Small Bay Performance Through Market Cycles

Cody reports consistent rent and price growth over recent years and notes the asset class has been resilient historically.

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Small Bay Industrial (a.k.a. Flex Space) wasn’t on your radar—and for good reason.

But what if the most overlooked asset class in commercial real estate turned out to be one of the most profitable? In this episode, Cody Payne, SVP at Colliers, breaks down why Small Bay Flex Industrial is quietly exploding—and why more active and passive investors are taking notice. Cody shares how he transitioned from leasing to owning, how syndication plays a role in the space, and why this niche might outperform retail and office over the next decade. Whether you’re looking to diversify your portfolio or find a less management-intensive asset, this is an episode you don’t want to miss.

Key Takeaways

Why Flex Industrial Is Heating Up

The asset class has evolved: from basic metal garages to glass-fronted multi-use spaces.
Demand is surging as small businesses, gyms, e-commerce, and retail users flood in.
Triple-net leases and low tenant improvement costs make this a capital-efficient play.

How to Add Real Value with Small Bay Assets

Simple cosmetic upgrades (like storefront glass) can attract higher-paying tenants.
Reconfiguring larger units into smaller ones can boost PSF rent.
Strategic side yards and outdoor storage add ancillary income.

Investor Returns: What to Expect

Typical stabilized deals offer 8–10% cash-on-cash returns with low capex.
Value-add plays or development deals can push IRRs significantly higher.
Cap rates range from 6–8%, depending on market and quality.

Management Made Simple

Triple-net leases reduce headaches—tenants handle their own maintenance.
Very few after-hours calls; most businesses operate during daytime hours.
Easy to find third-party managers who understand this asset class.

Syndication in Small Bay: A New Frontier

Cody’s early deals involved rolling his broker fee into equity—low-risk entry point.
Syndication works well, especially for stabilized assets or light value-add.
Investors like the stability, tenant diversity, and ease of management.