BKM report defines mid-bay industrial as the segment between small-bay and big-box

Institutional industrial has long been sorted into small-bay and big-box. BKM Capital Partners' report 'The missing middle: Making sense of mid-bay industrial,' covered by IREI, argues that the ground between those two buckets has gone largely undefined. It describes mid-bay properties as bridging the two ends, combining size, clear height, functionality and flexibility to serve small and medium-sized business tenants that neither extreme accommodates well.

The line BKM draws is suite-level rather than building-level. Mid-bay buildings typically run 100,000 to 200,000 square feet, the report says, while individual suites fall between 15,000 and 75,000 square feet. A building-size test would have filed much of that stock with one neighbor or the other; the suite is what signs the lease, absorbs a tenant's growth and rolls at expiry, and it is the unit an underwriter models when a roster turns over. Assets of that scale are likely to draw a different bidder list than a single big-box distribution center, though the summary does not address buyer composition.

For allocators, the issue is the comp set, since industrial assets get benchmarked and priced in buckets, so a mid-bay building split across the two established categories is likely to be valued against trades struck on different suite sizes, clear heights and tenant rosters. The classification is the proposal; whether appraisers and brokers treat it as a separate comp set is another matter, and the report does not settle it. The emphasis on flexibility points at something operators already know: the lease-up case for these buildings rests on keeping a growing tenant in place rather than replacing it.

The supply side is the sharper half of the argument, and the tightest availability, the report says, sits below 30,000 square feet, the small end of the band where tenants that neither extreme serves well compete hardest. With construction starts frozen across much of commercial real estate, a theme this publication has followed, that scarcity is not going to be built away quickly, which tends to strengthen a landlord's hand at renewal.

Whether the label travels is the open question. The comps allocators underwrite against come from appraisers, brokers and index rules, and a mid-bay bucket only does work if those sources quote it. Offering memoranda over the next several quarters will show whether the middle gets priced on its own or reverts to the two ends.