Small-Bay Industrial Out-Earns Big-Box by 55% Per Foot — in the CMBS Loan Data

Every commercial mortgage that gets packaged into a bond leaves a paper trail — and not a marketing one. The real numbers: net operating income, occupancy, debt coverage, filed with the SEC and re-checked each year by a loan servicer who has no reason to flatter the building. In that data, across CMBS-securitized industrial loans, small-bay out-earns big-box by 55% per square foot — $9.31 of NOI per foot versus $6.00 at loan issuance, at essentially the same occupancy and the same coverage.

I lead with that comparison because it inverts the reputation. The consensus reads small-bay as the scrappy, sub-institutional cousin — smaller, messier, presumably riskier, the thing you buy when you can't buy the trophy warehouse. The loan tapes say something quieter and more interesting: on the one number lenders actually underwrite, the little building wins. Not by growing faster. By earning more today, on relatively the same credit (per the CMBS pool). More return, minimally more risk.

What is CMBS loan-level data — and why trust it?

When a commercial mortgage is securitized, the property's financials become public. Issuers file loan-level disclosures with the SEC — the ABS-EE EX-102 operating financials and the Annex A-3 term sheets — and servicers refile the numbers annually over the life of the loan. It is, more or less, the one place in commercial real estate where a stranger can see audited-grade NOI, occupancy, and debt-service coverage for thousands of buildings at once.

That's the appeal. Broker pro formas are written to sell; owner numbers are written to borrow. A servicer's filing is written to a bond trustee, which is a different audience entirely. Nobody games a scorecard they're legally required to keep. So we pulled the industrial slice of it, classified each property as small-bay or large by its physical product type — not a simple square-foot cutoff — and compared the two. 3,180 industrial properties came back classified: 1,764 small-bay, 1,448 large, as of the July 2026 CMBS loan-tape pull. Everything below is that sample.

One caution before the numbers: this is the securitized universe, not the whole market. It's a well-lit room in a large, mostly dark house. But it's the best-lit room there is.

The finding, in five numbers

$9.31 vs $6.00 — NOI per square foot, small-bay vs large, at loan issuance. A 55% premium per foot.
97.6% vs 98.0% occupancy, and 2.18 vs 2.22 debt-service coverage — essentially the same, with big-box nominally ahead on both.
88,271 vs 365,096 SF — the small-bay buildings average about a quarter the footprint of the big boxes. Every figure here is per square foot, so size is already controlled for: this is pound-for-pound, not big buildings flattered against small ones.
Every major industrial state in the sample shows the same direction — small-bay NOI per foot above big-box.
~35% vs 84% — in multi-tenant small-bay, the single largest tenant carries only about a third of the rent roll, versus 84% for big-box. Where small-bay spreads its income, it spreads it far wider.

(Averages, at loan issuance, as of the July 2026 CMBS loan-tape pull, across CMBS-securitized industrial loans.)

How much more does small-bay earn per foot?

About 55% more net operating income per square foot — the headline of the whole study. And the premium isn't a lease-up fluke or a cheap-debt artifact; it holds across revenue, and it holds while the two products carry the same occupancy and the same coverage.

| Metric (avg, at issuance) | Small-bay (1,764) | Big-box (1,448) | Edge | |---|---|---|---| | NOI per SF | $9.31 | $6.00 | +55% | | Revenue per SF | $12.61 | $7.93 | +59% | | Revenue per SF (current) | $16.30 | $10.29 | +58% | | Occupancy | 97.6% | 98.0% | ~tied | | Debt-service coverage (DSCR) | 2.18 | 2.22 | ~tied | | Day-one cap rate | 6.68% | 6.62% | ~tied | | Avg building size (SF) | 88,271 | 365,096 | ~4.1× smaller |

Read the top row against the bottom one. Pound for pound, small-bay carries its weight in a way the trophy box doesn't — and lenders priced the two almost identically on coverage and on day-one yield. Every figure here is per square foot, so this isn't a small building flattered against a big one; it's the same unit of measure, and the small product simply produces more of it. That premium isn't the deal terms. It's the product type. (Where a figure is on a current basis rather than at issuance, I've labeled it; the headline NOI is at issuance, so we're comparing like to like.)

It also squares with what brokers see from the outside: product under roughly 150,000 SF has commanded about a 21% rent premium over larger industrial, per BKM Capital Partners' 2026 read. The loan tapes push that gap wider on NOI, because smaller buildings recover expenses differently — but the direction is the same one the market already reports.

Does the premium hold everywhere, or just in a few hot markets?

