we were the first state to
58
00:03:36,200 --> 00:03:39,800
legalize marijuana
recreationally, and that had a
59
00:03:40,360 --> 00:03:43,840
latent material impact on our
warehouses.
60
00:03:44,680 --> 00:03:48,640
And what I like to say is, you
know, the party's over and he
61
00:03:48,640 --> 00:03:52,840
now has the hangover of what
happens when your rents surge
62
00:03:53,600 --> 00:03:58,600
75% overnight.
What goes up can come down, and
63
00:03:58,600 --> 00:04:01,040
a lot of real estate owners
don't understand that.
64
00:04:01,560 --> 00:04:04,120
They think, oh, it goes up, I'm
rich.
65
00:04:04,400 --> 00:04:07,800
Rents only go up, rents only up.
Right.
66
00:04:08,120 --> 00:04:12,320
And so now we're in what I call
the hangover where rents are
67
00:04:13,080 --> 00:04:15,880
resetting.
And that's an interesting time.
68
00:04:16,160 --> 00:04:19,839
So I suppose, you know, it all
goes back to the fundamentals.
69
00:04:20,120 --> 00:04:23,800
Don't buy real estate poorly,
don't do dumb deals, and you'll
70
00:04:23,800 --> 00:04:26,280
be fine.
I'm so glad that you mentioned
71
00:04:26,440 --> 00:04:30,600
the Colorado legislation with
the medical marijuana or just
72
00:04:30,600 --> 00:04:34,440
marijuana in general.
I used that moment in economic
73
00:04:34,440 --> 00:04:37,640
time and data to get myself into
the acquisition world
74
00:04:37,640 --> 00:04:39,600
originally.
So I'm sitting in Chicago.
75
00:04:39,600 --> 00:04:41,280
I'm going to go back even
further in Tide.
76
00:04:41,520 --> 00:04:44,440
So it's 2016, I'm sitting in
Chicago.
77
00:04:44,440 --> 00:04:48,080
I am actively managing all of
our development accounting,
78
00:04:48,080 --> 00:04:51,480
spend all the draw processes,
the middle man for all the
79
00:04:51,480 --> 00:04:53,880
money.
And I'm looking at Colorado.
80
00:04:53,880 --> 00:04:57,160
I'm about to wrap up my master's
degree and I'm thinking, OK, I
81
00:04:57,160 --> 00:05:00,280
want to build walls.
Well, I'd like to go home to
82
00:05:00,280 --> 00:05:01,920
Colorado as well, 'cause I love
Colorado.
83
00:05:02,560 --> 00:05:07,440
And wow, would you look at that.
The data is showing 1% vacancy,
84
00:05:09,160 --> 00:05:13,600
half a percent vacancy, just
absurd absorption and leasing
85
00:05:13,600 --> 00:05:15,880
metrics.
And, and it all goes back to the
86
00:05:15,880 --> 00:05:19,200
legislation requiring, and I, I
don't recall the exact
87
00:05:19,200 --> 00:05:23,960
percentage, but I think it was
30% of your marijuana product
88
00:05:23,960 --> 00:05:27,240
that you sell has to be grown
yourself in your own facility.
89
00:05:27,240 --> 00:05:28,760
Something like that was the
rule.
90
00:05:29,640 --> 00:05:33,080
And what it did was just, Jim,
everybody into the Class B and
91
00:05:33,080 --> 00:05:37,560
Class C warehousing that Class A
started to get aggressively in
92
00:05:37,560 --> 00:05:38,920
demand.
And all of a sudden everybody
93
00:05:38,920 --> 00:05:41,320
was wanting to build again
because vacancy was on the
94
00:05:41,320 --> 00:05:43,960
floor.
And so I went to some friends at
95
00:05:44,000 --> 00:05:46,480
CBRE and said, Hey, I, I know
you don't know me.
96
00:05:46,480 --> 00:05:49,920
I'm a new young nobody, but can
you give me some data points?
97
00:05:50,240 --> 00:05:52,600
And I went and pitched our CEO
and our chairman sitting out in
98
00:05:52,600 --> 00:05:54,640
Chicago, and I said I want to go
to Colorado.
99
00:05:54,640 --> 00:05:57,200
I want to chase Colorado and the
Mountain West.
