By Taylor Williams
What do the phrases “owner-occupier,” “small-bay” and “mid-range WALT” have in common?
They could potentially be obscure references to real-life inspirations behind songs on the new Taylor Swift album. But just in case that’s not the case, these terms also represent types of industrial investment plays that have become increasingly favorable among owners and prospective buyers in Northeast markets. The rising popularity of these deals attests to shifts in the broader landscape, i.e. — large-scale e-commerce and logistics facilities have been either overbuilt or priced to perfection in many areas.
But the past 12 months have seen industrial deal volume in major Northeast markets regain traction. Although some — if not most — of that activity is tied to interest rates and geopolitics, the emergence of different deal types is nonetheless a positive indicator because it speaks to the creative approach that the investment community has taken in its return to the market.
Unlike a few years ago, industrial real estate today is not a mindless beneficiary of both institutional and private debt and equity — a bottomless pit of capital flows. Tenants are no longer forced to write quasi-blank checks to owners just to secure crucial space. Developers are not furiously scouring every appropriately zoned site in the trade area simply because demand is so ridiculously out of control and every deal works at a 3 percent interest rate.
Like a young adult who finally did enough years in college to get the party bug out of his or her system, the asset class has matured into a vehicle in which measured, disciplined capital deployments and rates of return can be had. And the ability of different types of deals to attract capital interest is a sign of the maturation of the property type.
In quantifying this qualitative analysis for the region as a whole, New Jersey often makes a good bellwether. On multiple levels and across multiple geographic areas, the Garden State embodies the qualities of robust industrial markets that characterize the Northeast: population density, proximity to major ports, (dwindling) availability of land for new projects and an established presence from institutional capital. As it happens, CBRE recently released its third-quarter report on the New Jersey industrial
market, describing the current state as one of “stabilization.”
According to the report, New Jersey had a sub-2 percent industrial vacancy rate from the fourth quarter of 2020 through the first quarter of 2023 — when debt was historically cheap. In the second quarter of 2023, developers delivered more than 6 million square feet of new space, more than double the highest quarterly total over the previous three years. Vacancy spiked nearly a full percentage point between spring and summer 2023, setting off a pattern that culminated in today’s statewide vacancy rate of 7.2 percent.
Yet the slope of the vacancy rate has already flattened in 2025, a year in which absorption has more closely trailed new deliveries. Further, New Jersey’s industrial rents have shown stability in 2025, slipping less than 1 percent between the second and third quarters to the current mark of $17.66 per square foot.
Tyler Peck, managing director of the capital markets team in JLL’s New York City office, says that this narrative applies to the current state of the Tri-State industrial market.
“We continue to be in a period of normalization,” he says. “In 2021 and early 2022, the sector got extended due to all the liquidity in the system and capital [that was allocated] specifically for industrial. Not every market got overbuilt, but certain pockets saw too much new product delivered.”
“The past few years have been challenging but healthy for the industrial capital markets, and we’re now working toward supply-demand equilibrium,” Peck continues. “Demand fundamentals are slowly improving in conjunction with less new industrial development. As things continue to improve on the ground, the bid-ask gap that exists on capital markets deals right now will tighten, and we’ll likely see increased transaction activity moving forward.”
Tim Walsh, partner and chief investment officer at national real estate investment firm Dermody, which has a strong East Coast presence, believes that new development can still work in the current environment despite overbuilding in certain submarkets. His reasoning invokes the idea of quality over quantity.
“In 2022 and 2023, a lot of projects got capitalized that wouldn’t have been able to attract equity if they were proposed in 2018 and 2019,” says Walsh. “So part of the higher vacancy in certain submarkets stems from projects that probably shouldn’t have been built. We try to make sure that our well-designed projects aren’t competing with buildings that tenants don’t want.”
Walsh concedes that Dermody’s penchant for building rather than buying in the current market is a bit “contrarian.” Most of Dermody’s current projects are geared toward e-commerce users and national retailers, which tend to be more stringent with their requirements and less able to work with older buildings, unlike manufacturers, which need massive power above all else.
“There’s more risk in having antiquated product than in fighting through the efforts to get buildings built,” says Walsh. “We’re trying to target the highest design standards in logistics, for both e-commerce and other distribution uses, but also trying not to be overly specialized. You don’t need data-center levels of power for those buildings, but you do need enough to run the material handling equipment. Data center players are really competing for power right now, so that’s probably the top long-term issue facing the industry.”
As these broader market trends play out, the aforementioned deal profiles are having their moments in the sun.
Control Your Destiny
Multiple sources interviewed for this story say that occupiers of industrial spaces wanting to become owners represents one of the most visible shifts in the investment landscape.
