While investors chase headlines about mega-warehouses serving e-commerce giants, four overlooked industrial real estate investment opportunities are quietly delivering superior returns with less competition. Industrial real estate remains a standout investment, driven by strong fundamentals of high demand, low vacancy rates, and consistent rent growth — but not all opportunities receive equal attention.
Smart investors look beyond the obvious to find underserved niches where supply constraints and evolving market dynamics create compelling value propositions. Below, SVN International® highlights four industrial real estate investment opportunities that deserve closer examination. Let’s get started.
Four Industrial Real Estate Investment Hidden Gems
Cold Storage Facilities: The Refrigerated Revolution
Most investors equate warehouse space with traditional logistics. They’re missing the refrigerated opportunity that’s transforming supply chains. Cold storage remains overlooked despite explosive growth. Expected to double in market value over the next six years, the U.S. cold storage market remains a largely untapped resource. Yet demand for cold storage has significantly outpaced the modest 3.73 billion cubic feet of existing supply, much of which is dated product built nearly 40 years ago.
Multiple factors drive this demand surge. Rising consumer demand for fresh and frozen foods, online grocery delivery, and pharmaceutical cold chain requirements are fueling market expansion. E-commerce grocery services, meal delivery platforms, and farm-to-table movements all require sophisticated temperature-controlled logistics that aging facilities can’t adequately support.
Investment considerations include strategic location near population centers and transportation hubs, energy efficiency features that reduce operating costs, and securing creditworthy tenants like national grocery chains or third-party logistics providers. Modern cold storage facilities are designed with higher ceilings — the preferred ceiling height is 50 feet — and optimized layouts to maximize storage capacity.
The specialized nature of cold storage creates natural barriers to entry, which benefits positioned investors while requiring brokers who can connect national tenants with regional facilities across multiple markets.
Last-Mile Distribution Centers: Proximity Creates Premium Returns
The final mile of delivery accounts for approximately 53 percent of overall shipping costs, and it’s creating unexpected real estate opportunities in suburban markets nationwide. These smaller facilities don’t attract institutional attention like billion-dollar fulfillment centers, yet the fundamentals tell a compelling story. Like cold storage, the expected growth is exponential in the global last mile in the e-commerce delivery market.
The returns reflect this urgency. In some markets, price per square foot grew at a compound annual growth rate of 17.2 percent between 2017 and 2022, while last-mile distribution centers can generate rents 20 to 50 percent higher than regular facilities based on location.
Location requirements differ dramatically from traditional warehouses. End users typically prefer small buildings in the sub-100,000-square-foot range, with ideal locations within 6 to 15 miles of high-density residential areas. High-density metros like New York, Los Angeles, and Chicago lead demand, but secondary cities, including Atlanta, Dallas, and Miami, offer strategic regional advantages.
Success requires hyperlocal market knowledge, such as understanding traffic patterns, residential density, and competitive positioning that only experienced local brokers can provide.
Small-Bay Flex Space: Where Main Street Meets Industrial Returns
While institutions construct million-square-foot distribution centers, small businesses scramble for modest warehouse bays, and these smaller spaces are winning the rent growth race.
The vacancy rate for U.S. industrial properties smaller than 50,000 square feet has reached record lows nationally. Even more telling: forecasts call for overall industrial rent growth to dip marginally in the short term, but that average masks continued strong increases for small-flex space.
Small-bay industrial properties are typically under 50,000 square feet, divided into units ranging from 1,000 to 10,000 square feet. These flex spaces blend warehouse functionality with finished office areas, increasingly demanded by tradespeople, e-commerce operators, contractors, and small businesses.
The tenant diversity provides remarkable stability. Local contractors, HVAC companies, electricians, small manufacturers, e-commerce businesses, and service companies needing combined office and storage space all compete for the limited supply.
Lower improvement costs — typically $5-20 per square foot versus $20-40 for traditional office space — make these properties affordable for tenants while maintaining attractive returns for investors. The fragmented nature of this market rewards brokers with deep local relationships and understanding of community business dynamics.