100
00:05:57,680 --> 00:06:00,440
Look at this data.
Look at the macroeconomics.
101
00:06:00,440 --> 00:06:03,760
How could we fail what we didn't
know?
102
00:06:03,760 --> 00:06:05,480
Was that COVID?
Was coming and it was going to
103
00:06:05,640 --> 00:06:07,760
throw a wrench at everybody.
Couple wrenches.
104
00:06:07,800 --> 00:06:10,400
My first project pursued in
Colorado was in Del Valley.
105
00:06:10,520 --> 00:06:13,880
I chased the and had it under
control and I rezoned.
106
00:06:14,160 --> 00:06:17,440
It wasn't easy rezoning, but the
site where the blue scope,
107
00:06:17,520 --> 00:06:21,600
Amazon 250 or so sits today, I
didn't get that one vertical,
108
00:06:21,600 --> 00:06:23,720
but I got it rezoned.
So that was at least a minor
109
00:06:23,720 --> 00:06:25,880
win.
But yeah, going it all comes
110
00:06:25,880 --> 00:06:29,640
down to data and economics.
It got me into the acquisition
111
00:06:29,640 --> 00:06:33,520
world, not easy.
And eventually I came back to
112
00:06:33,520 --> 00:06:38,440
Colorado and now I'm called 85%
plus focused on only Colorado.
113
00:06:38,440 --> 00:06:41,560
So it's you never know what the
world's going to take you.
00:00:00,040 --> 00:00:02,320
It's a it's a bloodbath,
absolute bloodbath.
2
00:00:02,320 --> 00:00:05,880
I've seen prices come down back
to those 2016 prices.
3
00:00:07,160 --> 00:00:09,600
So Speaking of industrial, what
are you seeing right now?
4
00:00:09,600 --> 00:00:14,240
What's the What's the hot app
class size location?
5
00:00:14,440 --> 00:00:19,680
OK, what's struggling today?
Obviously you're a class big box
6
00:00:19,680 --> 00:00:23,320
that maybe I don't want to say
the word overdeveloped because I
7
00:00:23,320 --> 00:00:27,600
think the long term outlook for
it is totally fine good.
8
00:00:27,600 --> 00:00:33,800
But you know that a class
product 20,000 feet plus they're
9
00:00:33,800 --> 00:00:35,720
struggling.
You know, I filled a lot of
10
00:00:35,720 --> 00:00:37,400
vote.
I can, I can speak about
11
00:00:37,400 --> 00:00:40,240
industrial, that's where I speak
and I can get into some land,
12
00:00:40,240 --> 00:00:44,240
but it's industrial land, so.
Well, that's great.
13
00:00:44,240 --> 00:00:45,560
I'm happy to hear about
industrial.
14
00:00:45,560 --> 00:00:47,920
I've been playing in this water
world a little bit.
15
00:00:47,920 --> 00:00:50,560
Industrial is was my bread and
butter.
16
00:00:50,560 --> 00:00:53,200
So I'm excited to hear the
nuance of what you've learned
17
00:00:53,200 --> 00:00:55,320
recently because I've been
distracted by waterfalls.
18
00:00:55,680 --> 00:00:56,720
OK, good.
I got you.
19
00:00:56,960 --> 00:01:00,800
I like to see what people are
saying on the phone to me.
20
00:01:00,800 --> 00:01:03,720
I get the calls and I'm always
just like collecting mental
21
00:01:03,720 --> 00:01:07,960
data.
So I would say, OK, it's 2026.
22
00:01:07,960 --> 00:01:14,640
Between 2016 to 2021, we'll say
every phone call was I want
23
00:01:14,640 --> 00:01:17,880
small Bay industrial multi
tenant warehouses.
24
00:01:18,240 --> 00:01:20,160
OK, great.
So does everybody else.
25
00:01:20,280 --> 00:01:25,600
You know, mazel tov and Supply
and Demand has it right And the
26
00:01:26,000 --> 00:01:29,960
they say in investing
terminology, right, you got to
27
00:01:29,960 --> 00:01:32,360
zig when people zag, right?
If the secret's out, you're
28
00:01:32,360 --> 00:01:36,720
already too late.
So I found between 2016 to 2021,
29
00:01:36,840 --> 00:01:38,720
everybody was calling on small
Bay industrial.
