Financial Freedom with Real Estate Investing

MB484: The Asset Class Most Multifamily Investors Overlook—That Could Help You Scale Faster - With Cody Payne

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Aug 11, 2025

Cody Payne, Senior VP at Colliers and a savvy player in small-bay flex industrial real estate, discusses why this overlooked asset class is booming. He highlights the shift in tenant types post-COVID and the surging demand from small businesses and e-commerce. With insights on how simple upgrades can elevate property value, Cody also explains the appeal of triple-net leases for low management stress and impressive returns. Discover how this niche could outperform traditional markets and learn essential strategies for lucrative investments.

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INSIGHT

What Defines Small Bay Flex Space

Small bay (flex) comprises multi-tenant light industrial units, typically 1,500–5,000 sqft.
Tenants range from contractors to gyms and retail due to flexible unit sizes and layouts.

INSIGHT

Evolution And Demand Drivers

The asset class evolved from metal garages to glass-front multi-use spaces attracting new tenant types.
COVID and e-commerce accelerated demand by expanding the tenant pool beyond traditional contractors.

ADVICE

Underwrite With Conservative Cap Rate Range

Target cap rates around 6–8% depending on market and quality when underwriting small bay deals.
Favor assets with low tenant improvement costs to maintain capital efficiency during turnover.

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Small Bay Industrial (a.k.a. Flex Space) wasn’t on your radar—and for good reason.

But what if the most overlooked asset class in commercial real estate turned out to be one of the most profitable? In this episode, Cody Payne, SVP at Colliers, breaks down why Small Bay Flex Industrial is quietly exploding—and why more active and passive investors are taking notice. Cody shares how he transitioned from leasing to owning, how syndication plays a role in the space, and why this niche might outperform retail and office over the next decade. Whether you’re looking to diversify your portfolio or find a less management-intensive asset, this is an episode you don’t want to miss.

Key Takeaways

Why Flex Industrial Is Heating Up

The asset class has evolved: from basic metal garages to glass-fronted multi-use spaces.
Demand is surging as small businesses, gyms, e-commerce, and retail users flood in.
Triple-net leases and low tenant improvement costs make this a capital-efficient play.

How to Add Real Value with Small Bay Assets

Simple cosmetic upgrades (like storefront glass) can attract higher-paying tenants.
Reconfiguring larger units into smaller ones can boost PSF rent.
Strategic side yards and outdoor storage add ancillary income.

Investor Returns: What to Expect

Typical stabilized deals offer 8–10% cash-on-cash returns with low capex.
Value-add plays or development deals can push IRRs significantly higher.
Cap rates range from 6–8%, depending on market and quality.

Management Made Simple

Triple-net leases reduce headaches—tenants handle their own maintenance.
Very few after-hours calls; most businesses operate during daytime hours.
Easy to find third-party managers who understand this asset class.

Syndication in Small Bay: A New Frontier

Cody’s early deals involved rolling his broker fee into equity—low-risk entry point.
Syndication works well, especially for stabilized assets or light value-add.
Investors like the stability, tenant diversity, and ease of management.

Navigating the Market: Deal Flow and Financing

Good deal flow in most metros if your buy box is realistic (e.g., 7–8% cap).
Financing is accessible: 25-year terms, 65% LTV, and ~6.25% interest.
Banks used to avoid this asset class—now they’re chasing it.

For full episode show notes visit: https://themichaelblank.com/podcasts/session484/