Small- And Mid-Bay Industrial Users Weathering Tariffs Well — For Now

Tariffs haven’t toppled small and mid-bay industrial users yet — but signs of strain are starting to emerge.

Shorter lease terms, increased stockpiling, and creeping vacancy rates all hint at mounting pressure. The key question: how long can they hold out? Both landlords and tenants agree — the balancing act is becoming more difficult as economic uncertainty lingers.

“We’re seeing more tenants ask for shorter lease terms,” said Mason Waite, Managing Director of Asset and Portfolio Management at BKM Capital Partners. “Our average lease is typically three to five years, but lately we’re getting more requests for two- or three-year deals.”

Small and mid-bay tenants — typically occupying under 25,000 square feet — span a wide range of businesses, from janitorial services and vintage stores to TikTok-fueled e-commerce startups. Within a single building, one tenant might be feeling the sting of tariffs, while another is barely affected. But that doesn’t mean they’re insulated. According to the U.S. Department of Commerce, 97% of U.S. importers are small businesses, most with fewer than 500 employees — and nearly half with fewer than 50.

Some landlords even saw a short-term boost from tariffs, as import-reliant tenants scrambled to stockpile inventory. In Houston, one BKM Capital tenant leased additional space to bring in extra goods from Vietnam ahead of anticipated tariff hikes.

“They believed in their product’s demand enough to pull forward purchasing and expand their footprint,” Waite said.

While occupancy hasn’t taken a hit yet, the climate of uncertainty is making it harder for small businesses to operate, said Katerina Cirilli, co-CEO of Saltbox, a co-warehousing company serving mostly e-commerce entrepreneurs — many of whom scaled up through social media platforms like TikTok. Saltbox now operates 11 buildings across nine markets.

“If you’re running an e-commerce business in the U.S. right now, the challenge is the constant change,” Cirilli said. “Things shift almost daily.”

Small manufacturers are especially vulnerable, said BJ Turner, CEO of Dunleer. About 10% of Dunleer’s portfolio includes manufacturing tenants, many of whom rely on imported materials.

“Those are the tenants I worry about most,” Turner said.

So far, landlords haven’t reported downsizing directly tied to tariffs, and rent payments remain stable. But leasing activity is slowing, and vacancies are sticking around longer.

“You might lose a tenant and not have that same pipeline of interested prospects as you did a few years ago,” Turner said. “It’s taking a little longer to fill those spaces. Vacancy increases are currently in the low- to mid-single-digit range.”

Waite views tariffs as just one more hurdle in a series of disruptions that small businesses have faced over the past five years.

“Everyone has been through a lot — the pandemic, supply chain issues, inflation, and now tariffs,” he said. “That’s a lot for anyone to absorb in just five years.”

Source: Bisnow