What Is Small-Bay Industrial Real Estate?
Small-bay industrial properties are typically under 5,000 square feet and designed for flexibility. They cater to a wide range of tenants—from local contractors and service businesses to e-commerce last-mile delivery and light manufacturers. Unlike massive distribution centers, small-bay spaces are often multi-tenant, adaptable, and located closer to urban centers, making them ideal for businesses that need to be near their customers.
Why Is Small-Bay Industrial Booming in Des Moines?
1. Chronic Undersupply
Developers in Des Moines and across the Midwest have historically focused on building large, bulk distribution centers, as these projects are more capital-efficient given high land and construction costs. As a result, there’s a structural shortage of small-bay spaces. Many existing small industrial properties are being demolished for residential or large-format redevelopment, further tightening supply.
2. Diverse and Resilient Tenant Base
Small-bay properties attract a “sticky” mix of tenants, including:
- Local contractors (HVAC, plumbing, electrical)
- E-commerce last-mile delivery and staging operations
- Light manufacturers
- Service-oriented businesses (auto repair, gyms, specialty trades)
This diversity makes the sector resilient to economic fluctuations, as these essential services remain in demand regardless of broader market conditions.
3. E-Commerce and Last-Mile Delivery
The continued rise of e-commerce is fueling demand for smaller, strategically located “last-mile” facilities. Businesses need to be closer to urban populations to meet same-day or next-day delivery expectations, making small-bay spaces in Des Moines especially valuable.
4. Small Business Growth
A surge in entrepreneurship and the expansion of small and medium-sized enterprises (SMEs) is driving demand for flexible, affordable workspace. Small-bay units provide the adaptability these businesses need to grow and thrive.
5. Shorter Lease Terms
Small-bay properties typically offer shorter lease terms (1–5 years), allowing landlords to adjust rents more frequently to market rates. This is a significant advantage in an inflationary environment, benefiting both owners and tenants seeking flexibility.
Market Performance: By the Numbers
| Metric | Small-Bay Industrial | Large Warehouse (Big-Box) |
| National Vacancy Rate (2025) | 3.4% | 7–10% |
| Des Moines Vacancy Rate (Q3 2025) | Below 5% (implied) | 16.5% (bulk warehouse) |
| Rent Growth | Outpacing large-box | Slower, some concessions |
| Investor Demand | Surging | Softening |
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- Des Moines Market: The overall industrial vacancy rate stabilized at 5.7% in Q3 2025, but small-bay spaces are even tighter, with vacancy rates consistently below the broader market average.
- Rent Growth: Rents for small-bay spaces have climbed significantly, often exceeding $12–$15 per sq. ft. (NNN) in high-quality units, and are expected to continue rising in the Midwest.
- Investor Appetite: Sales volume for small-bay properties is 32% above pre-pandemic averages, with institutional capital increasingly interested in aggregating these portfolios.
Why Investors, Buyers, and Tenants Are Flocking to Small-Bay Industrial
For Investors & Sellers:
- Stable Cash Flow: High occupancy and diverse tenants mean reliable income.
- Rent Growth Potential: Shorter leases allow for frequent rent adjustments.
- Defensive Play: Small-bay assets are less vulnerable to economic swings than large, single-tenant warehouses.
- Strong Exit Market: Investor demand is robust, supporting premium pricing.
For Business Owners & Tenants:
- Location Flexibility: Proximity to customers and urban centers supports business growth.
- Adaptable Space: Ideal for contractors, service businesses, and e-commerce operations.
- Shorter Commitments: Lease terms match business cycles, supporting agility.
- Affordability: Smaller spaces mean lower total occupancy costs and easier scaling.
Outlook: What’s Next for Small-Bay Industrial in Des Moines?
The growth in the small-bay industrial sector is expected to persist throughout 2025 and beyond. While a modest uptick in new construction may occur as developers chase rising rents, it’s unlikely to satisfy pent-up demand or significantly impact low vacancy rates in the near term. The chronic undersupply, combined with resilient demand from local businesses and e-commerce, will continue to drive rent growth and investment returns.
Conclusion: Now Is the Time to Act
Small-bay industrial real estate is the standout performer in Des Moines’ commercial property market for 2025. With record-low vacancy, strong rent growth, and a resilient tenant base, these properties offer compelling opportunities for buyers, sellers, and business owners alike. Whether you’re looking to invest, sell, or secure space for your business, acting now can help you capitalize on this dynamic and fast-moving market.
Ready to explore small-bay industrial opportunities in Des Moines?
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