The Evolution of U.S. Industrial Flex Space: 20 Years of Transformation for Startups

Introduction: Industrial flex space – low-rise buildings that blend warehouse, office, and even lab or workshop areas – has evolved from a niche real estate product into a critical backbone of the startup economy. In the early 2000s, flex industrial facilities were often older single-story structures in suburban business parks, serving as inexpensive space for local distributors, light manufacturers, or tech R&D offshoots. Today, these flexible industrial spaces are in hotter demand than ever, as digitalization and entrepreneurship redefine how companies use physical space. The U.S. now boasts roughly 19 billion square feet of industrial real estate across various subtypes, and a significant slice of this is flex space accommodating multi-use needs. Over the past 20 years, sweeping changes in technology, consumer behavior, and work culture have reshaped flex industrial properties – driving vacancies to historic lows, rents to new highs, and investor interest to record levels. This article provides a historical overview since the early 2000s, analyzes key drivers of change, and examines how startups are both occupying and transforming flex industrial spaces. We compare demand across typologies (light industrial, R&D labs, hybrid office-warehouse, maker spaces), highlight which formats are most sought-after in 2025 and why, and showcase regional case examples (Austin, Denver, Silicon Valley, Chicago). Data on pricing, occupancy, and investment trends will underscore a clear conclusion: flex industrial space has gone from an overlooked segment to a dynamic, innovation-fueling asset class in U.S. real estate.

From 2000s to 2020s: A Brief History of Flex Industrial Space

In the early 2000s, U.S. flex industrial space was largely a story of aging assets and steady, if unglamorous, use. Nearly 70% of all existing U.S. industrial stock was built before 2000, meaning many flex buildings were legacy facilities with low ceilings, simple concrete tilt-up construction, and basic office buildouts. Demand drivers at the time were modest – traditional light manufacturing, regional warehouses, and back-office tech or telecom labs. Notably, the dot-com boom of the late 1990s had little direct impact on industrial real estate; startups of that era were mostly software-oriented, favoring office space. Meanwhile, large-scale manufacturing in America continued its decline or moved offshore, leaving many industrial parks with surplus space and higher vacancies. In the mid-2000s, e-commerce was nascent (Amazon was only starting to build its fulfillment network) and “last-mile” distribution centers were not yet a major factor. Flex spaces did host some early biotech and hardware firms – for instance, Silicon Valley’s one-story “R&D/flex” buildings had been the cradle of hardware giants for decades – but on the whole, flex industrial real estate in the 2000s saw slow growth and relatively high vacancies by today’s standards.

The late 2000s brought turbulence with the 2008–09 Great Recession, which hit all property sectors. Industrial vacancies spiked as businesses scaled back. However, by the early 2010s, flex space was poised for a renaissance. Three interlocking trends drove a dramatic turnaround over the next decade:

• E-commerce Explodes: Online retail grew exponentially in the 2010s, generating unprecedented need for distribution space of all sizes. While headlines focused on giant “big-box” fulfillment centers, the e-commerce boom also boosted demand for smaller urban warehouses and flex spaces to handle last-mile delivery and local inventory. U.S. online sales rose ~8% annually in the late 2010s (and even faster during COVID), far outpacing brick-and-mortar retail growth. Because e-commerce requires roughly three times more warehouse space per dollar of sales than traditional retail (due to parcel sorting, returns, etc.), even modest local online sales translated into significant space needs. By 2020, e-commerce had surged to over 20% of U.S. retail sales and climbing. This megatrend funneled new tenants – from Amazon delivery partners to indie e-commerce startups – into flex industrial units near population centers.

• Startup & Tech Revolution: Over the past 20 years, a new wave of startups began building physical products, not just software, reviving the need for workshops and labs. The rise of hardware, IoT, cleantech, and biotech startups since the 2010s meant more young companies needed a combo of office and production space under one roof. At the same time, technological advances like affordable 3D printers and CNC machines enabled small-scale manufacturing and prototyping in compact spaces. Many businesses that might have outsourced production in the 1990s can now operate lean facilities of a few thousand square feet. For startups, flex space became an ideal solution: an affordable way to house both a small office and a workshop or lab without leasing two separate buildingsbluerock.com. In fact, flex buildings often target startups and SMEs by design – interiors are easily reconfigured, and tenancy is diverse, ranging from software firms with a lab to craft food producers. The 2010s also saw a cultural shift with the “maker movement”, as entrepreneurs and hobbyists sought communal workshops (makerspaces) and incubators outfitted with industrial-grade tools. This movement further legitimized flex/industrial spaces as creative environments for innovation, not just “dirty” factories.

