Small-bay industrial research often starts with a compelling observation: the buildings used by local contractors, suppliers, and small manufacturers may have a different supply picture from large distribution warehouses.
That is worth investigating. It is also easy to overstate.
A report might show low vacancy in smaller buildings, but the definition of “small” can vary. One dataset may classify the size of the entire building. Another may focus on individual suites. Some include office-heavy flex properties, while others exclude them. A regional average can combine locations that do not compete for the same tenants.
For Draymoor Ventures, the useful question is whether there is a shortage of comparable, usable space in the specific area we are studying. Answering it requires a clearer inventory than a headline percentage.
Define the tenant before defining the market
Begin with the businesses that could use the subject property.
A plumbing contractor with service vehicles may need different space from a light manufacturer or an online seller. Requirements can include suite size, door dimensions, power, ceiling height, parking, storage, and permitted activities. Some businesses need a modest office component. Others would see a large office buildout as expensive space they cannot use.
Location matters in a similarly specific way. A service business may want to stay near its customers and employees. A supplier may care about delivery routes. A business handling specialized equipment may need access that a nearby property cannot provide.
Once the likely user is defined, identify the area in which that business would realistically consider alternatives. That area may be smaller than the city boundary and much smaller than the region used in a brokerage report.
Inventory suites as well as buildings
A large building divided into small bays can compete directly with a smaller freestanding building. A small building containing a single large space may not compete with either if the intended tenant needs a much smaller suite.
This is why building-size categories alone can mislead.
A useful inventory records both the total property and the individual spaces. It should include suite sizes, configuration, access, major functional limitations, and whether the space is actually available to lease.
Owner-occupied buildings need separate attention. They may be part of the physical stock, but they are not necessarily available to a tenant searching today. Conversely, an occupied suite advertised for a future move-out may be a relevant alternative even though it is not currently vacant.
The objective is to understand the options facing a real tenant rather than simply count industrial square footage.
Keep vacancy and availability separate
Vacancy generally describes space that is unoccupied. Availability may also include occupied space being marketed for future use or sublease. The precise definitions depend on the source and should be stated.
For a hypothetical market with 200,000 square feet of comparable inventory, 10,000 empty square feet would represent 5% physical vacancy. If another 10,000 occupied square feet is being marketed, availability could be higher. These are illustrative numbers, not observations about a DV target market.
Both measures can be useful. Vacancy helps describe current occupancy. Availability helps describe competitive choices that may enter the leasing market.
Neither captures every difference in quality. A vacant suite with serious functional limitations may exert little competitive pressure on a useful property. A newly offered, well configured suite might matter a great deal.
Record the definitions, date, and inventory denominator alongside every percentage.
Check what has actually leased
Listings show what owners hope to receive. Completed leases provide a stronger basis for understanding what tenants have accepted, although complete terms are not always accessible.
When possible, compare executed leases for spaces with similar size, location, condition, and function. Ask about the term, concessions, expense structure, improvements, and the time required to find the tenant.
Rent quotations also need consistent units. A monthly rent per square foot cannot be compared directly with an annual figure. Base rent under a net lease should not be treated as the tenant's entire occupancy cost.
For example, a hypothetical 2,000-square-foot suite at $15 per square foot per year has annual base rent of $30,000, or $2,500 per month. Reimbursements, utilities, and other tenant obligations would come on top where applicable. Whether that cost is workable depends on the tenant and local alternatives.
The relevant question is what comparable businesses pay for usable space after the important terms are included.
Treat time on market as evidence with context
An empty bay that leases quickly can be evidence of demand, but one transaction is not a market. A space that remains listed for months could reflect weak demand, poor configuration, an unrealistic asking rent, or a listing that has not been updated.
Track first observation, confirmed status changes, and known lease dates. Ask brokers and managers what the listing history means rather than assuming every old advertisement represents continuing vacancy.
Tenant renewals can also reveal useful information. Why do businesses stay? Why do they leave? Are renewals happening at higher costs, with concessions, or through extended negotiations?
These conversations help distinguish a shortage of space from a shortage of space at the advertised terms. They also reveal which building features tenants will compromise on and which they will not.
Look beyond buildings under construction
Future competition can enter the market through more than new development.
An owner may subdivide a larger space, convert a property to a different configuration, or offer an owner-occupied building for lease. Existing vacant space might become more competitive after repairs. A nearby development may compete for some tenant types even if it does not match the subject property exactly.
At the same time, proposed projects are not completed inventory. Land availability does not establish that a viable competing project can be entitled, financed, built, and leased at current rents.
Separate proposed, approved, under-construction, and delivered projects. Note whether their intended suite sizes and uses overlap with the subject property. The distinction helps keep both supply fears and scarcity claims grounded.
Build a view that can be disproved
A good research process leaves room for evidence that challenges the investment idea.
If the thesis is that usable bays are scarce, look for hidden alternatives, concessions, slow leasing, and tenants choosing less expensive locations. If the thesis depends on expanding local businesses, look for actual space requirements rather than counting every new business registration as industrial demand.
Maintain a simple research log showing the source, observation date, definition, and confidence for each material claim. Public listings, broker interviews, site observations, and executed lease evidence each contribute different kinds of information. Conflicts should remain visible until resolved.
The result does not need to be a perfect census. It needs to be sufficiently transparent to explain what is known, what is estimated, and what could change the conclusion.
Scarcity matters only at a workable price
Even a well supported shortage does not settle the acquisition decision. The building may require substantial work, the tenants may have limited ability to absorb higher costs, or the purchase price may already reflect the perceived scarcity.
Supply and demand research should feed the underwriting through supported rents, vacancy assumptions, leasing timelines, and capital requirements. It should not become a blanket premium attached to every small industrial building.
The objective is to identify space businesses can use, understand the alternatives, and estimate income with enough margin for uncertainty. That is a stronger foundation than relying on a low regional vacancy number alone.