30
00:01:39,520 --> 00:01:46,360
Then between 2021 to 20252026
and and this is still existing,
31
00:01:46,640 --> 00:01:50,640
but it became the the phone
calls shifted from small Bay
32
00:01:50,640 --> 00:01:57,400
multi tenant industrial to iOS.
Everybody wants iOS, you know I3
33
00:01:58,200 --> 00:02:02,200
low coverage.
Outdoor storage, superior Bunsen
34
00:02:02,200 --> 00:02:05,440
lighting, all the things.
And I get it and I love the
35
00:02:05,440 --> 00:02:09,199
product type, but again, when
I'm noticing the inventory of
36
00:02:09,199 --> 00:02:11,920
the phone call over and over and
over and everybody's looking for
37
00:02:11,920 --> 00:02:14,720
the same thing, it kind of sets
off the alarm.
38
00:02:15,080 --> 00:02:19,600
And it's no secret that there
are these multibillion dollar
39
00:02:19,600 --> 00:02:22,560
funds buying up all the iOS in
the country right now.
40
00:02:22,640 --> 00:02:27,200
And what the impact of that will
be, you know, is a discussion
41
00:02:27,200 --> 00:02:30,600
for another time.
But I noticed recently my phone
42
00:02:30,600 --> 00:02:35,480
calls started changing back to I
want small Bay, multi tenant,
43
00:02:35,480 --> 00:02:40,240
industrial and even the biggest,
I'm talking to big developers
44
00:02:40,520 --> 00:02:43,800
who are saying, you know what
we're modifying what we're doing
45
00:02:43,800 --> 00:02:45,400
right now.
You know, maybe we built
46
00:02:45,400 --> 00:02:49,840
something in Dove Valley and
we're sitting vacant or in DIA
47
00:02:49,840 --> 00:02:53,320
and we're still vacant or up by
25 and we're, you know, we want
48
00:02:53,320 --> 00:02:59,280
small Bay.
What I'm seeing is a big shift
49
00:02:59,280 --> 00:03:01,600
back to small Bay.
Now on the leasing side, we do a
50
00:03:01,600 --> 00:03:05,440
lot of leasing.
Thankfully everything in the
51
00:03:05,440 --> 00:03:10,800
small Bay, up to five, I'd say 0
to 5000 feet is leasing well.
52
00:03:11,240 --> 00:03:12,240
Really.
Really.
53
00:03:12,640 --> 00:03:18,200
Strong leasing across the Front
Range, those bigger suite sizes,
54
00:03:18,360 --> 00:03:22,840
10,000 feet, it's a it's a
bloodbath, absolute bloodbath.
55
00:03:22,840 --> 00:03:29,120
I've seen prices come down back
to those 2016 prices, a very
56
00:03:29,120 --> 00:03:33,960
humbling variance for landlords
to no, Colorado is an anomaly
57
00:03:33,960 --> 00:03:36,200
market.
Like we were the first state to
58
00:03:36,200 --> 00:03:39,800
legalize marijuana
recreationally, and that had a
59
00:03:40,360 --> 00:03:43,840
latent material impact on our
warehouses.
60
00:03:44,680 --> 00:03:48,640
And what I like to say is, you
know, the party's over and he
61
00:03:48,640 --> 00:03:52,840
now has the hangover of what
happens when your rents surge
62
00:03:53,600 --> 00:03:58,600
75% overnight.
What goes up can come down, and
63
00:03:58,600 --> 00:04:01,040
a lot of real estate owners
don't understand that.
64
00:04:01,560 --> 00:04:04,120
They think, oh, it goes up, I'm
rich.
65
00:04:04,400 --> 00:04:07,800
Rents only go up, rents only up.
Right.
66
00:04:08,120 --> 00:04:12,320
And so now we're in what I call
the hangover where rents are
67
00:04:13,080 --> 00:04:15,880
resetting.
And that's an interesting time.
68
00:04:16,160 --> 00:04:19,839
So I suppose, you know, it all
goes back to the fundamentals.
69
00:04:20,120 --> 00:04:23,800
Don't buy real estate poorly,
don't do dumb deals, and you'll
70
00:04:23,800 --> 00:04:26,280
be fine.
I'm so glad that you mentioned
71
00:04:26,440 --> 00:04:30,600
the Colorado legislation with
the medical marijuana or just
72
00:04:30,600 --> 00:04:34,440
marijuana in general.