Everywhere we could measure it. State by state, small-bay's NOI per square foot sits above big-box in every major industrial market in the sample — coastal, Sun Belt, and Rust Belt alike. The size of the gap moves; the sign never does.

| State | Small-bay NOI/SF | Big-box NOI/SF | |---|---|---| | California | $13.96 | $9.71 | | Georgia | $9.87 | $5.40 | | Pennsylvania | $9.23 | $6.60 | | Texas | $8.94 | $6.34 | | Florida | $8.66 | $7.49 | | Illinois | $7.20 | $5.10 | | Michigan | $6.81 | $5.21 | | Indiana | $6.49 | $4.43 | | Ohio | $5.43 | $4.23 |

A pattern that survives nine different state economies is usually structural, not local. When California and Ohio disagree on almost everything and still agree on this, I stop treating it as a market quirk.

If small-bay earns more, isn't it riskier?

Not on the evidence in front of us. This is the assumption the data actually tests — that a higher per-foot yield must be paying you for hidden risk. In this sample it isn't. Small-bay carried 97.6% occupancy to big-box's 98.0%, and 2.18x debt coverage to 2.22x. Those are ties, and where they're not, the big box is nominally the stronger credit, not the small one.

One clarification, because a careful reader will raise it: on its own, big-box more often carries the investment-grade tenant — the household-name credit on a fifteen-year lease — and that's the stronger covenant in isolation. What levels the field here is the CMBS structure itself. These loans are pooled and rated together — small-bay and big-box sitting inside the same securitized deals, under the same bond ratings — so the credit comparison a bondholder actually makes is close to like-for-like. On the loan-level measures that survive that pooling, coverage and occupancy, the two come out essentially even. Read the premium in that frame: relatively the same credit, per the pool, for materially more income per foot.

Let me be precise, because it matters: I'm not claiming small-bay is safer. It isn't, on these numbers — large is a hair better on both occupancy and coverage. The honest statement is narrower and, I think, more useful: the extra return did not come with extra measured risk. Same coverage, same occupancy, materially more NOI per foot. Whatever premium you'd expect the market to charge for "smaller and less institutional," the loan tapes don't show it landing on occupancy or on coverage.

Why does the premium hold up?

Two forces, and it's worth keeping them apart, because they usually get blurred into one. The first is what actually drives the per-foot premium: small, functional space simply rents for more per square foot. It holds whether the building has one tenant or ten — in this sample, single-tenant small-bay earned $9.44 per foot and multi-tenant $9.07, both far above big-box's $6.00. That's a product effect, not a diversification effect. And it squares with what the market reports from the outside: space under roughly 150,000 SF has commanded about a 21% rent premium over larger industrial, per BKM Capital Partners' 2026 read. Scarce, small, functional square footage is worth more per foot; the loan tapes just price it.

The second force is about resilience, not yield — and it lives in the multi-tenant half of the asset. Where small-bay is genuinely multi-tenant, the income is spread remarkably wide: the largest tenant carries only about a third of the rent roll (~35%), versus 84% for big-box, and far more of it is flex space (17.8% vs 0.4%). More tenants, more frequent resets, less single-lease cliff risk. That doesn't create the premium — the single-tenant buildings earn it too — but it's why a multi-tenant small-bay rent roll tends to hold through a soft patch, where a single-credit box either renews or it doesn't.

One honest note on this sample: securitized small-bay skews toward single-tenant net-lease deals — about 60% of the small-bay loans here are single-tenant — because those package cleanly into bonds. In the broader market, small-bay is famously multi-tenant; our tenant intelligence names more than 910,000 distinct businesses operating inside small-bay nationally. The point isn't that small-bay is one-tenant or many. It's that the per-foot premium shows up either way — which is exactly what you'd want to see before believing it.

And it fits everything else this series has found. The stock is old — a median small-bay building was constructed in 1982, per our national age study. It's owned by private operators, not Wall Street. It's occupied by American small business at large — storefronts, makers, trades, clinics. Small, scarce, functional, and broadly used: an asset that earns its keep per foot in a way a single trophy box never had to.

What about growth — doesn't big-box compound faster?

No — growth was roughly matched, which is exactly why I'm not leading on it. Blended realized NOI growth ran +4.35% a year for small-bay versus +4.30% for big-box — a rounding error apart. Big-box actually grew faster before the pandemic; small-bay held up slightly better through COVID and in the years since. Call it a tie with a small small-bay tilt in the rough years.

| NOI growth (avg YoY, realized) | Small-bay | Big-box | |---|---|---| | Pre-COVID | +4.76% | +5.69% | | COVID (2020–21) | +3.44% | +3.21% | | Post-COVID | +4.58% | +4.42% | | Blended | +4.35% | +4.30% |

I include the whole table on purpose, because it would be easy — and wrong — to cherry-pick the COVID column and sell a resilience story. The truth is duller and more durable: the two products grow at about the same rate. The small-bay advantage isn't a faster escalator. It's a higher starting floor, held at the same risk. That's the case, and I'd rather it be honest than loud.

