Determining the Right Path to Small-Bay Industrial Ownership: Should You Buy an Existing Facility or Build New?

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Determining the Right Path to Small-Bay Industrial Ownership: Should You Buy an Existing Facility or Build New?

Small-bay industrial properties are in high demand, creating strong opportunities for both seasoned investors and first-time entrants. One of the most critical decisions you’ll face is whether to purchase an existing facility or build a new one. Each path offers unique benefits, challenges, and risk profiles — and the right choice depends on your goals, budget, and market conditions.

Buying an Existing Small-Bay Industrial Facility

Advantages:

  • Immediate Revenue Stream – If tenants are already in place, you start collecting rent and generating cash flow from day one.
  • Established Infrastructure – Utilities, parking, and build-outs are already in place, reducing startup costs.
  • Faster Market Entry – Acquisitions can close faster than a construction timeline, allowing you to capitalize on demand immediately.

Challenges:

  • Market Competition – Demand is high. In Q4 2024, the U.S. vacancy rate for warehouses under 100,000 SF was just 3.9%, signaling a tight market.
  • Potential Renovation Costs – Older assets may need upgrades to compete with modern facilities.
  • Inherited Issues – Outdated systems, environmental concerns, or unfavorable leases can erode returns.

Building a New Small-Bay Industrial Facility

Advantages:

  • Customization – You control the design, size, and layout to fit operational needs and target tenant profiles.
  • Energy Efficiency – Modern construction allows for sustainable materials and high-efficiency systems, lowering long-term operating costs.
  • Compliance with Current Standards – Avoids costly retrofits by meeting today’s codes from the start.

Challenges:

  • Higher Initial Costs – Land, materials, labor, and permits add up quickly.
  • Longer Timeframe – Planning, approvals, and construction delay revenue generation.
  • Market Risks – Extended build timelines expose you to shifts in demand and interest rates.

Key Decision-Making Considerations

  • Market Demand – Gauge the appetite for small-bay space in your target area. For example, Seguin, Texas, is experiencing a surge in demand from small businesses.
  • Financial Analysis – Compare the total cost of acquisition versus construction alongside projected ROI and lease-up timelines.
  • Location Strategy – Consider proximity to highways, suppliers, labor pools, and customers.
  • Risk Tolerance – Decide how much exposure you can handle — from construction delays and cost overruns to unforeseen issues in an existing property.

“The right path isn’t just about cost — it’s about matching the asset to your investment horizon, cash flow goals, and market timing.” – Cody Payne

Conclusion

Whether you buy or build, the decision should be based on a clear-eyed analysis of market conditions, capital requirements, and long-term strategy. Both options can yield strong results if aligned with your investment objectives.

“In small-bay industrial, success comes from preparation — know your market, know your numbers, and choose the route that positions you to win.” – Cody Payne


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