In the evolving landscape of the California industrial market, small-bay industrial continues to stand out across Northern California. While big-box warehouses are experiencing rising vacancy and slower absorption, the smaller, multi-tenant properties under 50,000 square feet are maintaining significantly tighter market conditions.
Our market reports from Sacramento, Chico, and Redding show a consistent trend. Small-bay industrial spaces are still leasing quickly, with minimal new construction and limited availability. This relative tightness is even more striking when compared to the mounting challenges faced by larger logistics and distribution formats.
What Is Small-Bay Industrial?
Small-bay industrial typically refers to properties with units under 20,000 square feet and total building sizes generally under 50,000 square feet. These properties are often:
- Multi-tenant buildings with flexible configurations.
- Used for light manufacturing, storage, service providers, or local logistics.
- Located in infill locations close to workforce and consumers.
Unlike large-scale distribution centers, these properties are often geared toward small businesses and regional operators rather than national occupiers.
Small-Bay Industrial Market Conditions in Northern California
Sacramento
The broader industrial market in Sacramento real estate has a 6.9% vacancy rate, but small-bay industrial is far more constrained. Vacancy in multi-tenant buildings under 50,000 SF is trending near 4%, with leasing velocity under four months—a notable improvement over the 5-6 month average in pre-pandemic years.
Big-box properties tell a different story. Nearly 2.2 million square feet of space completed since 2023 remains available, much of it in buildings over 200,000 SF. These properties are leasing more slowly, even with tenant incentives and competitive rates.
Chico
Chico real estate data shows the overall vacancy rate hit 10.7%, largely due to logistics and flex vacancies. But small-bay assets within infill areas of Chico proper remain stable. Leasing data indicates demand is still active for spaces under 20,000 SF, particularly those near established industrial corridors like Hegan Lane Business Park.
There is no new industrial construction in Chico as of Q3, and speculative supply is virtually nonexistent—a major factor in maintaining relative tightness for small-bay product.
Redding
The Redding commercial real estate market presents one of the clearest cases of small-bay outperformance. The market-wide vacancy rate is 3.1%, well below state and national averages, but leasing activity is concentrated in smaller buildings. Notably, 14 of the top 20 leases in the past year were for spaces under 15,000 SF.
Despite no new deliveries in the past 12 months, absorption remains positive. Redding’s combination of low availability, strong tenant demand, and a complete lack of speculative development makes its small-bay segment particularly resilient.
Why Is Small-Bay Industrial So Tight?
There are several factors driving the relative scarcity of small-bay space in Northern California:
- Limited New Supply: Most new construction has focused on large-scale logistics centers. Very few developers are building smaller, multi-tenant facilities.
- Stable Tenant Base: Local businesses, contractors, and regional distributors form a stable demand base for small-bay properties.
- Flexibility and Location: Small-bay sites are typically located in urban or infill areas, making them ideal for last-mile distribution and service-oriented tenants.
- Minimal Turnover: Smaller tenants often sign longer leases or renew consistently, keeping turnover low.
How to Lease or Acquire Small-Bay Industrial Space in Northern California: 5 Steps
If you’re a business owner or investor looking for small-bay industrial real estate in tight Northern California markets, here’s how to approach the process effectively:
- Define Your Size and Use Requirements. Clarify how much space you need and what zoning or build-out specifications apply.
- Start Early and Move Fast. With most spaces leasing in under four months, early engagement is key to avoiding lost opportunities.
- Partner with a Local Expert. Work with a commercial real estate broker who understands the nuances of sub-50,000 SF product in markets like Sacramento, Chico, and Redding.
- Be Flexible on Geography or Specs. Flexibility on layout, finishes, or slightly different locations can unlock more options.
- Monitor Listings and Off-Market Deals. Many small-bay deals transact before hitting listing platforms. Stay connected with brokerage networks.
Big-Box Industrial: A Contrasting Picture
It’s important to acknowledge that the industrial sector as a whole is not uniformly constrained. In Sacramento, Chico, and even parts of Redding, large blocks of newly delivered space remain available, particularly those 100,000 SF and above. This divergence in performance reinforces that not all industrial real estate is created equal.
While large-format space competes on price and concessions, small-bay product is competing for availability. The imbalance between demand and supply in this segment is likely to persist, particularly as speculative development remains limited and demand from local users stays strong.
Summary
Small-bay industrial continues to outperform other industrial formats across Northern California. With vacancy rates consistently lower than the broader market, limited new construction, and high leasing velocity, this segment remains a bright spot in a sector facing bifurcated performance.
As businesses seek well-located, right-sized spaces, and as investors look for resilient asset classes, small-bay industrial is proving to be one of the tightest and most reliable industrial property types in the region.
Looking for small-bay industrial space or interested in investment opportunities in Northern California? Contact Capital Rivers Commercial today to explore our listings or speak with a local expert in Sacramento, Chico, or Redding.
