Small Bay Industrial

The Real Estate Espresso Podcast

Small Bay Industrial

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Welcome to the Real Estate Espresso podcast. Your morning shot on what’s new in the world of real estate investing. I’m your host, Victor Menasce, this is the weekend edition. We’ve got a very special show for you today. On today’s show. I’m coming to you live from the Ottawa real estate investors organization, where I’m giving a talk on small Bay Industrial. Enjoy today’s talk on small Bay Industrial.

Good evening and welcome to Orio. I’m Victor Menasce, present here at Orio, and we’re going to be talking tonight about small Bay Industrial. But first, let me give you just a little bit of background on myself and my team. I’m the host of the Real Estate Espresso podcast, daily show seven days a week. If you’re not already a listener. Please, put up your hand if you already subscribe to the show. Awesome. Well, thanks for listening and for those who are not part of the show, it’s a daily show seven days a week. Just coming up on episode 2,700. So I’ve been doing this for a little while and over here on the right hand side you see a photograph of partners in our team at Y Street Capital. No, we’re a development firm based here in Ottawa split between Ottawa and the US. Probably the majority of the work that we do is US based. We do a little bit here in Canada. This is a rendering of a project that we’re looking to pull out of the ground later this year in Westboro and this is an image of actually just from this morning. I’ll have a project up at Mont-Tremblant, which is a workforce housing project. That’s something the community’s been looking for, for a long time.

Moving on to our topic for today, we want to talk about small bay industrial and in fact, this is an article from the Ottawa Business Journal. It’s actually kind of funny, the picture on the headline of the article is of a large bay product that was just built in Canada, even though the article is talking about small Bay. They got the picture wrong. However, the point is the same – small bay industrial is a segment that’s in hot demand. To understand this better, let’s start by actually defining what it is, who uses it, and who are the customers for this product? It’s your traditional small commercial trades like plumbers, electricians, landscaping companies, mechanical contractors, siding contractors, and so on. Auto repair parts fulfillment businesses are also typical users of a small bay industrial setup. We’re also starting to see some unconventional uses. A new one lately is Pickleball courts.

Now, let’s talk a little bit about what the typical format of a small bay industrial setup is. It typically looks a little bit like a retail storefront with a commercial door and maybe a window. And then at the back, there’ll be a roll-up door to an open space. Some of the older product are single story buildings. Generally, these are single story buildings, but ceiling height matters. The newer product is typically going to have a 20-foot ceiling height, while some of the older products that are typically 10, 12 foot ceiling height, in my opinion, are functionally obsolete.

You’re probably thinking, why is ceiling height important? After all, people are only six feet tall. The reason has to do with storage. It’s also to do with the possibility of building a mezzanine level above the front office so that you can get additional functionality. A lot of folks are looking for that. And if you’re going to be storing product, getting that additional height matters. Moreover, these buildings usually do not have a basement, they’re typically built as slab-on-grades. In any kind of industrial product, anywhere between 25 to 30% of the cost of the build is actually going to go into the concrete slab. If you’re building something that’s got significant height, that’s going to carry loads, of course, the concrete slab is going to be thicker and more expensive. But generally speaking, the concrete slab is the number one cost associated with these buildings.

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