• Supply Chain Shifts & Post-Crisis Resilience: Globalization patterns and corporate strategies also swung in favor of U.S. industrial demand. After 2010, rising labor costs overseas and geopolitical uncertainties led to more onshoring/nearshoring of manufacturing. A domestic manufacturing mini-boom took shape by the late 2010s, including high-tech production (e.g. electronics, batteries, EVs) and a surge of investment in U.S. plants – nearly $1.0 trillion in new production investments announced across semiconductors, EV factories, biotech manufacturing and more. Meanwhile, companies learned hard lessons from the 2020–21 supply chain disruptions. There’s now a strategic push for inventory stockpiling and building resilient, regional supply chains (a shift from “just-in-time” to “just-in-case” inventory models). This means businesses are leasing additional flex warehouses to hold safety stock closer to customers. Even remote work trends indirectly benefited industrial real estate – as people shopped more online and as some ex-office workers launched their own small businesses from garages, demand for small industrial units and storage spiked. In 2021, a record 5.4 million applications for new U.S. businesses were filed, indicating a wave of entrepreneurship; many of those fledgling firms graduating from home setups have since moved into flex spaces (from craft e-commerce operations to home-grown electronics startups). In short, the past two decades’ economic shifts have funneled more users than ever into flex industrial properties.

By the early 2020s, these forces combined to turn flex space from a backwater into a star performer. Industrial vacancy nationwide plunged to historic lows around 2021–22 amid a frenzy of leasing. In major markets like Chicago, for example, vacancies hit all-time lows (~3.5%) in early 2023 with record rent growth. Even as of 2025, after a wave of new construction, U.S. industrial vacancy is only about 6.7% (Q3 2024) – and critically, the flex/small-unit segment is far tighter than the rest. We will explore this divergence in demand by typology next.

Key Drivers of Change in Flex Space Demand

Several structural drivers underpin the evolution of flex industrial space over the last 20 years:

• The E-Commerce & “Last-Mile” Revolution: The proliferation of online shopping is perhaps the single biggest catalyst for industrial real estate demand. As noted, e-commerce uses about 3x more space than conventional retail, due to distribution logistics. This has meant explosive demand for warehousing at all scales: enormous fulfillment centers at logistics hubs, but also small infill warehouses near cities for last-mile delivery. Same-day and next-day delivery promises (set by Amazon Prime, etc.) forced 3PLs and retailers to secure dozens of local nodes. Many 5,000–20,000 sq. ft. flex units in urban fringe areas have been converted into mini distribution hubs to stage inventory closer to consumers. For example, third-party logistics firms and courier companies increasingly snap up multi-tenant bays in places like Brooklyn, South LA, or the Dallas suburbs to meet local delivery needs. The math is compelling: U.S. online sales growth of $1 billion creates an estimated need for 1.2 million sq. ft. of new warehouse space, much of it in smaller facilities proximate to end customers. Thus, the e-commerce boom of the 2010s and the pandemic surge in 2020–21 filled flex industrial parks with delivery vans, package sort centers, and e-retail startups. Even as e-commerce growth normalized post-pandemic, online sales remain far higher than a decade ago, ensuring sustained demand for last-mile flex space well into the future.

• Technology Adoption & Changing Production: Modern technology has lowered the barriers to entry for manufacturing and R&D, enabling smaller firms to do more in smaller spaces. For instance, advances in automation and modular equipment mean a 10-person company can have a tiny assembly line or lab that fits in 3,000 sq. ft. Flex spaces, by design, cater to such adaptability. According to industry analysis, recent demand for light industrial space is being driven by “new technology companies with multi-purpose operations (manufacturing, assembly, storage)” and by smaller-scale production like 3D printing labs. A software startup working on robotics might need a small testing workshop alongside its office; a custom electronics firm might run assembly, shipping, and an admin office all from one flex unit. Compared to traditional high-rise offices or massive plants, flex facilities offer versatility – they can be reconfigured quickly as a tenant’s needs change, which is ideal for fast-growing startups. As one report notes, these single-story buildings can accommodate uses ranging from “100% office… to pure industrial, lab space or a 50/50 blend of office and warehouse”, simply by adjusting the interior buildout. This easy re-purposing and combo usage has been a game-changer for startups that value agility. Moreover, as workforce preferences shifted (especially post-2020), some companies began favoring locations closer to where employees live (often suburban/outer urban areas) and with direct unit access – flex parks fit this bill by providing drive-up entries and avoiding crowded elevators or lobbies. In an era of health consciousness and flexible work, the privacy and direct access of flex units became a selling point, reducing shared common areas and allowing employees to park right by their .

