Doors & Spaces Industrial

***Small Bay Sundays*** SBI’s Attractiveness as the Most Responsive of Industrial Asset Types At Doors & Spaces, most of our work happens inside the buildings themselves. When you’re walking spaces, talking to tenants, and dealing with the day-to-day realities of small bay, you see quickly that how well you do your simple blocking and tackling, influences how these assets perform. The attractiveness of SBI comes from cash yields that can improve very shortly after an acquisition given the short term nature of the leases. Such as when a tenant who’s been on a hand shake legacy lease has a market to market of 50-100%. We see it when a 3,000 SF functionally challenged space is rethought, leased properly, and placed back into the rent roll with minimal downtime. In a similar fashion, an early renewal, a shorted vacancy, a tighter hand on expenses - all produce immediately noticeable results. Small bay is an operating business. You create value by staying close to tenants, managing friction, and solving problems quickly. It’s how we measure progress across our portfolio, and it’s how we know the execution is working. We build these assets and the portfolio but one decision at a time. And it’s to our benefit that the shorter lease term profile of SBI allows us to transform asset values at a faster pace than other alternatives. Go apartmentsofindustrial.com! #SmallBaySundays #SmallBayIndustrial #CRE #Investments Brian Whitmer Doors & Spaces Industrial

***Small Bay Sundays*** - SBS collab with Jeff Paschal of White River Partners Path Towards the Institutionalization of Small Bay PS Business Parks proved years ago that small bay can scale. Before being acquired by Blackstone, they built a system that made a small tenant portfolio function at an institutional scale. Jeff Paschal, who spent years at PS Business Parks and now runs White River Partners, says it best: small bay platforms can thrive when the sponsors and investors focus on turning the complexity of heavy multi tenancy and the operational needs into simplicity and aligning incentives for all involved. To make small bay investable at scale, the structure has to match the workload: 1. Incentivize for activity. Property management teams deal with more tenants, more leases, and more coordination. Fees need to reflect that, often in the 4–5% range. The upside is that the returns are superior to single tenant investments that are priced to perfection. 2. Reward brokers for welcoming the volume. Smaller units mean more activity. No different than multifamily. Work with brokers who value steady leasing activity, predictable fees and long-term relationships over large one-time deals. 3. Keep operations lean and responsive. At PS Business Parks, “lean and nimble” was a guiding principle. It still applies today. Small bay performs best when operators can make quick decisions and stay close to their tenants with limited decision layers and overhead. When these pieces are in place, small bay becomes more than just functional real estate. It becomes a repeatable, investable platform that can scale at an institutional level. #SmallBaySundays #SmallBayIndustrial #IndustrialRealEstate #InstitutionalInvesting Brian Whitmer Doors & Spaces Industrial

***Small Bay Sundays*** - SBS Collab with Tyler Bateh of ARCO Design/Build Best practices for ground up small bay construction. Rinse and repeat. Try to keep all the variables the same as the make or break is the entitlement, soft costs and the site work. Once you go vertical, make it super simple and repeatable with little input needed from your MEP and building supplier teams. We try to use the same professionals repeatedly as you can’t recreate the wheel each time. Small bay needs to be a coordinated team effort that has little learning curve to navigate. If not, you’ll be burned by time, carry and mistakes. Bring the entire team in once you know the project is viable. As a team who knows loyalty and has a working relationship with each other is the difference between good and great. Getting your team involved during conceptual planning is key. Take the opinions of all regarding site work, stormwater, codes and building design. Strive to design once the first time and have speed to approval. #SmallBayIndustrial #IndustrialDevelopment #GroundUpDevelopment #SmallBaySundays #CommercialRealEstate Brian Whitmer Doors & Spaces Industrial

***Small Bay Sundays*** PSL: Paint, Signage, and Landscaping At Doors & Spaces, we talk a lot about the three cheapest competitive advantages to get a small bay industrial building leased. PSL: paint, signage, and landscaping. It has become one of the most consistent ways we add value in small bay industrial. When you serve small businesses that do not have large marketing budgets or national branding, the building itself becomes their identity. It is the first thing customers see and the first impression employees get when they arrive each morning. A well-painted building with clear signage and clean landscaping helps tenants feel proud of where they work. That pride often leads to longer tenancies and stronger relationships. Some tenants discover spaces by driving past, not by searching online. A property that looks clean, well-lit, and maintained tells a story about who owns it and how it is managed. First impressions often begin before a lease is ever signed, that is why we invest in PSL on every acquisition and every new project. Our approach is straightforward: keep the presentation professional, consistent, and visible. Fresh paint shows active ownership. Updated signage improves visibility and helps tenants stand out. Landscaping completes the picture by showing care and creating a sense of arrival. These details help our spaces lease faster and keep tenants longer. In small bay, consistent execution is what separates average properties from lasting ones. #SmallBayIndustrial #IndustrialRealEstate #ValueAddRealEstate #CREInsights #LeasingStrategy Brian Whitmer Doors & Spaces Industrial

