Industrial real estate isn’t moving in one direction anymore. While big-box industrial is dealing with rising vacancies and soft demand, small-bay industrial is outperforming across several metrics. That’s the central takeaway from the newly released Q3 2025 Light Industrial Market Update by BKM Capital Partners (BKM), a vertically integrated institutional fund manager specializing in multi-tenant light industrial real estate.
While large-format warehouses face rising vacancies and softening demand, buildings under 100,000 square feet remain in short supply and high demand among both tenants and investors. BKM’s latest analysis shows that vacancy in the small-bay segment has held steady at approximately 4.5 percent over the past four quarters, roughly half the rate seen in larger facilities.
Despite concerns over industrial overbuilding, supply growth in this segment has totaled just 2.3 percent since 2019, while new construction starts are down 33 per
