Demand is rising for “shallow-bay properties” in industrial real estate, reflecting the growing need for smaller-format space tied to service-oriented users and last-mile distribution, according to a report from CBRE.Unlike big-box warehouse properties that have expanded rapidly in recent years, the supply of shallow-bay space has grown only modestly, leaving many markets with aging inventory and limited new construction. CBRE defines shallow-bay space as buildings under 50,000 square feet with clear heights between 14 and 28 feet.Starting in 2017, shallow-bay vacancy began falling below the overall industrial vacancy rate, reflecting growing demand for smaller-format space tied to service-oriented users and last-mile distribution. This gap widened significantly during the recent development cycle, as new supply was largely concentrated in big-box warehouse development while shallow-bay construction remained limited. By early 2024, shallow-bay vacancy was 2.5 percentage points below the overall industrial vacancy rate, underscoring the limited availability amid sustained demand for these smaller facilities.By 2025, shallow-bay asking rents were more than 50% higher than 2010 levels, highlighting the durable demand and supply constraints of this segment. The steady increase in rents over this period reflects continued leasing activity and limited available space for smaller occupiers across most markets.With little new development over the past two decades, shallow-bay industrial inventory in major U.S. markets is heavily concentrated in older facilities. Nearly half of shallow-bay inventory was built prior to 1980 and more than 80% was built before 2000. Properties built since 2010 account for only 5% of total inventory. This aging supply reflects…