***Small Bay Sundays*** - SBS Collab with Nathaniel Neman Two-Phase Mark-to-Market Strategy Last week’s Small Bay Summit felt like a milestone moment for our industry. For the first time, many of the most active small bay operators, investors, and lenders were all in one room, sharing real-time insights in a sector that remains highly fragmented. The ability to exchange perspectives directly with brokers, owners, and capital providers revealed how professionals are viewing small bay markets across the country… information that simply isn’t available online. It validated what many of us have believed for years: small bay industrial is the next institutional asset class. One of the standout discussions came from BKM Capital Partners Brett Turner, our keynote speaker for the event and one of the leading voices in the small bay industrial space. BKM has built one of the most recognized platforms in the country, aggregating and institutionalizing small bay portfolios through a disciplined, hands-on approach to operations and value creation. During his presentation, Brett shared an idea that resonated with both of us: an approach to mark-to-market in two phases. After the session, Nat and I discussed how this concept could shape the way we think about portfolio growth. When rents are significantly below market, BKM doesn’t immediately push to full market levels. Instead, they execute mark-to-market in two phases. It is a small shift in strategy, but an important one. When speaking with brokers, you can come across a deal with as much as 50 percent mark-to-market upside. On paper, that sounds like a home run. But in practice, such a sharp increase can cause disruption. Small bay tenants are typically local service businesses that value stability and predictability, and sudden rent spikes can lead to turnover and downtime. The two-phase approach creates balance: • Phase 1: A moderate rent increase that starts closing the gap while keeping occupancy strong. • Phase 2: A full market reset once improvements are complete and the property’s value proposition has been elevated. This method allows owners to capture upside while maintaining occupancy and long-term tenant relationships. It supports consistent portfolio growth and smoother stabilization. For those building small bay platforms, it is a reminder that how you grow NOI can matter just as much as how fast you grow it. Thoughtful sequencing builds lasting value. #SmallBayIndustrial #IndustrialRealEstate #ValueAdd #LeasingStrategy #MarkToMarket #SmallBaySummit Doors & Spaces Industrial Brian Whitmer Small Bay Summit Small Bay List Nathaniel Neman Portal Warehousing

***Small Bay Sundays*** In Small Bay, returns come from execution. Marking leases to market, reducing downtime through proactive leasing, and normalizing recoveries as tenants roll are what drive NOI growth. These operational steps, applied consistently, compound into meaningful value creation over time. Each improvement builds momentum. As a portfolio grows, so does the efficiency of the platform behind it. Shared management lowers cost per bay, internal tenant demand reduces downtime, and portfolio data sharpens pricing and renewal decisions. With scale, consistency attracts lower-cost debt and institutional capital. A single Small Bay asset is illiquid. A well-run portfolio creates its own liquidity. Aggregation converts private-market inefficiency into institutional optionality. Investors are compensated for holding assets that are less liquid, a concept known as the illiquidity premium. Studies from Franklin Templeton and Trion Properties show that private real estate has historically delivered higher returns than public market equivalents because of this dynamic. When quality assets operate under one system, that advantage compounds. Scale introduces new exit paths, and the same cash flows begin to trade at institutional pricing. Our model is built on NOI growth through effort and liquidity through design. Compression, when it happens, is additive. As the Small Bay sector continues to institutionalize, portfolios built on operational discipline will earn premium valuations and access to capital that fragmented owners cannot achieve. Effort today. Liquidity tomorrow. #SmallBaySundays #CREInvesting #PrivateEquity #NOIGrowth #PortfolioStrategy Brian Whitmer Doors & Spaces Industrial

***Small Bay Sundays*** From an Idea to a Sold-Out Summit What started as a few people in the small bay space calling each other to share notes and help one another out has turned into a sold-out event in Midtown Manhattan. That’s how the Small Bay Summit was born. We picked a venue for 180 seats, weren’t sure how it would go… and never in our wildest dreams did we think it would be completely sold out in a matter of weeks. The Summit brings all the major players into one room to exchange ideas, data, and perspectives that are shaping the future of small bay industrial, marking one of the first times all the voices that define this space are together in one place. Something I’m especially excited for is our panels. Brokers, who are the gatekeepers of leasing and sales information in this fragmented asset class, will share what they’re seeing in the market. Capital groups will dive into how they’re underwriting small bay as it moves toward institutionalization. And operators, some of the largest nationally, will give real insights from their portfolios about how they buy, operate, and grow. In a space where public data is limited and insights are often kept close to the vest, these are the kinds of conversations you can’t get anywhere else. Attendance represents a true cross-section of the small bay ecosystem: Who’s in the room: - Institutional capital and family office investors - Bank and non-bank credit decision-makers - National and regional brokerage leaders - Multi-market small bay operators and portfolio managers - Ground-up developers and site selectors - Title, legal, engineering, and construction partners Getting this mix in one room is rare, and it’s exactly what makes the Summit valuable. We’ll also be featuring live podcast recordings and conversations that capture the energy of where this asset class is headed next. We could not have done this without our co-hosts Matt Hunsucker of Small Bay List and Lee Sager and David Harris of Camps Bay Capital, along with all of our generous sponsors who helped make this event possible. Without them, this would not have come to fruition. If you’re attending the event, please reach out, I’d love to connect rfischer@doorsandspaces.com #SmallBayIndustrial #SmallBaySummit #IndustrialRealEstate #FlexIndustrial #SmallBaySundays Brian Whitmer Doors & Spaces Industrial Aislinn Cholet

