Small‑bay stickiness holds
EastGroup’s strategy highlights that infill, small‑bay warehouses keep tenants longer because scarcity and proximity matter for last‑mile and service operators, producing higher retention and pricing power. That stickiness is a reminder that users who prioritise location density will trade some flexibility for operational advantage. (x.com)
The warehouse market split in two. Big boxes on the suburban edge got easier to find. Small bays near the customer did not. EastGroup Properties has spent years betting on that gap, and its recent results show why the trade still works. EastGroup is not chasing the giant fulfillment center. It focuses on multi-tenant industrial buildings, usually for users in roughly the 20,000- to 100,000-square-foot range, clustered on infill sites near major transportation corridors in Sun Belt metros. The company says those buildings serve “location sensitive customers,” which is a dry phrase for businesses that cannot do the job well from far away. (eastgroup.net) That detail matters because small-bay tenants often use space differently than the headline-grabbing logistics giants do. They are local distributors, repair firms, contractors, food operators, light manufacturers, and service businesses that need to reach neighborhoods fast, dispatch crews quickly, or hold inventory close to customers. Infill space is not just cheaper than losing time. It is part of the product they sell. (eastgroup.net) Once that kind of tenant is in place, moving becomes painful. A relocation can mean longer drive times, slower deliveries, weaker labor access, and a break in customer coverage. That is why small-bay industrial often behaves more like infrastructure than like generic warehouse space. CBRE recently noted that shallow-bay availability has remained tight because strong demand from small occupiers keeps vacancy low while new supply stays limited. (cbre.com) The supply side is the real trapdoor. Most shallow-bay inventory is old, and very little comparable product has been built over the past two decades. Land close to rooftops is scarce, zoning is harder, and developers usually prefer larger projects with bigger check sizes. In many infill submarkets, some small-bay stock is even disappearing as sites get redeveloped into higher-value uses. (cbre.com) That scarcity shows up in EastGroup’s numbers. At the end of 2025, its operating portfolio was 97.0 percent leased and 96.5 percent occupied. Rental rates on new and renewal leases rose 40.1 percent on a straight-line basis for the year. Same-property net operating income rose 7.0 percent. Those are not the numbers of a landlord begging tenants to stay. They are the numbers of a landlord that owns space users do not want to give up. (prnewswire.com) The broader market makes the contrast sharper. JLL put overall U.S. industrial vacancy at 7.5 percent in late 2025. Cushman & Wakefield put it at 7.1 percent through the second half of the year. Small-bay space has been tighter than that. CBRE found shallow-bay vacancy running 2.5 percentage points below the overall industrial vacancy rate in major markets. EastGroup’s portfolio sat tighter still. (jll.com) This is why “stickiness” is the right word. Tenants in these buildings are not choosing maximum optionality. They are choosing operational advantage. They give up some flexibility because the location does work that extra square footage cannot. EastGroup has built its portfolio around that simple fact, and as of December 31, 2025, that portfolio had grown to about 65 million square feet. (eastgroup.net
