TAG Industrial Watch: January 31, 2026

Three years ago, TAG began highlighting the growing divergence in vacancies between big-box warehouses and small industrial properties. Since then, TAG has foreshadowed the day that institutional investors would gravitate toward small industrial properties, and based on a recent article by Globe Street, that day has officially arrived. The article points out that the “Average sale prices for buildings under 100,000 square feet rose 10.6% year-over-year (in Q4 2025), outpacing the 3.5% growth of larger properties…” Despite the boost in property values, market fundamentals among industrial properties under 100,000 square feet continue to deteriorate.

In 2025, net absorption contracted for a record third consecutive year, dropping to the lowest level since 2009 and pushing the vacancy rate to a 12-year high of 5.7% (CoStar). As referenced in the article, big-box vacancy rates are nearly twice this level. If you are an investor or owner-user of a small industrial property that is considering a sale, the attraction of institutional investors comes at a convenient time. Although investment demand continued to rebound last year, landlords should not overlook the potential impact that market fundamentals can have on sales activity, especially in an economic environment with rising interest rates.