***Small Bay Sundays*** Why Small Bay is a Natural Hedge Against Rising Insurance Costs Over the last few years, property insurance has gone from being a line item in the budget to a headline risk across commercial real estate. Costs traditionally rose two to three percent a year, but that trend has shifted. Moody’s has reported that premiums are growing more than 17 percent year over year in some markets. Deloitte shows the average monthly cost of real estate insurance for a commercial building climbed from $1,558 in 2013 to $2,726 in 2023 and could reach $4,890 by 2030, an increase of nearly 80 percent. Travelers points to the drivers we all feel on the ground: climate events, reinsurance costs, and rising replacement expenses. For many owners of large single-tenant warehouses or multifamily assets, insurance is now eating into NOI in ways that make deals difficult to pencil.   Small bay is built differently. Smaller buildings naturally limit the loss magnitude. A 30,000 square foot property simply does not carry the same catastrophic exposure as a one million square foot box. Multiple tenants spread risk, so one claim does not derail the rent roll. Portfolios that span across metros are less exposed to a single storm or flood. And when it comes to hardening assets, it is more practical and cost effective to upgrade roofing, drainage, sprinklers, or fire barriers at this scale.   When we began looking at small bay opportunities in Florida, we knew insurance would be the biggest hurdle. What we found is that the structural guardrails of small bay, including smaller footprints, diversified tenants, and easier upgrades, held up even in one of the most insurance-pressured states in the country   Think about it this way. If you own one million square feet in a single big box and premiums rise 15 percent, that building could easily face a re-rating that pushes the increase to 25 percent. Now imagine the same million square feet broken into ten small bay properties across three markets. One or two assets might take the hit, but the blended increase could land closer to 12 to 16 percent. Over time that spread compounds into a real advantage.   Owning small bay is the first step. Managing it strategically is just as important. The best operators are bundling programs across properties, highlighting tenant diversification and clean loss histories when working with carriers, and investing in upgrades that mitigate exposure. Insurance stress testing is becoming part of underwriting, not just an afterthought once the deal is closed.   Insurance is quickly becoming one of the most important drivers of real estate performance. For many asset classes it is eroding yield. For small bay it is proving to be a defensive moat. In a market where every basis point matters, small bay industrial is not just functional space, it is durable cash flow. #CommercialRealEstate #IndustrialRealEstate #SmallBayIndustrial #RealEstateInvesting #CREInsights Brian Whitmer

Over the last three decades, ground-up Small Bay development generally was not penciling for speculative development. Rental rates did not justify the construction and land costs, leaving returns that were inferior to other investment options. The average age of the SBI product tells this story. Across major markets like Miami, Los Angeles, Dallas, Chicago, and Northern New Jersey, the average small bay building was built in 1976. Developers could not justify new construction when rents were stuck in the single digits. That has changed. Today, average asking rents across those same markets are $17 per square foot. 1970s-era product is commanding high-teen rents, while new purpose built SBI is achieving $20+ triple net. Case in point: the limited supply of 50+ year old product is now in high demand from the shifting landscape of logistics, business ownership and e-commerce. When looking at a small bay development project, as a general rule of thumb, we try to stay under $200 PSF. Take a simple example. Assume an all-in development cost of $170 per square foot and target stabilized rents between $18 and $22 NNN, 5 percent vacancy and $0.75 per foot of non-reimbursable expenses: At $18 rent, effective NOI is about $16.35 per square foot, which yields a 9.6 percent return on cost. At $20 rent, NOI rises to roughly $18.25, producing a 10.7 percent return on cost. At $22 rent, NOI reaches about $20.15, delivering an 11.8 percent return on cost. Historically, rents in the single digits made that math impossible. Today, with rents predictably in the high-teens and beyond, projects are meeting return thresholds. The Fed’s recent rate cut adds further support. Lower debt service does not create the deal, but it strengthens coverage, improves loan proceeds, and widens the yield on cost spread over the exit cap rate (ie. the profit). This dynamic plays out faster in Small Bay than in bulk industrial. Small Bay behaves more like multifamily, hotels or self storage when rates move. Shorter leases, quicker turnover, and frequent rent resets mean SBI owners can harness asset appreciation faster and be more nimble to either refinance or sell into a falling rate environment. Bigger box is locked into longer leases, and therefore typically takes many years to have a significant rent reset where there’s opportunity to revalue the asset. In summary, rent growth has opened the door for SBI development. Falling interest rates will only help to fuel the supply and redevelopment of both existing and new SBI. So after nearly fifty years of the SBI user base relying on aging stock…we’re all benefiting from the dynamics in play setting the stage for new supply of SBI. #SmallBaySundays #IndustrialRealEstate #Development #CREInvesting #ValueCreation Doors & Spaces Industrial Brian Whitmer Graphic attached to see the back of the napkin math I did to get YOC.