Investor Education

Small-Bay vs. Large-Bay Industrial Real Estate: What Canadian Investors Should Know

Published September 3, 2026 · 12 min read

Industrial real estate is a category, not a single property type. Bay size, tenant depth, and building specs change the risk.

For anyone researching industrial real estate investment in Canada, one of the most important distinctions is also one of the least discussed: industrial buildings are not all the same.

A 7,000-square-foot light-industrial unit occupied by a local service business behaves very differently from a 400,000-square-foot distribution centre leased to one national company. Both may fall under the broad category of industrial real estate, but their tenant pools, lease structures, vacancy risks, operating requirements and potential sources of return can differ considerably.

That matters to investors.

Before evaluating an industrial property or an industrial REIT, it helps to understand what type of industrial space is actually inside the portfolio.

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Industrial Real Estate Is a Category, Not a Single Property Type

The term “industrial real estate” can describe warehouses, distribution centres, manufacturing buildings, contractor facilities, logistics hubs, storage buildings and multi-tenant light-industrial properties.

Even two warehouses in the same city can serve completely different users.

The lesson for an individual investor is simple: saying that a REIT owns “industrial real estate” does not provide enough information to properly evaluate the portfolio.

You need to look deeper.

One useful place to start is bay size — the same property-level thinking behind why the building is the real income engine.

What Does “Bay Size” Mean?

A bay is generally an individual industrial space that can be occupied by a tenant. A building may contain one bay occupied by a single company or many bays occupied by different businesses.

There is no universal Canadian definition separating small-, medium- and large-bay industrial properties. Definitions vary by market and research firm.

For its Q2 2026 Calgary industrial analysis, Colliers classified vacant industrial units as:

• Small bay: less than 10,000 square feet
• Medium bay: 10,001 to 40,000 square feet
• Large bay: greater than 40,001 square feet

Those categories are useful for understanding the basic differences between industrial properties, even though another brokerage or landlord may use different cutoffs.

Why Small-Bay Industrial Space Attracts Attention

Small-bay industrial properties typically serve businesses that need functional operating space but do not require a massive warehouse.

Potential occupants may include trades, equipment suppliers, fabrication companies, wholesalers, automotive businesses, service companies, local distributors and other small or mid-sized enterprises.

This can create a broad pool of potential tenants.

A 5,000-square-foot industrial unit may be suitable for hundreds of businesses in a metropolitan area. A 500,000-square-foot distribution centre requires a company capable of occupying and paying for half a million square feet.

That difference becomes important when space becomes vacant.

CBRE’s 2026 Canadian industrial outlook specifically identified small- and mid-bay industrial properties as a segment expected to outperform larger-bay properties under current economic conditions. CBRE’s reasoning is that smaller industrial spaces provide greater leasing flexibility, while very large facilities require commitments from a much smaller number of potential occupants.

Current Calgary data also shows strong activity at the smaller end of the market.

In Q2 2026, CBRE reported that industrial availability in Calgary declined, with the reduction particularly pronounced among spaces under 10,000 square feet. The number of available options in that category had fallen 25.1% from a year earlier.

That does not mean small-bay properties will always outperform.

It does show why industrial investors should pay attention to tenant depth rather than looking only at total square footage.

Tenant Diversification Can Change the Risk Profile

Consider two hypothetical 100,000-square-foot industrial properties.

That simple example explains one potential benefit of multi-tenant industrial properties: income can be spread across several businesses.

But diversification comes with a trade-off.

Ten tenants mean ten relationships, ten leases, more renewals and potentially more frequent tenant improvements or leasing costs. A single-tenant building may be simpler to operate if the tenant is financially strong and has committed to a long lease.

Neither structure is automatically better.

An investor needs to understand where the risks sit — one of the common mistakes in industrial real estate investing is treating occupancy as the whole story.

Large-Bay Industrial Has Its Own Advantages

Large logistics and distribution facilities play an important role in the Canadian economy.

These buildings may support regional distribution networks, retailers, manufacturers, third-party logistics companies and major e-commerce operations.

Large facilities can also attract substantial corporate tenants capable of signing longer leases.

A long-term lease with a financially strong tenant may provide an owner with relatively predictable contractual rent for an extended period.

That can be attractive.

The risk is concentration.

The larger and more specialized the building, the smaller the number of replacement tenants may become.

If a 500,000-square-foot tenant vacates, finding another company that needs the same amount of space, in the same location, with the same building specifications can take time.

Large-bay vacancy can therefore have an outsized effect on the income of an individual property.

Building Specifications Matter Too

Square footage tells only part of the story.

Industrial tenants care about how effectively they can operate inside a building.

Factors such as clear ceiling height, loading configuration, power capacity, truck access, yard space, parking, building depth and proximity to major transportation routes can all affect the usefulness of a property.

Modern logistics companies may also require buildings capable of supporting automation and greater electrical demand.

Prologis, one of the largest logistics real estate companies globally, identified access to power for automation and manufacturing as one of the major location considerations it expects logistics users to focus on during 2026. Its research also continues to track e-commerce, manufacturing and supply-chain restructuring as drivers of industrial space decisions.

This gives investors another useful question to ask:

A property may have a good current tenant and still face problems at the next lease rollover if the building becomes functionally outdated.

Location Still Drives Industrial Real Estate

Industrial property is operational real estate.

Tenants typically choose locations because those locations help their businesses function.

• For a distribution company, highway access may matter.
• For a contractor, proximity to customers and employees may matter.
• For a manufacturer, power, labour and transportation infrastructure may matter.
• For an urban last-mile facility, being close to the end customer may carry significant value.

This is one reason industrial real estate close to established population centres and transportation networks can be difficult to replace.