Infill Industrial and Adaptive Reuse: Hidden Value in Aging Assets
The most profitable industrial opportunities might not require building anything new, just recognizing potential where others see obsolescence.
Repositioning existing facilities offers compelling economics. Class C industrial buildings can present redevelopment opportunities for conversion into self-storage, last-mile facilities, or mixed-use real estate.
Urban land scarcity makes creative reuse increasingly valuable. Older warehouses can become modern cold storage facilities. Industrial parks subdivide into small-bay flex developments. Urban manufacturing buildings transform into last-mile distribution hubs. Obsolete facilities convert to data centers or specialized uses, matching evolving market needs.
Success requires understanding local zoning, building relationships with specialized contractors, and identifying tenant demand before acquisition. This opportunity particularly benefits from collaborative broker networks that can match property owners with developers, architects, and end-users who can reimagine outdated space.
Find Smart Industrial Real Estate Investment Prospects with SVN
These four opportunities share critical characteristics: undersupplied markets relative to demand, resilient tenant bases serving essential needs, requirements for local expertise combined with market connections, and less competition from mega-funds chasing larger deals.
Successful industrial investing demands both local market intelligence and national tenant relationships. Working with brokers who understand specialized segments while leveraging collaborative networks helps investors identify off-market opportunities and connect with qualified tenants across regions.Ready to explore these industrial investment opportunities? Connect with SVN International Public Benefit Corporation (SVN®). Our collaborative network of over 2,000 advisors across 225+ offices can help identify and capitalize on tomorrow’s best industrial investments, today. Visit svn.com/franchise to learn more about how SVN’s unique approach creates value in commercial real estate.
The St. Louis economy has experienced strong growth since the recession and now features a 5.2% unemployment rate as of January ‘16 with modest job growth of 1.2% annualized. The diverse economic base includes manufacturing of food and agricultural products that are relatively immune to cyclical forces and thus stabilize the St. Louis industrial space market. Still, the key industrial sector of Manufacturing is losing jobs at a 1.3% annualized pace while Trade, Transportation, and Utilities grows at a nearly flat rate of 0.3% annualized. Overall, the stable nature of the industries operating in St. Louis, many with corporate HQs, and its strong river, rail, and air linkages should allow its industrial market to remain healthy in 2016 and beyond.
Seattle has experienced significant job growth since the recession and continues to add jobs at an annualized rate of 3.0%, keeping unemployment stable at 5.6% as of January ‘16, according to the BLS. As Seattle hosts major West Coast ports, a major airport, and excellent rail linkages, trade and distribution activities dominate the industrial real estate market. Employment in the Trade, Transportation, and Utilities sector is growing at an annualized rate of 4.2%, making up for losses in the Manufacturing sector that is contracting at an annualized rate of –0.9%. Overall, the Puget Sound ports and infrastructure should drive robust demand for industrial real estate as more and more ship traffic is routed up north from congested Long Beach, California.
The Pittsburgh economy has more or less stabilized after the recession and massive losses to its manufacturing and steel production base. Today the unemployment rate sits at 5.5% as of January ‘16 but job creation is effectively flat at a literal 0.0% rate of growth. The industrial real estate market of Pittsburgh is highly influenced by oil and gas production as well as the steel industry, both of which have potential to see long-term losses. Key industrial sectors are losing jobs, including Manufacturing and Trade, Transportation, and Utilities which are declining at annualized rates of –3.4% and –0.4%, respectively. Thankfully, Pittsburgh is transforming itself into a more research and high-tech focused economy which should grow overall jobs and ultimately benefit the industrial sector. Further, this trend should cause more vacant industrial buildings to be repurposed and redeveloped, helping industrial landlords overall.
The Memphis economy has been slowly growing and recovering since the recession and stands today with 5.6% unemployment as of January ‘16, with modest annualized job gains of 1.7%, according to the Bureau of Labor Statistics. Its strongest industrial segment and in fact strongest employment segment overall is Trade, Transport, and Utilities, which is expanding at an annualized rate of 4.2%. Manufacturing is also adding jobs at 0.7%. Given that Memphis is located in the approximate population weighted center of the country, it is an ideal location to serve for e-commerce and other direct to consumer distribution businesses. Thus, the Memphis industrial market may be one of the largest benefactors of the rise of online shopping and will likely continue to expand in 2016 and beyond.