I used that moment in economic
73
00:04:34,440 --> 00:04:37,640
time and data to get myself into
the acquisition world
74
00:04:37,640 --> 00:04:39,600
originally.
So I'm sitting in Chicago.
75
00:04:39,600 --> 00:04:41,280
I'm going to go back even
further in Tide.
76
00:04:41,520 --> 00:04:44,440
So it's 2016, I'm sitting in
Chicago.
77
00:04:44,440 --> 00:04:48,080
I am actively managing all of
our development accounting,
78
00:04:48,080 --> 00:04:51,480
spend all the draw processes,
the middle man for all the
79
00:04:51,480 --> 00:04:53,880
money.
And I'm looking at Colorado.
80
00:04:53,880 --> 00:04:57,160
I'm about to wrap up my master's
degree and I'm thinking, OK, I
81
00:04:57,160 --> 00:05:00,280
want to build walls.
Well, I'd like to go home to
82
00:05:00,280 --> 00:05:01,920
Colorado as well, 'cause I love
Colorado.
83
00:05:02,560 --> 00:05:07,440
And wow, would you look at that.
The data is showing 1% vacancy,
84
00:05:09,160 --> 00:05:13,600
half a percent vacancy, just
absurd absorption and leasing
85
00:05:13,600 --> 00:05:15,880
metrics.
And, and it all goes back to the
86
00:05:15,880 --> 00:05:19,200
legislation requiring, and I, I
don't recall the exact
87
00:05:19,200 --> 00:05:23,960
percentage, but I think it was
30% of your marijuana product
88
00:05:23,960 --> 00:05:27,240
that you sell has to be grown
yourself in your own facility.
89
00:05:27,240 --> 00:05:28,760
Something like that was the
rule.
90
00:05:29,640 --> 00:05:33,080
And what it did was just, Jim,
everybody into the Class B and
91
00:05:33,080 --> 00:05:37,560
Class C warehousing that Class A
started to get aggressively in
92
00:05:37,560 --> 00:05:38,920
demand.
And all of a sudden everybody
93
00:05:38,920 --> 00:05:41,320
was wanting to build again
because vacancy was on the
94
00:05:41,320 --> 00:05:43,960
floor.
And so I went to some friends at
95
00:05:44,000 --> 00:05:46,480
CBRE and said, Hey, I, I know
you don't know me.
96
00:05:46,480 --> 00:05:49,920
I'm a new young nobody, but can
you give me some data points?
97
00:05:50,240 --> 00:05:52,600
And I went and pitched our CEO
and our chairman sitting out in
98
00:05:52,600 --> 00:05:54,640
Chicago, and I said I want to go
to Colorado.
99
00:05:54,640 --> 00:05:57,200
I want to chase Colorado and the
Mountain West.
100
00:05:57,680 --> 00:06:00,440
Look at this data.
Look at the macroeconomics.
101
00:06:00,440 --> 00:06:03,760
How could we fail what we didn't
know?
102
00:06:03,760 --> 00:06:05,480
Was that COVID?
Was coming and it was going to
103
00:06:05,640 --> 00:06:07,760
throw a wrench at everybody.
Couple wrenches.
104
00:06:07,800 --> 00:06:10,400
My first project pursued in
Colorado was in Del Valley.
105
00:06:10,520 --> 00:06:13,880
I chased the and had it under
control and I rezoned.
106
00:06:14,160 --> 00:06:17,440
It wasn't easy rezoning, but the
site where the blue scope,
107
00:06:17,520 --> 00:06:21,600
Amazon 250 or so sits today, I
didn't get that one vertical,
108
00:06:21,600 --> 00:06:23,720
but I got it rezoned.
So that was at least a minor
109
00:06:23,720 --> 00:06:25,880
win.
But yeah, going it all comes
110
00:06:25,880 --> 00:06:29,640
down to data and economics.
It got me into the acquisition
111
00:06:29,640 --> 00:06:33,520
world, not easy.
And eventually I came back to
112
00:06:33,520 --> 00:06:38,440
Colorado and now I'm called 85%
plus focused on only Colorado.
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00:06:38,440 --> 00:06:41,560
So it's you never know what the
world's going to take you.
