Reviewed by Robert Mendieta Jr., CCIM — Associate Broker · Commercial Division · DRE #01422904
Last updated: October 14, 2026 · More CRE guides
Small bay industrial is the part of the industrial market built for smaller users: stand-alone buildings or multi-tenant suites, under 100,000 square feet by one industry definition, designed for local and regional businesses. It serves small business owners, service providers and last-mile distribution.
In the Inland Empire, the smallest buildings are the tightest part of the market. Apex’s analysis of CoStar data (Q3 2026) puts availability in buildings under 50,000 SF below 7%, against 18% for buildings of 250,000 to 500,000 SF. This guide covers what small bay industrial real estate is, who leases it, how its leases split costs, and where regional demand sits.
The direct answerWhat Is Small Bay Industrial?
Small bay industrial is industrial space in smaller units, either stand-alone buildings or suites in a multi-tenant industrial building, that one industry definition places under 100,000 square feet. The spaces often have dock or grade-level loading and serve local and regional users such as service contractors, light manufacturers, e-commerce operators and building suppliers.
That definition comes from an article in CREDA’s Development magazine (CREDA was NAIOP until July 1, 2026), so treat it as a working industry definition, not a legal or CoStar standard. CREDA’s research foundation calls the product small- and shallow-bay multitenant industrial buildings, a relatively small share of recent development that serves tenants from many industries, often in the same building.
Key Takeaways
- Defined by size. One industry definition puts small bay under 100,000 SF.
- Tighter than big box. CoStar puts 2026Q2 U.S. vacancy at 6.3% for buildings under 200,000 SF versus 9.6% for larger ones; Inland Empire availability under 50,000 SF is below 7% (Q3 2026).
- More per foot, shorter terms. Multitenant small bay typically carries higher rent per square foot and shorter leases.
- The lease decides who pays. Gross, modified gross and triple net leases split operating costs differently.
- New supply is limited. Land and per-foot construction costs hold back new small buildings.
How Big Is a Small Bay Industrial Unit?
There is no single standard. One industry definition caps small bay at 100,000 SF, and CoStar’s national data shows most leasing happens in suites under 20,000 SF.
CoStar’s national bulk distribution report says mid-sized multi-tenant properties average suites of around 50,000 SF and typically can’t serve those sub-20,000-SF tenants. Many developers are revising site plans for smaller tenants, though not every building can be demised. CoStar also has no small bay subtype: its Inland Empire reports split industrial into Logistics, Specialized Industrial and Flex, and report availability by building size.
Small bay vs. shallow bay industrial
Shallow bay industrial describes building depth; small bay describes unit size. Bay depth runs from the bay door or dock wall on one side of a building to the door or wall on the other, so a shallow bay building is less deep front to back. CREDA uses the terms together, and its August 2026 report, Developing, Owning and Operating Shallow Bay Industrial Buildings, covers the same multitenant product.
How it comparesSmall Bay Warehouse vs. Big Box vs. Flex: What’s the Difference?
Big box means bulk distribution buildings larger than 200,000 SF, small bay means smaller units for local users, and flex is defined by use, with a large office share.
| Feature | Small bay | Big box | Flex |
|---|---|---|---|
| Size | Under 100,000 SF (one definition) | Over 200,000 SF | Defined by use, not size |
| Typical users | Contractors, light manufacturers, e-commerce, building suppliers | Large logistics users | Service centers, showrooms |
| Office share | Varies by suite | Varies by building | Typically at least 20% |
| Asking rent | Under 200,000 SF: $11.41/SF/yr (U.S.) | 200,000 SF+: $8.50/SF/yr (U.S.) | IE Flex: $1.55/SF/mo vs. $0.97 Logistics |
| Vacancy | Under 200,000 SF: 6.3% (U.S.) | 200,000 SF+: 9.6% (U.S.) | IE Flex: 6.2% |
| Cycle exposure | Less sensitive to booms and busts | More sensitive | Separate CoStar subtype |
A small bay building can contain flex suites, but the two aren’t the same. Small bay flex is a small suite built out to the flex standard: space that converts easily between office and warehouse use, typically with at least 20% of floor area in office. CoStar’s Inland Empire Flex subtype totals about 16.2 million SF, roughly 2% of industrial inventory, and describes that building type, not small bay as a whole. If you need yard more than building, compare industrial outdoor storage (IOS).
