Entrepreneurial Companies Spur Small-Box Industrial Growth

Industrial demand has been focused on large-box product this cycle, especially with the rise of ecommerce and the Amazon effect. In addition, the economic recovery came from the top down, further driving the need for larger industrial space. However, the stability of the economy has now fueled growth for smaller companies and has subsequently generated demand for small-box industrial spaces.

“The economic recovery started with larger corporations and trickled down to smaller corporations. In the last several recessions, it has been the opposite, where smaller companies emerged first and larger companies were slower to recover,” Jonathan Pharris, co-founder and president of industrial developer CapRock Partners, tells GlobeSt.com. “In this last recession, however, it was really top-down. That really drove big box development everywhere in the United States. Now, the entire market has recovered, and over the last 24 to 18 months, more entrepreneurial companies have felt comfortable enough in this economy that they are expanding. As a result, 50,000 to 200,000-square-foot spaces are in high demand.”

CapRock Partners has seen the pent-up demand for industrial product, and currently has 1 million square feet of new small-box industrial product under construction. Small box product takes on a different look than larger product. It generally averages 50,000 square feet, has four dock-high doors, is mostly used for distribution but could include manufacturing uses, and is single-tenant occupied. “We have seen this pent-up demand. Many developers, us included, have focused on big box industrial because that has been where the demand is,” says Pharris. “It is also more expensive to build a small-box building than it is to build a big-box building, and we are now at a point where we can build small box buildings. Today, the standing inventory of small-box buildings is at an all-time low.”