• Remote Work, Entrepreneurship & “Garage Startups”: The rise of remote and hybrid work has had nuanced effects on flex space. On one hand, remote work reduced the need for central offices, but on the other hand it unleashed a wave of entrepreneurship and decentralized business activity. Many white-collar professionals, freed from the office, pursued side ventures or moved out of big cities to places where starting a physical business was more feasible. As mentioned, 2021 saw a record number of new business formations– from boutique e-commerce brands to artisans and makers – and these ventures often graduated from home garages to small commercial spaces. Industrial flex units (as small as 1,000–2,000 sq. ft.) became the next step up from a garage for entrepreneurs who needed storage or production room. For example, a pair of mechanics fixing electric cars in a residential garage might move into a 2,000 sq. ft. flex bay to operate a proper auto service startup. Similarly, a popular Etsy crafts seller might outgrow a basement and lease a flex unit to store inventory and handle shipping. Coworking-style concepts also extended into industrial real estate to support this trend (more on this shortly). In short, the democratization of entrepreneurship meant a surge of smaller tenants looking for flexible, short-term leases and small spaces – which traditional big-box warehouses or long-term office leases cannot provide, but flex multi-tenant buildings can.

• Supply Chain Resilience and Nearshoring: Geopolitical and economic shifts have placed new importance on having production and inventory stateside. Trade tensions in the late 2010s, the pandemic’s supply chain chaos, and transportation bottlenecks (e.g. port congestion) forced companies to rethink logistics. The result has been higher inventory levels (retailers and manufacturers holding more goods domestically to buffer against delays) and some manufacturing processes being relocated to the U.S. or Mexico. Industry analysts estimate that just a 5% increase in U.S. business inventories (as companies move from just-in-time to just-in-case) would require 400–500 million additional square feet of industrial space nationwide. Flex and small industrial sites play a key role in this storage and localized manufacturing push, since not all goods need giant regional depots – many require smaller regional facilities or specialized production spaces. Additionally, massive federal investments (e.g. the 2022 CHIPS Act for semiconductors) spurred new domestic factories, and each large plant often comes with a network of local suppliers, contractors, and startups that require nearby flex industrial units (for making components, conducting R&D, or providing services). For example, the onshoring boom in electric vehicle and battery plants across the Midwest and South has spawned dozens of support businesses, many of which occupy flex spaces in surrounding communities. Overall, shifting globalization patterns have funneled more activity into U.S. industrial real estate, including the flex segment.

• Investor Interest & Capital Flows: Finally, a self-reinforcing driver is that flex industrial properties have become darlings of investors, bringing new capital that further transforms the sector. Since 2010, industrial real estate (especially logistics warehouses) has delivered outsize returns – the industrial property index returned 43% in 2021 alone, outperforming all other core property types. This performance attracted significant capital: institutional allocations to industrial assets jumped from ~14% of portfolios in 2017 to 35% by 2022, a record high. At first, big investors focused on large “Class A” warehouses, but more recently many have turned to light industrial and flex as the next opportunity. Specialized funds and REITs are acquiring small-bay portfolios, upgrading older facilities, and developing new business parks for multi-tenant use. Their rationale: strong tenant demand plus limited new supply make flex a stable, high-growth bet. Even during the economic uncertainty of 2023–24, flex assets showed resilience – landlords achieved rent increases and high occupancy, while other sectors (like office) struggled. Investors also appreciate the broad tenant base (from “blue-collar” trades to high-tech startups) which spreads risk, and the fact that flex spaces provide “mandatory” services to local economies (housing the contractors, suppliers, and small businesses every city needs). In the words of one investment firm principal, small-bay industrial offers downside protection in a shaky economy because new supply is scarce and the space is essential to communities. This flood of investor interest has injected professionalism and innovation into the flex market – e.g., old cinderblock warehouses are being refurbished into modern “industrial campuses” with added amenities, and some developers are experimenting with multi-story urban industrial buildings to create more small units in dense cities. In short, capital is fueling a new golden age of flex industrial development, albeit still constrained by land and zoning challenges.

