By Cody Payne
Over the past decade, self-storage has been one of the most consistent and attractive asset classes in commercial real estate. Predictable cash flow, low overhead and strong demand made it a go-to for private and institutional capital alike.
But that trade is getting crowded. And now, a noticeable shift is underway. Self-storage investors and operators, including RV/boat storage, across the country are beginning to move aggressively into small bay industrial or flex space options.
Why the Shift Is Happening
The fundamentals behind self-storage haven’t disappeared—but they’ve changed.
- Increased competition has compressed yields
- Development pipelines are saturated in many markets
- Lease-up timelines have extended
- Institutional capital has driven pricing to levels that are harder to justify
For many experienced operators, the question is no longer “Is self-storage a good asset class?” It’s now: “Where can I find similar—or better—returns with less compression?” Small bay industrial is increasingly the answer.
Why Feasibility Is No Longer Optional
Before making that transition, one thing is becoming very clear: You cannot approach small bay industrial the same way you approached self-storage. On paper, many small bay deals look strong. But when you break them down—tenant base, absorption, competing supply, rent ceilings—the story can change quickly.
This is where many investors get into trouble early.
That’s why working with a market feasibility company that solely focuses on small bay industrial is becoming a critical part of the process. Groups like Small Bay Feasibility, backed by Flex Parks USA, are built specifically to analyze this asset class at a granular level.
They focus on:
- Real tenant demand (not assumptions)
- Lease-up timelines
- Competitive supply mapping
- Rent projections based on actual comps
- Site-specific strengths and weaknesses
In a space that is still highly fragmented and misunderstood, this level of analysis can be the difference between a deal that performs—and one that struggles.
Small Bay Offers Familiar Advantages—With Upside
For self-storage operators, small bay industrial feels familiar in all the right ways:
- Multi-tenant diversification
- Shorter lease terms relative to big-box industrial
- Strong demand driven by local businesses
- Ability to push rents with mark-to-market resets
But where it separates itself is in income potential and tenant stickiness. Unlike storage, where tenants can leave with little friction, small bay tenants often build their business inside the space—creating longer tenancy and more stable income over time.
And from a revenue standpoint, small bay continues to outperform in key areas:
- Higher rents on a per-square-foot basis
- Additional income streams (yards, mezzanines, signage)
- Strong absorption in most U.S. markets
The Yield Gap Is Driving Capital
One of the biggest catalysts behind this migration is simple: returns. Self-storage cap rates have been compressed heavily by institutional demand over the past several years. In contrast, small bay industrial is still:
- Less institutionalized
- More fragmented
- Inefficiently priced in many markets
That inefficiency is creating opportunity. We’re seeing investors who built their portfolios on storage begin reallocating capital into small bay—either through acquisitions, new development or full platform pivots.
Developers Are Following the Capital
This shift isn’t just happening on the investment side—it’s showing up in development pipelines as well. Storage developers who understand entitlement, site selection and efficient construction are now applying those same skill sets to small bay.
And in many cases, the transition is seamless.
- Similar site sizes
- Comparable construction approaches (especially with efficient builds)
- Strong demand near residential rooftops
The difference is the end user—and the rent profile.
Where Many Storage Investors Get It Wrong
While the opportunity is real, the transition is not automatic—and we are already seeing common mistakes.
- Combining Self-Storage and Flex on the Same Parcel
This is one of the biggest missteps. In theory, it sounds like a great idea—but in reality, it can hurt you significantly when it’s time to sell.
The issue isn’t just operational—it’s an exit strategy.
- Small bay buyers want pure-play flex assets
- Self-storage buyers want pure-play storage
- Combining the two shrinks your buyer pool dramatically
And when your buyer pool shrinks, so does your pricing.
The highest-paying buyers in each asset class typically do not want a hybrid. On top of that, management, leasing, and operations are completely different between the two. Cody Payne and Amy Bix discuss this in the Toy Storage Nation podcast.
The result: a compromised asset that often trades below its full potential.
- Underestimating the Complexity of Tenant Demand
Storage is driven by consumer demand. Small bay is driven by business demand.
That means:
- Understanding local business density matters
- Tenant mix matters
- Layout and functionality matter
- Amenities matter
What works in one submarket may completely fail in another.
- Treating Small Bay Like a Passive Asset
Small bay requires a more hands-on approach:
- Leasing velocity matters
- Tenant relationships matter
- Design and usability directly impact performance
This is not a “set it and forget it” asset class.
What This Means for the Market
As more self-storage capital enters the space, we expect:
- Increased competition for quality sites
- More development across secondary and tertiary markets
- Continued upward pressure on pricing
- Greater institutional interest over time
But we are still early.
Small bay industrial remains one of the most underbuilt and misunderstood sectors in commercial real estate. This is why companies like Toy Storage Nation are adding this to their education master classes to help not only spread the word but educate people coming into this rising asset class.
Final Thought
The smartest investors in self-storage built their success by getting ahead of demand.
Now, many of those same groups are making their next move. And increasingly, that move is into small bay industrial.
The opportunity is real—but only for those who understand it.
Cody Payne is the Founder and Managing Partner of Flex Parks USA, a national
brokerage, advisory and platform exclusively focused on small-bay flex industrial real estate. With more than 20 years of experience and 1,000+ closed commercial real estate transactions, he is widely recognized as one of the leading authorities in the small-bay flex and multi-tenant industrial sector across the United States. Through Flex Parks USA, Cody has built a specialized ecosystem designed to serve investors, developers and owners of flex space — combining brokerage, proprietary data, feasibility analysis and a nationwide buyer network to drive superior outcomes. His platform-centric approach has helped redefine how small-bay industrial assets are evaluated, marketed and transacted, creating clarity and confidence for both seasoned investors and first-time developers.
Toy Storage Nation proudly recognizes Flex Parks USA as a Silver Sponsor of the TSN Storage Redefined Masterclass, April 10 in Las Vegas. Hosted in partnership with ISS World Expo, the Masterclass featured Flex Parks USA Founder and Managing Partner Cody Payne, who led an interactive roundtable discussion.
