Small industrial buildings, the ones under 50,000 square feet, are the hardest kind of industrial space to find empty. Cushman & Wakefield put vacancy in its shallow-bay segment at 4.8% in the second quarter of 2026, the lowest of any size, while the market as a whole sat at 6.9% (C&W Q2 2026 MarketBeat).
The cause is supply. These buildings make up about 31% of U.S. industrial space but only about 7% of what's being built, and most of them went up before 2000 (BKM Q2 2026 update, citing Newmark and CoStar; CBRE, March 2026). That gives owners less new competition than almost any other industrial product, and leaves tenants who need to move with few places to go.
Small-building vacancy has run below the market every year since 2017
Every major research house we read puts small-building vacancy below the market overall. They define "small" differently and measure vacancy their own way, so the levels don't line up, but the gap shows up in every one.
| Source | What counts as small | Small buildings | All industrial | As of |
|---|---|---|---|---|
| Cushman & Wakefield | Shallow-bay | 4.8% | 6.9% | Q2 2026 |
| Marcus & Millichap | 10,000 to 50,000 sq ft | 4.5% | 7.8% | Mar 2026 (overall; size bands undated) |
| BKM, citing CoStar | Under 50,000 sq ft | about 4% | about 8% for larger buildings | Q1 2026 |
CBRE, which defines shallow-bay as under 50,000 square feet with 14 to 28 foot clear heights, says vacancy in that segment has been below the overall rate every year since 2017, by 2.5 points as of early 2024 (CBRE). Cushman & Wakefield called smaller-bay space the tightest segment nationally in its 2025 year-end report (C&W, January 2026).
The wider market has tightened a little this year too. National vacancy was 6.8% in the third quarter of 2026 by Cushman & Wakefield's count and 6.4% by CBRE's, with most new supply going into big distribution buildings (C&W Q3 2026; CBRE Q3 2026).
Almost nobody builds them
Small industrial buildings are 31% of the stock but 7% of new supply.
Share of U.S. industrial square footage in buildings under 50,000 sq ft, Q1 2026.
Small buildings cost far more per foot to build. Cushman & Wakefield's 2026 cost guide puts core-and-shell construction at $144 a square foot for small projects against $78 for large ones, averaged across 46 markets in the Americas (C&W cost guide; BDC Network summary).
The land is the expensive kind too. Small buildings work best close to the customers and workers they serve, on infill sites where land costs more and zoning often favors other uses. Matthews found that entitling a small parcel can take almost as long as a 40-acre site (Matthews, 2024). CBRE adds that institutional money prefers large distribution buildings with long leases (CBRE).
Higher rates made it worse. Corebridge says new small buildings need rents above current Class B levels to pencil, that the pipeline has shrunk since rates rose in 2022, and that some infill land has gone to apartments and mixed use instead (Corebridge, June 2025).
So the stock keeps getting older. CBRE counts nearly half of shallow-bay space as built before 1980, more than 80% before 2000, and only about 5% since 2010 (CBRE).
What it means if you own one, or lease one
Existing small buildings sell for about what it costs to put up a new shell, before land. CoStar's average sale price for buildings under 50,000 square feet was $147 a foot in the second quarter of 2026 (BKM, citing CoStar), close to Cushman & Wakefield's $144 core-and-shell cost for small projects. In January, Newmark sold a 1.4 million square foot portfolio of small Mid-Atlantic buildings for $203M, which works out to about $145 a foot (Newmark). The comparison is our own arithmetic and the cost figure is a broad average. It suggests existing buildings trade near the cost of a new shell, though an older building often needs roof, clear-height and other capital work a new one wouldn't.
If you own a small building with a tenant in it, that tenant has few new buildings to move to, which tends to help at renewal. It doesn't replace the lease itself. When the building sells, buyers still price the term left and who signed the lease before they price the market around it. We've written about both: what remaining term is worth and who actually signs the lease.
If you lease one, start renewal talks earlier than you would for a larger space. Headline vacancy for your market probably overstates your options, and most of what is available will be decades old.
What could loosen it
Construction is picking up again, though almost all of it is large. Cushman & Wakefield counted 324 million square feet under construction in the third quarter of 2026, up 23% from a year earlier; CBRE counted 278 million, up 9% (C&W Q3 2026; CBRE Q3 2026). If more small projects start to pencil, the gap would narrow, though it would take years of building to move a 31% share.
The rent evidence is mixed. Corebridge found rents on suites under 50,000 square feet up more than 40% since 2020, against about 30% for the broader market on its own measure (Corebridge). CBRE, looking back further, puts shallow-bay rents more than 50% above 2010 levels but says they grew more slowly than the overall market during the pandemic boom (CBRE).
Marcus & Millichap forecast in May that overall vacancy on its measure would reach 8.4% by the end of 2026 (M&M), though third-quarter data from Cushman & Wakefield and CBRE has moved the other way. A looser market would give some small tenants the option of moving into cheaper space in a larger building.
National averages also hide a lot. Greater Philadelphia's overall industrial vacancy was 8.39% in the third quarter (Lee & Associates), well above the national figure, and nobody we found publishes a small-building rate for the region. Check your own submarket before leaning on any of the numbers here.
Notes on method
This paper uses published research only. Every figure links to the page we read it on, as of 27 October 2026. Where a figure came through a second publisher, we name the original source too.
- Most sources define small as under 50,000 square feet, and CBRE adds a 14 to 28 foot clear height. Cushman & Wakefield doesn't state the size behind its shallow-bay figure. We say which cut each number uses.
- Vacancy series differ by firm. Marcus & Millichap's overall rate runs about a point above Cushman & Wakefield's and CBRE's, so we compare small against overall within one source, never across sources.
- BKM Capital Partners manages small-bay industrial funds. We use its report because it collects Newmark and CoStar data that is otherwise paywalled, and we name the underlying firm.
- The cost comparison is our own arithmetic. Cushman & Wakefield's $144 is an average for small core-and-shell projects across 46 markets in the Americas, and the guide doesn't say where small ends. We found no published discount to replacement cost for small buildings.
- We left out widely repeated figures we couldn't trace to an original source, including a $160 to $220 a foot construction range and a claim that small buildings are 36% of inventory.
Corbel Partners buys and holds veterinary, medical and light industrial real estate. We write up some of what we find along the way. This paper is general market research, not investment, legal or tax advice.