Los Angeles is one of the largest, most dynamic cities in the United States and its economy has fully recovered, with a normalized level of unemployment at 5.5% as of January ‘16 and annualized total employment growth of 2.3%, according to the Bureau of Labor Statistics. Its industrial space market is one of the best performing in the nation due to the growth in container and freight traffic from the port as well as inbound air cargo from Asia. The Trade, Transportation, and Utilities sector is growing at an annualized rate of 1.7%, meaning that further growth and expansion is possible. Of course, the reliance on trade could cause a contraction in the industrial sector with global pressures, but this is unlikely as much of the trade and distribution are import goods that will benefit from a strong US dollar.
The Knoxville economy is extremely steady given its diverse economic base and thus experienced relatively low effects of the recession. The city now has a 4.5% unemployment rate as of January ‘16, with overall employment growing at an annualized rate of 2.5%, according to the Bureau of Labor Statistics. The industrial sectors of Knoxville are all showing marked strength, including Manufacturing and Trade, Transport, and Utilities growing at annualized rates of 4.5% and 4.1%, respectively. Additionally, the Mining, Logging, and Construction sector is growing at a rapid 10.2% annualized rate, further fueling the market. The mix of defense, research, and industrial manufacturers gives Knoxville strong power to grow its industrial real estate in 2016 and beyond.
The Greenville-Spartanburg region has experienced significant gains in its labor force, and overall employment is growing at a 2.6% annualized rate with unemployment holding steady at 4.9%, according to the Bureau of Labor Statistics. Key industrial sectors of Trade, Transport, and Utilities and Manufacturing are growing at annualized rates of 2.6% and 1.3%, respectively, setting up the industrial market for gains in 2016 and beyond. As South Carolina is well located for distribution in the Southeast, connected to ports, and unfriendly to labor unions, it is likely to continue to see expansion in its industrial sectors including those of Greenville-Spartanburg. Low cost of living and operating costs also serve to boost overall business development.
The Dallas economy remains one of the strongest of the major metros in the nation with unemployment at 3.8% as of January ‘16 and steadily rising total employment at a 3.4% annualized rate, according to the Bureau of Labor Statistics. The fastest growing sector of employment in Dallas is an industrial space using Trade, Transport, and Utilities, which is growing at an annualized rate of 5.2%. This is the sector, where most of the 2016 and beyond gains in the industrial space market will be generated. Dallas has unparalleled airport and rail access making it an ideal business and distribution hub. In fact, the area surrounding the DFW airport is best poised to expand. Manufacturing is the weakest sector declining at a –1.6% annualized rate. This sector touches oil and gas production and exploration, and is thus most at risk for declines in 2016 and beyond.
Albuquerque’s overall economy has remained fairly stable with a slowly falling, above national average level of unemployment at 5.8% as of January ‘16, according to the Bureau of Labor Statistics. Key industrial sectors have been losing employees and thus may threaten to soften the industrial space market; these include Manufacturing and Trade, Transportation, and Utilities which are contracting at –2.5% and –0.9% annualized rates, respectively. As much of the economic and industrial base of Albuquerque centers on high tech, research, defense, and other manufacturing, the industrial sector should remain very stable on a relative basis. Given low levels of new supply, growth in fundamentals could also occur in 2016 as the market is not over-supplied.
The drivers of the industrial sector’s headline performance numbers are varied. Breaking a pattern of decline that began in the 1980s, increasing manufacturing activity and employment since the end of the recession have supported the absorption of a wide range of heavy and light manufacturing spaces. That trend coincides with continued growth in shipping volumes, both on a large scale at the nation’s deep-water ports and along the “last mile” where fulfillment centers are allowing online retailers to shorten delivery times in major metropolitan areas.