Prologis has long highlighted the connection between supply-chain costs and logistics locations, particularly as companies place inventory closer to consumers.

Investors therefore need to examine more than the building. They should understand the economic purpose of its location — a theme also explored in InvestPlus REIT’s corporate strategy.

What Is Happening in Canada’s Industrial Market in 2026?

The national industrial market has been moving through a period of normalization after the exceptionally tight conditions seen earlier in the decade.

Current data suggests conditions are starting to stabilize.

Cushman & Wakefield reported national industrial vacancy of 5.4% in Q2 2026. Leasing activity reached approximately 16 million square feet during the quarter, bringing first-half leasing to approximately 32 million square feet, 29.1% above the same period in 2025.

CBRE’s measurements use availability rather than the same vacancy methodology and reported national industrial availability of 5.5% in Q2 2026. That was the first quarterly decline in national availability since Q3 2022. CBRE also reported 3.9 million square feet of positive national net absorption during the quarter.

Different research firms may publish different vacancy or availability figures because their methodologies, geographic coverage and definitions vary. Investors should avoid treating one national number as a complete description of the Canadian market.

Industrial real estate is local.

Calgary, Edmonton, Toronto, Vancouver and Montreal can move in different directions at the same time.

Western Canada Shows Why Local Analysis Matters

Calgary’s industrial market continued to show healthy demand in Q2 2026.

CBRE reported that 89% of Calgary’s 429,000 square feet of newly delivered industrial space during the quarter was already pre-leased. The city’s availability rate also declined slightly.

Colliers separately reported approximately 1.54 million square feet of Calgary net absorption in Q2, supported in part by major distribution transactions and a large new distribution facility. Its measurements placed overall Calgary industrial vacancy at 2.97% and availability at 5.24%.

Edmonton was also relatively tight.

CBRE reported Edmonton industrial vacancy below 3% for a seventh consecutive quarter in Q2 2026, with an availability rate of 4.5%. Transactions involving 25,000 square feet or less represented 91.2% of deal count during the quarter.

These figures do not predict future property returns.

They do demonstrate why investors evaluating Western Canada industrial real estate should examine individual markets, submarkets and building types instead of relying on national narratives.

What Should an Industrial Real Estate Investor Actually Evaluate?

For a direct property investment or a private industrial REIT, investors should ask questions about the real estate itself.

1. Look at tenant concentration and how much income depends on any one occupant.
2. Review lease expiry dates and what happens at rollover.
3. Understand how much of the portfolio is small-bay, multi-tenant, large-bay or single-tenant.
4. Examine occupancy, historical leasing activity, tenant industries and the financial strength of major tenants.
5. Ask whether trucks can access the site efficiently and whether the building can accommodate different tenants.
6. Check whether major capital expenditures are expected and whether new competing supply is being built nearby.

Investors evaluating a REIT should also examine factors beyond the properties, including debt, borrowing costs, management fees, acquisition strategy, valuation methodology, redemption provisions and liquidity.

A strong building does not automatically make a strong investment structure.

Small-Bay vs. Large-Bay: There Is No Automatic Winner

It would be easy to turn current market data into the claim that small-bay industrial is simply “better.”

That would be an oversimplification.

Small-bay assets can offer a deeper tenant pool and greater tenant diversification. They may also require more active leasing and property management.

Large-bay facilities can attract major companies and long contractual leases. They can also create significant tenant concentration and re-leasing risk.

The quality of the investment depends on price, location, tenant strength, building quality, financing, lease terms, management and many other factors.

That is the central point for investors researching an industrial REIT in Canada.

How InvestPlus Industrial REIT Approaches Industrial Property

InvestPlus Industrial REIT focuses on revenue-generating industrial properties across Western Canada.

Its current portfolio includes light-industrial and multi-tenant properties across Alberta and Saskatchewan. The portfolio page reports 20 buildings and more than 750,000 square feet of industrial space under management.

For prospective investors, those numbers should be the beginning of the research process rather than the end.

Review the portfolio. Learn how private REIT ownership works. Read the Investor Overview. Examine the current Offering Memorandum, financial information, fees, risks, liquidity terms and investment structure.

Then ask questions.

That is a much stronger foundation for an investment decision than simply deciding that industrial real estate sounds attractive.

Frequently Asked Questions

Is small-bay industrial real estate less risky than large-bay industrial?

Not necessarily. Small-bay properties can have larger pools of potential tenants and can spread rental income across several occupants. They may also experience more frequent leasing activity and require more active management. Risk depends on the property, market, tenant base, financing and purchase price.

Why do industrial investors care about tenant concentration?

Tenant concentration measures how much rental income depends on individual tenants. If one company represents a large percentage of a property’s rent and leaves or fails to meet its lease obligations, the effect on property income can be significant.

What is net absorption in industrial real estate?

Net absorption measures the change in occupied space over a period. Positive net absorption generally means more industrial space became occupied than was vacated. Negative absorption means occupied space declined.

What is the difference between industrial vacancy and availability?

Vacancy generally measures space that is physically vacant. Availability can also include space that is still occupied but being marketed for lease or sublease. Research firms may calculate these figures differently, which is why their market statistics do not always match exactly.

Is industrial real estate still performing well in Canada in 2026?

Current 2026 data shows improving leasing activity and relatively stable national vacancy and availability, but results vary significantly by city and property type. Investors should evaluate individual markets rather than assume the entire Canadian industrial sector performs the same way.

Learn Before You Invest

Industrial real estate can appear simple from the outside: own a building, lease it to a business and collect rent.

The reality is more detailed.

Bay size, tenant concentration, lease expiries, property specifications, location, financing and local supply can all affect performance.

If you are researching private industrial real estate, start by understanding those fundamentals.