Published on Friday, June 5, 2026
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The fundamentals and BKM's position gave the firm the flexibility to act, according to Brett Turner, senior managing director of acquisitions and dispositions.
Small bays' intriguing fundamentals have forced BKM Capital Partners to bet as big as it ever has on the sector, with its $1.81 billion deal to buy a 51-property multi-tenant portfolio in a joint venture with Kayne Anderson. It marked the largest light industrial transcation since 2022, according to the two firms.
Brett Turner, senior managing director of acquisitions and dispositions at BKM, spoke to the resiliency of the small bay fundamentals, where he has witnessed doubling rent growth over the last decade.
"Through [high] interest rate hikes, through tariffs—this small bay sector just continues to perform," he told GlobeSt.
Plus, Turner said that its position as the top light industrial operator in the country gave it the flexibility to make the massive purchase with Kayne.
"We can take down these larger portfolios, with limited competition," he noted. "We've been able to produce a number of off-market transactions in those larger portfolio spaces."
Scarce Supply Provides Tailwind
A major industry tailwind is the limited supply, with a recent BKM light industrial report revealing that facilities under 100,000 square feet average a 4.9 percent vacancy rate, which is half the amount for buildings over that limit.
"There's just absolutely no supply," Turner said.
"The cost to build this product is staggeringly high, and it's really kept that new supply from entering into the space."
This limited supply narrative has been the case since the post-pandemic period when interest rates remained low for a brief time, according to the industry veteran with more than two decades of commercial experience.
As a result, Turner is seeing no shortage of investor demand for small bay. In fact, he went as far as saying players are shifting their focus from other asset classes like office and self storage to light industrial.
Capital is coming into the sector with firms "looking for ways to grow rents, produce value-add returns," according to Turner.
BKM Turns to Florida and Chicago
BKM, which focuses on small as well as mid bay properties under 100,000 square feet, has assets located in the Sun Belt. Core markets for the firm include Florida, Texas and Georgia.
Now, after the transaction, Turner said that the firm plans to focus on "building out" the South Florida market and Chicago in the short term, while not losing its focus on all of its existing other regions. Targeting new destinations will stay as a selective approach.
"When we enter a new market, we're pretty methodical about it and we watch those markets for a couple of years, do our research before taking a position," Turner revealed.
Small Bay Tenants Remain Hungry
Yet, general headwinds exist, including over tariffs and the war in the Middle East that's causing an oil shock. While Turner didn't downplay the concerns, he thinks these are now "really priced in to the market.
Tenants are not only showing willingness to expand — but move or upgrade to higher-quality space, with technology advancement playing a big factor today, according to Turner.
"We've certainly seen an acceleration as uncertainty has come into the overall economy, he noted.
"We've also seen technology enter into the space where tenants that would typically be in more of a large box or mid bay [now] are in the small-bay sector. So with robotics [and] higher empower 3D printing they don't need as large of a space, and so we've seen a push and a contraction, not in their business, but a contraction in their space need, because these businesses can operate more efficiently."
To go further on the point, technology is also influencing more advanced manufacturing entering small bay, which is something that BKM has witnessed in the last two quarters.
"The technology that AI has produced, robotics has produced, has been able to shrink those tenant footprints, and then also create new tenants as this reshoring has occurred," he said.
For now, small bay remains in a strong position. This is especially the case for BKM, whose poor credit quality across its tenant portfolio has been "very low" by historical standards, according to Turner. Barring an economic shock, small bay looks poised for continued resilience thanks to the constrained supply and appetite from tenants.