“The owner-occupant sales market has been very healthy,” says Jonathan Klear, senior vice president at NAI Mertz. “[Rental] rates are what they are, but there are a considerable number of users looking to buy industrial space as opposed to lease. Whether it involves selling a vacant building [to an end user] or a sale-leaseback, there’s been more volume there in the past few months than in the beginning of the year.”
Klear’s comments are mostly applicable to the Southern New Jersey/greater Philadelphia market, but other sources say the trend is prevalent in other parts of the Northeast as well. Tom Farrelly, executive managing director at Cushman & Wakefield’s Manchester, New Hampshire, office, says owners throughout that part of New England are having similar thoughts.
“Occupants want to own because they don’t want to get surprised like they did post-COVID, when rents went from the mid-single digits to the low teens [on a per-square-foot basis],” he says. “People are looking to monetize the value of their occupancy of the space by buying and owning.”
It isn’t necessarily any one subcategory of industrial users — manufacturers, e-commerce groups, logistics providers — that are keen to own rather than lease their facilities. But given that the typical industrial lease term is five to seven years, it’s understandable that groups that need space now would want to hedge against a projected return to healthy rent growth as new supply burns off in the coming years.
WALT for the Win
Speaking of an expected return to healthy rent growth, the question isn’t so much “if” but “when.”
Sources say that rebounding rents proved elusive this year due in large part to tariff policies from the new presidential administration. Liberation Day in particular set the market back because it forced a number of tenants to pause inventory orders and planned expansions.
This pause, which now seems to be fading, complicates the efforts of industrial investors targeting multi-tenant properties with low weighted average lease terms (WALTs). These investors are tasked with determining a fairly precise trajectory of rent growth over a five-plus year period.
“For existing industrial buildings, fully occupied, functional properties with short-term WALTs and mark-to-market opportunities in infill locations have attracted the most interest from the investment community — especially if the deal size is on the smaller side (i.e.— sub $75 million),” says Peck. “Those deals represent smaller and relatively safe bets, which makes sense in a somewhat uncertain market.”
Walsh concurs that the sweet spot for low-WALT deals has shifted a bit, which is to say it’s increased relative to the recent past.
“A year ago, deals for short WALTs were the most interesting because everyone believed in rent growth,” he explains. “The belief in widespread rent growth seems to now have been pushed out of the market, at least temporarily, so now a medium WALT is more in favor. There’s optimism that we’ll be back to a healthier market in terms of rent growth in three to four years, whereas the one-to-two-year view is less certain.”
Klear adds that deals with low WALTs are still popular. As long as the WALT is still fairly low — five years or fewer — the deal is unlikely to fall apart, all other factors being held equal, he says.
“It’s more about making sure there’s a fair market value as an option — hopefully less than five years. That’s usually the standard case for what’s attractive rather than any fixed options,” he explains. “But if the building, property and tenant are right, five years [of remaining WALT] won’t necessarily make a huge difference over three years or vice versa.”
Small Space, Big Opportunity
In contrast to shallow-bay, small-bay industrial properties feature smaller unit sizes and tend to attract local users or professional contractors that serve a community or support nearby construction activity.
“We consider shallow-bay to be 5,000- to 15,000-square-foot units, have ceiling heights that accommodate racking, a higher percentage of office finish and offer both loading docks and drive-in doors,” explains Brian Whitmer, co-founder and managing partner of Doors & Spaces, a New Jersey-based industrial investment firm exclusively focused on small-bay facilities.
“Our definition of small-bay has a sub-5,000-square-foot average unit size, buildings that are predominantly served by overhead doors and limited office space. Tenants tend to be service-oriented and target a regional area: plumbers, electricians, carpenters, e-commerce and essential needs-based services. These facilities run and operate like apartment buildings: short-term leases, a multitude of small tenants and monthly rents that are generally comparable to Class A apartments. The existing space class already operates at near full occupancy while demand continues to increase.”
Whitmer believes that the emergence of small-bay industrial as a coveted subcategory of industrial real estate stems from the fact that very little of the product has been built in recent years. In addition, rental growth outperforms that of larger buildings; turnover and vacancy downtimes are very limited, while occupancy is stable and collections are high.
“Most existing small-bay product has an average age of 30 to 40 years,” he says. “As a response to demand for functional, smaller industrial spaces, new product is now being built in many markets across the country at rents that can be double the existing inventory. The rise of the entrepreneurial economy, franchised service firms and the displacement of contractors from larger, last-mile warehouses taken by logistics firms — these are all reasons that we are bullish on the future prospects for small-bay.”
Farrelly agrees.
“Small-bay product hasn’t been built in a long time, and demand is such that higher rents can be had from catering to the smaller-tenant market,” he says. “Instead of $13 to $14 [per square foot] on a triple-net basis, you can have $16 to $17 [per square foot], and that’s what’s driving developer interest in that segment of the market.”
— This article originally appeared in the October 2025 issue of Northeast Real Estate Business magazine.