Under 7%
IE availability, buildings under 50,000 SF
Source: CoStar, Q3 2026
$11.41/SF
U.S. yearly asking rent, buildings under 200,000 SF
Source: CoStar, 2026Q2
6.3%
U.S. vacancy, buildings under 200,000 SF
Source: CoStar, 2026Q2
Who Leases Small Bay Industrial Space?
Local and regional businesses: service contractors, light manufacturers, e-commerce operators, building suppliers, small business owners and last-mile distribution users.
That mix spreads risk for owners of multi-tenant industrial buildings, but management intensity kept institutional investors away for years. Limited new supply has since meant lower vacancies and higher rents than larger buildings, drawing lenders and institutions in.
Owner-users matter too. In CoStar’s Riverside submarket, users account for over 15% of buyer volume over the past decade, and CoStar describes the Coachella Valley submarket as characterized by owner-user acquisitions and locally based businesses. Comparing suites across several parks? Tenant representation puts an advisor on your side.
Lease structureHow Do Small Bay Industrial Leases Work?
Multi-tenant industrial buildings share operating costs, and the lease decides who pays them. Small bay leases can be gross, modified gross or triple net, with typically shorter terms.
- Gross. The landlord receives a stipulated rent and pays all operating expenses and real estate taxes.
- Modified gross. Operating expenses are divided between landlord and tenant by the lease terms.
- Triple net (NNN). The tenant pays taxes, maintenance, insurance and its operating costs; the landlord typically keeps the roof, HVAC and structure.
Your pro rata share is usually your leased area divided by the building’s net rentable area, though expense stops and other lease terms change the math. Those shared costs are your CAM charges.
Hypothetical example: you lease 6,000 SF in a 60,000 SF building, a 10% pro rata share. If reimbursable expenses are $120,000 a year, your share is $12,000 a year ($1,000 a month), adding $2.00/SF a year, about $0.17/SF a month, to base rent.
In the Inland Empire, CoStar reports landlords often offer several months of free rent, sometimes on shorter-term deals too.
California adds a rule for the smallest tenants. Civil Code § 1950.9 (SB 1103, effective January 1, 2025) bars a landlord from charging a qualified commercial tenant for building operating costs unless the costs are allocated proportionately with supporting documentation, were incurred within the previous 18 months or are reasonably expected within the next 12, the tenant got a pre-lease notice of inspection rights, and documentation arrives within 30 days of a written request. Qualified tenants are microenterprises (five or fewer employees, including the owner, and generally lacking access to capital), restaurants with fewer than 10 employees and nonprofits with fewer than 20 that have given the landlord written notice and a self-attestation of their employee count: for a lease longer than month to month, before or upon signing and annually after; for a month-to-month or shorter tenancy, within the previous 12 months. The section applies only to leases signed, or tenancies begun or renewed, on or after January 1, 2025, to month-to-month or shorter tenancies, and to older leases with no operating-cost provision.
Not legal advice. Apex Real Estate Services is not a law firm. Have your attorney confirm whether § 1950.9 applies to your lease.
What Does Small Bay Space Cost Compared With Big Box?
More per square foot, on a smaller footprint. CoStar’s 2026Q2 national data says the larger the space, the lower the rent: U.S. buildings over 750,000 SF average about $8/SF triple net, while buildings under 200,000 SF average over $11/SF.
