Tariffs haven’t broken small- and mid-bay industrial users yet — but with shorter leases, stockpiling and rising vacancies, the question is how long they can last.
As time wears on, landlords and tenants say the balancing act is getting harder.
Falling confidence in the U.S. economy has dampened long-term planning, shortening the length of leases.
“Our average lease terms are usually three to five years,” said BKM Capital Partners Managing Director of Asset and Portfolio Management Mason Waite.
“What we've seen is a lot more tenants, when we come up for renewals, saying, ‘Instead of a three- or four- or five-year proposal, can you give me a two- or three?’”
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Defined as tenants under 25K SF, small- and mid-bay users span cleaning crews, vintage shops and TikTok-driven e-commerce sellers.
In a single property, one occupier might be struggling with import duties while another sails by unaffected.
But they are just as vulnerable as larger users: A report from the U.S. Department of Commerce found that 97% of importers to the U.S. are small businesses with fewer than 500 employees.
About half of those have fewer than 50 employees.
Some landlords even benefited as import-reliant tenants grabbed extra space to stockpile goods before tariffs hit — including a BKM Capital tenant in Houston that ordered additional products from Vietnam.
“They took down some additional space, actually, leased more space because they had enough belief and forecast demand for their product that they pulled forward purchasing,” Waite said.
While the tariffs haven’t impacted their occupancy rates to date, the uncertainty they have created is presenting challenges to the already difficult task of running a small business, according to Katerina Cirilli, co-CEO of cowarehousing company Saltbox.
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Most Saltbox users are e-commerce companies, including sellers that scaled up from TikTok. The company now operates 11 buildings across nine markets.
“Transparently, if you imagine being an e-commerce owner in the United States right now, I think the hardest part is there's so much that's changing almost on a like daily, weekly, monthly basis,” Cirili said.
Small manufacturers could also feel the squeeze, said Dunleer CEO BJ Turner, noting that about 10% of the firm’s portfolio is manufacturing tenants, many of them dependent on imported goods.
“Those are maybe the ones that I worry about the most,” Turner said.
No landlords reported tenants downsizing directly related to tariffs, and so far, rent collections have not been impacted. But vacancies are lingering for longer.
“You can see a tenant leave, and maybe you're just not getting that the line of tenants that we did a few years ago, and maybe there's fewer tenants applying, and therefore you've got a little bit more vacancy,” Turner said.
He anticipates the increase in vacancy is in the low- to mid-single digits.
Waite sees the tariffs as the latest in a nonstop wave of challenges the last five years have brought for small businesses.
“Everyone really has been through quite a lot in the last five years,” Waite said. “That's a lot to digest for anyone in a five-year period.”
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