Small Bay, Big Potential: Unlocking Canada’s Industrial Underdog

The Canadian industrial market is vast, but not all assets are created equal. While large-scale distribution centres and logistics hubs often steal the spotlight, it is the Small Bay segment, generally characterized by industrial properties 50,000 square feet (“sf”) or less, that quietly powers the backbone of Canada’s economy. This segment is driven by rapid population growth and the essential businesses that sustain local communities. Representing approximately 30% of total industrial inventory, these spaces serve industries that remain resilient throughout economic cycles. Small Bay industrial has five key pillars that underpin its strong investment fundamentals: non-cyclical tenant nature, strong demand, hardened income streams, persistent supply shortages, and lack of institutional ownership. With population growth fueling leasing activity and a projected 3 million sf supply deficit over the next five years, the sector is primed for rising rents and valuations. However, institutional investors have largely overlooked Small Bay industrial properties in part due to scale constraints, leaving a fragmented market ripe for professional management and value creation. As the fundamentals continue to tighten, this segment stands out as one of the most mispriced yet resilient investment opportunities in Canadian real estate. Simply put, Small Bay is nearing a catalyst moment – one where its valuation gap relative to larger industrial assets and replacement costs must close. If not, the pressure will only build, creating even greater upside potential. Savvy investors recognize this imbalance and are capitalizing on elevated income returns while awaiting the inevitable repricing to more stabilized valuations.