Startups and the Transformation of Flex Spaces

One of the most striking aspects of flex space’s evolution is the growing role of startups and small businesses as primary occupants. Twenty years ago, a flex park tenant might have been a regional copier repair company or a local electrical contractor. Those users are still in the mix, but today they are joined – and often overshadowed – by high-growth startups, tech spin-offs, and niche e-commerce ventures. This has fundamentally changed the perception and functionality of flex industrial real estate:

• Startups as Anchor Tenants: In tech-centric regions, startups now vie for flex space much as they compete for downtown offices. For example, in Silicon Valley, the archetypal flex/R&D buildings of the 1970s–80s (low-slung buildings in Mountain View, Palo Alto, Santa Clara, etc.) have been reimagined as modern tech hubs. Many of these spaces are occupied by venture-funded hardware and biotech startups, or have been converted into campuses for giants that started small. (Google famously began in a garage; today countless garages and small industrial suites in the Valley incubate startups working on drones, robotics, or quantum computers.) The demand for lab and prototype space is so high in some tech hubs that vacancy for quality flex/R&D product is effectively zero. Life sciences startups are a prime driver: in Boston/Cambridge, for instance, lab-capable flex buildings near MIT and Harvard have been 99% leased for much of the past decade, with tenants ranging from two-person pharma R&D teams to unicorn biotech companies. Even during a market dip in 2023, lab space demand remained above pre-pandemic levels and began rising again by 2024. Startups continue to absorb space as soon as it’s built; Boston added over 10 million sq. ft. of new lab space from 2019–2024 and it was quickly backfilled by growing companies. This pattern repeats in San Diego, the San Francisco Bay Area, Raleigh-Durham, and other innovation clusters. The key shift is that flex space is no longer seen as a stopgap for startups – it’s a strategic asset. Companies design their growth plans around access to these facilities. A biotech startup might intentionally locate in a suburban flex campus where they can take 5,000 sq. ft. initially and expand to 15,000 sq. ft. as they add a pilot production line, all without leaving the park. The ability to combine office, lab, and small-scale manufacturing in one flex facility gives startups a huge efficiency boost, saving cost and time. This has made certain flex properties akin to startup incubators, where landlords offer short leases, turnkey buildouts, and even shared amenities (conference rooms, cafeterias) to attract the next big thing.

• Cowarehousing and Co-Making: New Shared Models: The coworking revolution of the 2010s – epitomized by WeWork’s rise – also spawned analogues in the industrial sphere. Recognizing that many startups and solo entrepreneurs don’t need an entire warehouse, a new concept called “co-warehousing” emerged. Companies like Saltbox, ReadySpaces, and CubeWork have created facilities that function like coworking spaces for product-based businesses. Co-warehousing facilities provide small suites (100 to a few thousand sq. ft.) within a larger warehouse, plus shared services like forklifts, loading docks, fulfillment support, and even co-working style offices and meeting rooms. The goal is to give e-commerce sellers, makers, and small importers the flexibility of on-demand space with short-term leases. According to Saltbox’s CEO, “the vast majority of companies that sell physical things… need to be more logistically enabled,” and co-warehousing helps them level up from a home garage. About two-thirds of Saltbox’s users are B2C e-commerce brands (often just 1-2 person startups) who previously fulfilled orders from a spare room or storage unit. Now they operate out of a professional warehouse environment with proper loading bays and inventory software support. This model has gained such traction that even large corporations have taken notice – some enterprise firms use co-warehousing on a short-term basis to handle seasonal overflow or regional distribution without long leases. For instance, Walmarthas used flexible warehouse space during holiday surges rather than building or leasing permanent facilities. In tandem, “maker spaces” and incubators have proliferated, often with public or university support. A great example is mHUB in Chicago, a 63,000 sq. ft. manufacturing incubator hosting hundreds of hardware startups and inventors under one roof, with shared machine shops and labs. Similar innovation hubs (Greentown Labs in Boston for clean-tech, Circuit Launch in Oakland for electronics, etc.) refurbish older industrial buildings into vibrant startup ecosystems. These shared-space models lower the cost of entry for industrial startups by providing ready-to-go infrastructure (expensive equipment, loading facilities, broadband, security) and fostering collaboration. The net effect has been to dramatically broaden the range of startups occupying flex space – not only those with venture funding, but sole proprietors, artisans, and small teams can now find a foothold in industrial real estate.

