Exploring Secondary Market Opportunities in Small-Bay
Industrial Real Estate
Investors seeking high-yield opportunities in commercial
real estate are increasingly looking to secondary markets for small-bay
industrial properties. These mid-sized metropolitan and suburban markets offer lower
acquisition costs, less competition, and strong growth potential.
While major gateway cities like Los Angeles, New York, and
Chicago have long dominated the industrial sector, markets such as Phoenix,
Charlotte, Nashville, and Indianapolis are emerging as viable alternatives for
investors aiming for strong returns.
Understanding the potential of these markets — and how to
identify the right opportunities — is key to successfully navigating small-bay
industrial investments.
Why Secondary Markets Are Attractive for Small-Bay
Industrial Investment
Unlike heavily institutionalized primary markets, secondary
markets tend to be less saturated and more accessible. Lower land
and development costs allow investors to enter at a lower price point while
still achieving healthy rental income and appreciation.
Tenant demand is also on the rise. Many logistics providers,
service-based businesses, e-commerce suppliers, and light manufacturers are
moving to secondary markets to lower operational costs and be closer to their
workforce and customers.
Additionally, government incentives — such as tax credits,
favorable zoning, and infrastructure investments — often target these growth
areas, encouraging industrial development.
“In secondary markets, you can often buy better locations
for less — and watch them appreciate faster than assets in overheated primary
markets.” – Cody Payne
Key Factors for Evaluating Secondary Market Opportunities
1. Economic and Population Growth
Markets with sustained job growth, corporate relocations, and infrastructure
investment tend to support stronger tenant demand. Diversified economies
(technology, healthcare, logistics, manufacturing) are generally more stable
than single-industry markets.
Examples: Raleigh, Austin, and Salt Lake City are
experiencing business expansion and significant population growth, making them
prime candidates for small-bay investment.
2. Supply and Demand for Industrial Space
Low vacancy rates and limited development often indicate strong demand. Analyze
leasing activity, rental rate trends, and absorption rates to understand market
health.
Example: A market with high demand but limited supply allows
landlords to increase rents and maintain stable occupancy.
3. Infrastructure and Transportation Access
Proximity to interstate highways, ports, rail lines, and airports significantly
increases tenant appeal.
Examples: Louisville (I-65), Columbus (I-70), and Memphis
(I-40/I-55) have become logistics hubs due to prime connectivity.
4. Local Business Climate and Industrial Policies
Pro-business regulations, tax incentives, and zoning that supports industrial
development can boost market attractiveness. Research municipal policies, tax
structures, and economic development plans to ensure long-term viability.
Strategies for Finding and Securing Deals in Secondary
Markets
1. Build Relationships with Local Brokers and Developers
Local professionals can reveal off-market deals and upcoming industrial zones
before they hit public listings.
2. Target Value-Add and Redevelopment Opportunities
Look for underutilized properties that can be modernized, subdivided, or
reconfigured to serve multiple tenants.
3. Conduct Thorough Market Research and Financial
Analysis
Compare lease rates, track economic indicators, and evaluate cap rates to
determine return potential.
4. Focus on Long-Term Growth Potential
Prioritize markets with sustainable population growth, business-friendly
policies, and ongoing infrastructure investment.
“Secondary market success comes from looking past today’s
numbers and focusing on where the growth is heading.” – Cody Payne
Final Thoughts: Why Secondary Markets Matter
As competition grows in primary markets, secondary markets
present a compelling alternative — offering lower entry costs, diversified
tenant bases, and value-add potential.
By analyzing economic drivers, infrastructure, supply-demand
balance, and business climate, investors can tap into the untapped potential of
these markets and position themselves for sustainable, long-term returns
in the evolving industrial real estate landscape.
Comments
Post a Comment