Once considered unlikely candidates for urban revival, instrument makers, furniture designers, textile and fashion producers, craftspeople, food processors, art studios and specialty fabricators are part of a quiet transformation sweeping through American cities. A growing number of cities and towns are embracing a return to an era when small-scale businesses not only supplied goods and services but also created jobs and injected life into local economies, The New York Times reports. This resurgence is poised to reshape commercial real estate, influencing everything from warehousing and manufacturing to new retail dynamics and the evolution of mixed-use developments.
The concept itself is not entirely new. Across the country, especially in smaller cities and towns, clusters of individual businesses have long thrived in repurposed spaces like old mills. What’s different now is the expansion of these small-scale enterprises into larger metropolitan areas.
New York City, for example, revised its zoning rules last year to accommodate this shift. The changes broadened the types of emerging businesses—such as indoor agriculture, life sciences research and development and micro-distribution centers—that can operate in all commercial districts.
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The new regulations also permit a wider range of commercial uses in additional districts, even allowing them on the second floor of mixed-use buildings. Activities like apparel, furniture, medical equipment manufacturing, and certain types of food and beverage production—which were once restricted to manufacturing districts—are now allowed in most commercial districts, The Times explained.
Elgin, Illinois, a suburb of Chicago, enacted similar zoning changes last year. The city introduced an “Artisan Industry” category, which covers businesses engaged in the small-scale fabrication, preparation, or production of goods by artists, artisans, craftspeople, or cooks, for wholesale, on-site, or online retail sales. These spaces encourage collaboration, with shared tools and work areas, and allow artisans to teach their skills as well as create products for sale. The range of goods includes everything from cooking and micro-distilleries to cheese shops, candy stores, electronics, as well as food and beverage production.
Another aim is to encourage people who currently work part-time from home to establish local businesses. In Seattle, the City Council is expected to vote soon on a proposal that would allow artisan manufacturers in residential neighborhoods, paving the way for more walkable, mixed-use communities.
For commercial real estate developers and owners, these evolving trends present substantial new opportunities. Many are transforming underutilized or vacant urban properties into multi-tenant light industrial and warehouse facilities to meet the rising demand from small-scale manufacturers and makers.
Small-scale industrial infill is emerging as one of the most compelling investment prospects for 2025. Vacancy rates for warehouses under 100,000 square feet have plummeted—reaching as low as 3.9% in some markets—while rents for small bays have surged by more than 40% since 2020, outpacing the performance of larger warehouse assets.
Retail landlords are also capitalizing on this shift by leasing space to artisan producers who combine on-site production with direct-to-consumer sales. This hybrid approach blurs the traditional boundaries between manufacturing and retail, resulting in unique shopping experiences.
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