Industrial developer Merritt Properties is eyeing an undersupplied segment of the market with strong demand, and it just secured a major investment to fund more projects.

The Baltimore-based firm received a $750M capital injection from two companies: longtime partner Almanac Realty Investors and new investor Centerbridge Partners.

The deal gave the investors a roughly 35% stake in the firm, said Merritt Properties CEO Robb Merritt, who took the leadership role earlier this month, 59 years after his late father, Leroy Merritt, founded the company.

The new CEO told Bisnow its strategy is focused on shallow-bay industrial spaces, which already make up 65% of the company’s portfolio.

“Our focus is going to be in the Southeast,” he said.

Merritt said he is looking for markets with business growth first. He declined to reveal exactly where the company is growing its footprint, but he said it has entered Richmond, Virginia, Raleigh, North Carolina, and Jacksonville, Florida, in recent years.

More than 75% of the expansion will be carried out through new construction, the CEO said. He is focused on projects that will draw tenants seeking 9K SF or fewer.

Shallow-bay vacancy nationwide sat at 4.8% last quarter, compared to 6.9% for industrial overall, according to Cushman & Wakefield.

Part of that disparity is because the cost to construct small industrial spaces is significantly higher per square foot than the hulking warehouses that came online en masse amid the post-pandemic e-commerce boom.

“The code is you have to get very high rents,” Merritt said when explaining how his firm makes new shallow-bay builds pencil. “It's that simple.”

Institutional investors have historically avoided shallow-bay assets due to the resources needed to manage a large number of small-footprint tenants, the CEO said.

Merritt has roughly 50 customer service representatives in the Beltway region around Washington, D.C., alone. They each serve between 150 and 200 tenants.

But as the bulk segment became oversupplied in recent years, shallow-bay industrial has become a hot commodity. This means some industry players are stretching the definition of the term beyond the small spaces Merritt specializes in.

“There's a lot of people now that are discovering this product, and they want to duplicate what we're doing,” Merritt said of his firm’s strategy.

“Some people will tell you that shallow-bay is 180 feet deep. Our product is 90 to 100 feet deep,” he added. “We see product come up that says shallow-bay. We don't think it's shallow-bay. They're just using the word because it's an attractive product.”

Merritt’s portfolio is leased to tenants from a wide array of industries, which is part of why the CEO described it as resilient in the face of broad economic downturns.

“It doesn't suffer the distress that some of the bulk product does when the bulk market is not going well. You lose entire buildings,” Merritt said.

The $750M investment came as the industrial market appears to be turning a corner. Cushman tracked a 20-basis-point decline in overall vacancy nationwide year-over-year in Q2.

Vacancy for warehouses 750K SF and larger fell from 8.3% to 7.3% in the year leading up to Q2 2026, according to Savills.

Interest in the industrial sector meant that Merritt had roughly 100 potential new investors to choose from when its previous deal with Almanac, which the firm has partnered with since 1997, expired in 2025.

The new deal started with a $500M investment, 73% of which was provided by Centerbridge and 27% of which was provided by Almanac. They have jointly committed to providing an additional $250M for future growth.

Along with the investment, Merritt assumed the CEO position previously held by Scott Dorsey, who has transitioned to an executive chairman role. Dorsey started working at the company with Merritt’s father in 1972, the CEO said.

Merritt’s former position as president was filled by Bobby Lanigan, who previously led the company’s acquisition and strategic growth initiatives.

“We’re just strengthening and adding depth to our C-suite,” the CEO said of the personnel changes.