2 — August 2025 — M id A tlantic Real Estate Journal
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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher, Conference Producer ..............Linda Christman VP, Conference Producer .............................Lea Christman Editor/Graphic Artist ......................................Karen Vachon Contributing Columnist ........David Hansel, Lucern Capital Partners Mid Atlantic R eal E state J ournal ~ Published Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 117 HMS Halsted Dr., Hingham, MA 02043 USPS #22-358 | Vol. 37, Issue 8 Subscription rates: 1 year $99.00, 2 years $148.50, 3 years $247.50 & $4.00 single issue - plus postage
David Hansel
How to Unlock Yield in Underperforming Small Bay Assets S mall bay industrial as- sets have been an un- derappreciated segment of the commercial real estate market for decades. These flexible building structures, typically range from 10,000 – 100,000+ s/f, offer the abil- ity to scale individual tenant spaces up or down as needed, making them a staple of the US industrial market. Yet not all small-bay assets deliver the same return potential. Older, legacy-owned assets are often under-managed, requiring a specialized, hands-on ap- proach to unlock value. Where some see stagnation in small-bay industrial assets, others see untapped potential. With the right operational strategy and a focus on value creation, these overlooked properties can become consis- tent performers. Unlocking yield starts with a disciplined, hands-on approach. 1 | Start with Mispriced Opportunity
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Many older small-bay prop- erties are owned by mom-and- pop operators who have tradi- tionally prioritized long-term stability over maximizing net operating income (NOI). As a result, rents are below market, common area maintenance (CAM) charges are inconsis- tently recovered, and higher vacancy rates are accepted as a cost of doing business. This dynamic creates op- portunities for yield-oriented investors. Mispricing in these assets is often tied to three primary characteristics: be- low-market rents relative to comparable properties, inef- ficient property management, and a clear runway for lease- up within a relatively short time horizon. When these ele- ments converge, there is often
significant embedded value that can be realized through strate- gic operational improvements. 2 | Re-Tenant with Intent Small-bay tenants are sticky, but not forever. As leases roll, underperforming assets often rely on conve- nience to retain occupancy, leaving yield on the table. A more intentional approach to leasing can dramatically improve performance. Attract- ing higher-quality tenants that align with both local market dynamics and broader national trends, such as last-mile lo- gistics, clean tech services, and e-commerce support, can improve cash flow and tenant retention. Additionally, shorter lease terms should be viewed as opportunities for rent resets, continued on page 38
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