In Apex’s analysis of CoStar data (Q3 2026), Inland Empire Flex, a separate building type rather than a small bay measure, asks $1.55/SF a month against $0.97 for Logistics, about 60% more per foot. In CoStar’s South Riverside submarket, average asking rents run roughly 20% above the metro average, supported by a concentration of smaller manufacturing buildings and nearby affluent households. There, the second phase of MS Mountain View Park on Avenida Alvarado delivered 19 buildings, most under 40,000 SF, asking $14.40 to $18.60/SF a year triple net, about $1.20 to $1.55/SF a month.
Market-wide, Inland Empire triple-net asking rents trend about 25% below their 2023 peak, and with concessions, CoStar reports market observations of effective rents up to 40% lower, depending on location, size and vintage. For rent ranges and occupancy cost math, see what warehouse space costs in the Inland Empire.
Inland Empire demandWhy Is Small Bay Industrial Real Estate in Demand in the Inland Empire?
Because the region’s smallest buildings remain in stronger demand, while availability in mid- to large-sized buildings has soared. CoStar’s Q3 2026 data shows availability under 7% in buildings under 50,000 SF.
| Building size | Availability |
|---|---|
| Under 50,000 SF | Under 7% |
| 50,000–100,000 SF | 10% |
| 100,000–250,000 SF | Around 14% |
| 250,000–500,000 SF | 18% |
| 500,000 SF and larger | In the 12% range |
The overall market is looser, with 8.7% vacancy, near a 15-year high, and 12.5% availability. CoStar’s submarket reports point to smaller product:
- Riverside. Strong demand for the many buildings under 25,000 SF delivered over the past three years; buildings under 50,000 SF have generally absorbed quickly, though several smaller deliveries under 60,000 SF remain available.
- Mojave River Valley. Nearly 90 leases of 20,000 SF or less were signed in 2025.
- Moreno Valley/Perris. A handful of buildings under construction are mostly small-bay.
- Airport Area. The nation’s largest industrial submarket, at 259 million SF, has developments from small-bay projects to million-SF facilities.
- San Bernardino. Development has shifted toward midsized and smaller buildings.
Behind that is a local customer base of 4.78 million people, the 11th-largest market in the country (CoStar, August 2026). Demand for shallow bay space is usually greatest near population centers and transportation thoroughfares, where higher land costs and higher per-foot construction costs for smaller buildings have limited new construction.
CoStar submarkets are not city limits. The names above are CoStar’s submarkets, not cities.
For the full quarter, see our Inland Empire industrial market report and warehouse availability by submarket.
Owner-usersShould You Lease or Buy a Small Bay Building?
Buy to lock in occupancy costs if you can use a whole small building; lease for flexibility. In CoStar’s Riverside submarket, users often buy buildings of roughly 20,000 to 50,000 SF at price points in the $200/SF range to lock in real estate costs. To lease now and buy later, see how a commercial lease with option to purchase works.
New buildings can sell for more. At Caterpillar Industrial Park on 20th Street, a speculative 175,600-SF development of seven buildings of 23,000 to 48,000 SF in the Riverside submarket, one building sold in August 2024 for $7.9 million ($303/SF) and a second in January 2025 for $9.1 million ($305/SF). Many investors work the other end, buying vintage buildings and marking rents to market. For financing, see buying a warehouse with an SBA 504 loan.
Before you signWhat Should You Check Before Leasing a Small Bay Warehouse?
Check the building against your operation and the lease against your budget.
- Clear height. Floor to the lowest hanging ceiling member, the key measure of usable height. Not every tenant needs 32 feet.
- Doors. Dock-high doors sit at 4 feet for tractor-trailers, semi-dock doors at 2 feet for smaller trucks, and drive-in doors at grade.
- Truck court and bay depth. Check the court’s depth from the building and the building’s depth door to door.
- Office share. Flex-style suites typically run at least 20% office; budget the build-out with a tenant improvement allowance.
