Why Multi-Tenant Shallow Bay Industrial Parks Are a Smart Investment in Today’s Market

In a market characterized by economic uncertainty, rising interest rates, and evolving tenant demands, one real estate asset class continues to shine: multi-tenant shallow bay / flex industrial properties. Once considered a niche segment, these assets are now increasingly viewed by savvy investors as a high-performing, risk-mitigated alternative to traditional commercial real estate.

At Avistone, our investment strategy has long focused on acquiring and operating these types of properties – and for good reason. The fundamentals backing this asset class are stronger than ever.

What Are Shallow Bay / Flex Industrial Properties?

Before diving into the “why,” it’s worth defining the “what.”

Shallow bay /flex industrial properties are typically under 100,000 square feet with bay depths of 120 – 150 feet and multiple tenant suites, often with dock-high or grade-level loading. They offer a mix of warehouse, light manufacturing, and office space, giving tenants the flexibility to adapt their space to changing business needs.

These properties cater to a diverse tenant mix – from logistics companies and e-commerce distributors to local service providers and manufacturers – and are generally located near major metro areas or infill urban locations.

1. Resilient Demand and Strong Occupancy Trends

While the broader commercial real estate market faces headwinds, multi-tenant shallow bay and flex properties continue to maintain low vacancy rates.

According to research by CBRE and Cushman & Wakefield:

• Vacancy for properties under 100,000 SF is averaging just 3.6%, significantly lower than larger logistics facilities.
• Urban infill markets are seeing occupancy rates above 95%, driven by demand from small and mid-sized businesses needing close-in distribution hubs.

E-commerce, 3PLs, and local service businesses continue to drive this demand, and the shift toward just-in-time delivery and last-mile logistics further reinforces the value of well-located shallow bay assets.

2. Diversified Tenant Base = Reduced Risk

Unlike single-tenant industrial buildings where vacancy means zero income, multi-tenant properties spread risk across many tenants. A vacancy in one unit may only represent 5% – 10% of a property’s total income, reducing revenue volatility.

At Avistone, we target properties with 10 or more tenants across diverse industries, allowing for stable cash flow even during economic downturns.

Plus, shorter lease terms (typically 3–5 years) allow for:

• Frequent rent resets to keep pace with the inflation
• Opportunities to re-lease at higher market rates
• Greater operational flexibility

3. Supply is Shrinking, Not Growing

One of the most compelling market tailwinds? New supply of shallow bay industrial is nearly nonexistent.

Why?

• Developers prioritize large-format distribution centers due to economies of scale.
• Zoning restrictions and urban land scarcity make smaller industrial developments challenging.
• Many older shallow bay properties are being converted to retail, office, or mixed-use.

According to a report from Bisnow, shallow bay product makes up only 12% of industrial inventory in Atlanta and similar ratios exist in other markets. This limited supply, combined with high replacement costs, protects investors from new competition and helps support long-term rent growth.

4. High Rent Growth and Value-Add Upside

Because of this supply / demand imbalance, rents for smaller industrial spaces have surged:

• Properties under 100,000 SF are renting for an average of $10.94 per SF, nearly 46% higher than the average for larger industrial buildings.
• Many legacy properties are still under-rented, offering the potential for significant rent increases at renewal or through tenant turnover.

At Avistone, we actively pursue value-add opportunities – acquiring properties with under-market rents, excessive office build-out, or deferred maintenance, and repositioning them to unlock higher income and long-term value.

5. Strategic Urban Locations for Last-Mile Demand

Flex and shallow bay industrial assets are often located within 5 to 20 miles of major metro centers, making them ideal for:

• Last-mile distribution
• Local trade and service companies
• Businesses seeking proximity to workforce and customer bases

This access not only increases tenant desirability but also creates higher barriers to entry for new competition – there’s simply no land left in many infill markets.

6. Institutional Recognition and Capital Interest

Historically dominated by local operators, shallow bay and flex industrial assets are now attracting institutional attention:

• Firms like Blackstone, Prologis, and Clarion have acquired portfolios of small-bay industrial over the past 2–3 years.
• Private equity groups are increasingly targeting these assets for their strong yield profiles and downside protection.

This increased demand can contribute to cap-rate compression, boosting exit values for current owners.

7. Avistone’s Track Record in the Sector

With over a decade of experience in this asset class, Avistone has acquired more than 4 million square feet of multi-tenant industrial properties across top-performing U.S. markets.

What sets us apart?

• Disciplined underwriting: We prioritize cash-flowing assets with upside potential.
• Hands-on asset management: From lease negotiations to capital improvements, we actively manage to drive value.
• Investor alignment: Our proven track record has delivered average annual weighted IRRs of 20%+ in prior offerings (past performance does not guarantee future results).

A Rare Opportunity in an Evolving Market

As interest in industrial real estate continues to grow, multi-tenant shallow bay and flex properties stand out for their unique blend of:

• Stability
• Diversification
• Growth potential
• Risk mitigation

In a market where traditional asset classes face increasing uncertainty, these properties offer a compelling alternative for investors seeking predictable cash flow with upside potential.

At Avistone, we remain bullish on this sector – and we invite you to explore how this strategy can work for your portfolio.