What this means for how the asset behaves

Not what to buy — how the thing works. The CMBS data describes a product that produces more income per square foot than its institutional cousin, off a smaller and more diversified rent roll, at coverage and occupancy lenders treat as equivalent. However you weigh that, weigh it as a property of the asset class, not as a signal to act. The premium is structural; whether any single building deserves your capital is a diligence question the loan tape can't answer for you.

It does, though, reframe the reputation. "Smaller, so riskier, so cheaper" is the folk model. The securitized data says: smaller, roughly the same risk, and earning more per foot. If you've been pricing small-bay off the first story, the second one is worth sitting with.

Frequently asked

Does small-bay industrial earn more than big-box per square foot? In CMBS-securitized industrial loans, yes — small-bay averaged $9.31 of NOI per square foot at loan issuance versus $6.00 for large industrial, a 55% premium, as of the July 2026 CMBS loan-tape pull. It's a securitized sample of 3,180 properties, not the whole market.

Is small-bay industrial riskier than big-box? Not on the measured credit metrics in the CMBS loan data. Small-bay carried 97.6% occupancy and 2.18x debt-service coverage versus 98.0% and 2.22x for big-box — essentially the same, with big-box nominally ahead. The higher per-foot yield did not come with higher measured risk in this sample.

Where does the small-bay NOI premium come from? From the product, not the tenancy. Small, functional space rents for more per square foot — it holds in both single-tenant ($9.44/SF) and multi-tenant ($9.07/SF) small-bay, both far above big-box's $6.00, and it matches the ~21% small-format rent premium BKM reported for 2026. Diversification is a separate benefit: where small-bay is multi-tenant, its largest tenant is only ~35% of the rent roll versus 84% for big-box, which helps the income hold — but it isn't what creates the premium.

Does the premium hold in every market? Across CMBS-securitized industrial loans, small-bay's NOI per foot exceeded big-box in every major industrial state we measured — California, Texas, Florida, Georgia, Pennsylvania, Illinois, Michigan, Indiana, and Ohio. The gap's size varies; its direction doesn't.

Does small-bay grow faster than big-box? No — growth was roughly matched, +4.35% vs +4.30% blended annual NOI growth in the CMBS data. Big-box grew faster pre-COVID; small-bay held up slightly better through COVID and after. The small-bay advantage is a higher income floor, not faster growth.

Methodology

This study covers CMBS-securitized industrial loans drawn from publicly filed CMBS loan disclosures — SEC EDGAR ABS-EE EX-102 loan-level financials and Annex A-3 term sheets — pulled in July 2026. Of the industrial properties in the pull, 3,180 classified cleanly by product type into small-bay (1,764) and large (1,448). Classification is by physical product type, not a single square-foot cutoff. All figures are averages, reported at loan issuance unless explicitly labeled current, and NOI growth is measured actual-to-actual year over year. The loan "vintage" in this data refers to the securitization year, not a building's year built — distinct from the 1982 median construction year in our national age study. One state (Hawaii) was excluded from the state table for too small a sample. This is a point-in-time snapshot of a fixed securitized sample as of July 2026 (Central Time) — the CMBS universe, which is narrower than and separate from SpanVor's national small-bay platform coverage. The numbers describe how these securitized loans performed; they are not investment advice.

Key takeaways

Small-bay earns ~55% more NOI per square foot than big-box in the CMBS loan data — $9.31 vs $6.00 at issuance, as of the July 2026 loan-tape pull.
The extra return came without extra measured risk — 97.6% vs 98.0% occupancy and 2.18x vs 2.22x coverage, essentially tied (big-box nominally ahead). More return, same credit — not "safer."
The premium holds in every major industrial state measured, from California to Ohio — structural, not a hot-market quirk.
The premium is a product effect, not a tenancy effect — small functional space earns more per foot whether single- or multi-tenant ($9.44 and $9.07/SF, both far above $6.00). Where small-bay is multi-tenant, its largest tenant is only ~35% of the rent roll vs 84% for big-box — diversification that helps the income hold, but isn't what creates the premium.
Growth was a tie — +4.35% vs +4.30% blended; small-bay held up slightly better through COVID. The advantage is a higher income floor, not faster growth.

See it below the loan tape. The CMBS filings show the pattern; SpanVor resolves small-bay down to the parcel, owner, and tenant across the national universe — so you can find the functional buildings the securitized data only samples. Explore the small-bay universe we map at spanvor.com. And for the full thesis, read the SpanVor Small-Bay Industrial Investor Primer.

One last thing, since you read this far: the code SpanvorBlog takes 25% off a SpanVor Pro subscription — where the parcel-level data behind posts like this one actually lives.

Written by Jason Probert, Founder of SpanVor — Industrial Property Intelligence.