- Expense allocation. Confirm how your pro rata share is calculated and documented.
- Room to grow. Many buildings can’t be subdivided into suites under 20,000 SF, so ask about expansion options.
For location factors from freeways to labor, see warehouse site selection. To compare buildings with an advisor, see our industrial real estate broker page.
Small Bay Industrial: Frequently Asked Questions
What is considered small bay industrial?
Industrial space in smaller units, either stand-alone buildings or suites in a multi-tenant building. One industry definition, from CREDA’s Development magazine, puts it under 100,000 square feet. CoStar’s national data shows most U.S. leasing happens in suites under 20,000 square feet.
What is the difference between small bay and shallow bay industrial?
Small bay refers to unit size. Shallow bay refers to building depth, measured as bay depth from the door or dock wall on one side to the other. CREDA uses the terms together for multitenant buildings serving small business owners, service providers and last-mile distribution.
Who leases small bay warehouse space?
Local and regional businesses: service contractors, light manufacturers, e-commerce operators, building suppliers, small business owners and last-mile distribution users, often from different industries in the same building.
Are small bay industrial leases gross or triple net?
It depends on the building and landlord. In a gross lease the landlord pays operating expenses and real estate taxes; in a modified gross lease they are split by the lease terms; in a triple net lease the tenant pays taxes, maintenance, insurance and its operating costs.
Is small bay industrial more expensive per square foot than big box?
Usually, yes. CoStar’s 2026Q2 national average asking rent is $11.41 per square foot a year for buildings under 200,000 square feet, versus $8.50 for larger buildings. In CoStar’s South Riverside submarket, a concentration of smaller manufacturing buildings helps keep average asking rents roughly 20 percent above the Inland Empire average.
Is small bay industrial space hard to find in the Inland Empire?
Generally, yes. CoStar’s Q3 2026 data puts availability in Inland Empire buildings under 50,000 square feet below 7 percent, versus 18 percent for buildings of 250,000 to 500,000 square feet. Some smaller new buildings in the Riverside submarket remain available.
Is flex space the same as small bay industrial?
No. Flex is a building type that converts between office and warehouse use and typically has at least 20 percent of its floor area in office. Small bay describes unit size. A small bay building can include flex suites.
Find the right small bay space
Tell us your square footage, loading needs and timing. Robert Mendieta Jr., CCIM, will help you compare small bay suites and buildings across the Inland Empire, read how each lease shares operating costs, and negotiate terms.
Apex is not a law firm. Have your attorney review lease terms.
Call Robert: (951) 977-3251Or call Joseph Lombera, Commercial Agent + CMO · DRE #01971957: (909) 406-6538
Or request a free CRE consult below.
Sources (web pages accessed October 6, 2026): CoStar · Inland Empire Industrial Market Report and Riverside, South Riverside, Moreno Valley/Perris, Airport Area, Mojave River Valley, Coachella Valley and San Bernardino Industrial Submarket Reports · Q3 2026, dated September 30, 2026; Industrial Bulk Distribution National Report: United States · 2026Q2, dated September 18, 2026; About the Market Report: Inland Empire · August 26, 2026 (licensed data). CREDA (formerly NAIOP) · The Small-bay Surge at the Heart of the Industrial Market’s Recovery · Spring 2026. CREDA Research Foundation · Developing, Owning and Operating Shallow Bay Industrial Buildings · August 2026; Preview of Upcoming Research · July 2026. CREDA · Commercial Real Estate Terms and Definitions · current edition. California Legislative Information · Civil Code § 1950.9 and Business and Professions Code § 18000 · current text.
Robert Mendieta Jr., CCIM · Associate Broker · Commercial Division · DRE #01422904 · Joseph Lombera · Commercial Agent + CMO · DRE #01971957 · Apex Real Estate Services · 3750 E. Florida Ave Suite A, Hemet, CA 92544 · (951) 977-3251 · robert@apex-res.com