• Entrepreneurial Clusters in Flex Parks: Startups are also transforming flex business parks into new-age innovation districts. In the past, a typical industrial park might have contained a quiet mix of warehouse tenants. Today, some parks are intentionally curating a mix of cutting-edge users. For example, consider a flex campus in Austin, Texas: where once it might house a few telecom equipment suppliers, it now hosts a hardware startup assembling IoT devices, a craft brewery R&D lab, a 3D-printing prototyping studio, and a last-mile delivery depot for an online retailer, all side by side. Austin’s tremendous tech growth (often dubbed “Silicon Hills”) has extended beyond office towers – its industrial areas are teeming with startups, from electric vehicle mod shops to space-tech companies. In fact, Austin, Denver, and even Los Angeles are emerging as contenders to be the “Silicon Valley of Space” – private spaceflight and satellite startups are snapping up flex industrial sites to build and test hardware. Firefly Aerospace outside Austin or Relativity Space in LA are examples of space-tech firms that began in small industrial bays and grew into larger facilities. The presence of such exciting tenants can rejuvenate industrial neighborhoods, attracting talent and investment. It’s not uncommon now for a flex park to market itself as an “innovation campus” once it lands a few startup tenants. Landlords may add fiber-optic internet, trendy food truck events, or maker labs on-site to support the creative vibe. This blurring of lines – industrial space doubling as startup space – marks a profound shift from 20 years ago.

• Startup Influence on Design and Amenities: Startups’ needs have prompted developers to rethink industrial design. Modern flex buildings increasingly feature higher ceilings, abundant natural light, and polished office entrances to appeal to tech users, alongside the requisite loading docks and power supply for industrial use. Some new small-unit industrial projects in places like Denver and Phoenix resemble hybrid office campuses, with glassy fronts and collaborative outdoor spaces – a far cry from the drab cinderblock warehouses of old. Even the lease structures have adapted: many startups insist on shorter-term leases or scalable space options. Flex landlords have responded with incubator programs, graduated rent structures, or by partitioning large spaces into micro-units that can expand as a tenant grows. The bottom line: startups have injected energy and creativity into flex spaces, and in doing so they’ve ensured that flex industrial real estate is now seen as a key ingredient in regional innovation ecosystems, not just a utilitarian afterthought.

  
  

Comparing Demand by Flex Space Typology

Not all flex spaces are alike. The category spans a spectrum from basic small warehouses to cutting-edge R&D labs. Over the past two decades, demand has diverged across these typologies, influenced by different economic forces. Below we compare a few key types – light industrial (small-bay warehouses), R&D/lab space, hybrid office-warehouse flex, and makerspace/co-working industrial – in terms of demand and usage, and identify which formats are most in demand today.

1. Light Industrial (Small-Bay Warehouses): This is the classic flex subtype: single-story buildings (often 10,000–100,000 sq. ft. total) subdivided into bays, with roll-up doors and modest office buildouts. Historically home to wholesalers, service contractors, and local distributors, small-bay industrial has become arguably the hottest segment in recent years. The reason is simple – broad-based demand meets chronic undersupply. Small-bay space serves a vast range of users: “blue-collar” businesses like electricians, plumbers, and carpenters; e-commerce startups; last-mile delivery hubs; small manufacturers; even gyms and recreational uses (crossfit boxes, climbing walls) have taken whatever space is availablep. This “mandatory” nature in every local economy means when the economy grows, demand for small industrial units grows in tandem. However, developers have long favored building larger warehouses (more profitable per project), so new small-bay construction has lagged. In fact, over the last decade the total U.S. inventory of industrial buildings under 50,000 sq. ft. grew only ~3% – while in the same period, employment in typical small-bay-using sectors (construction trades, auto repair, etc.) grew 20%. Even worse, more than 115 million sq. ft. of small industrial space was demolished (often replaced by apartments or big-box warehouses) in the past 10 years. The result: record-tight vacancy and rising rents. As of early 2025, the vacancy rate for sub-50,000 sq. ft. industrial space is around just 3.4% nationally – comparable to the housing vacancy in New York City, a market known for severe undersupply. This is half or less the vacancy rate of the overall industrial market (which rose to ~7–8% after a spate of big-box construction). In many metro areas the squeeze is even sharper: Las Vegas’s small-bay industrial vacancy is only 2.7%, about half the metro’s overall industrial vacancy. Dallas–Fort Worth, one of the busiest logistics hubs, had ~9–10% vacancy overall in 2024 due to huge warehouse projects, but small industrial availabilities were only ~6%, down from nearly 9% a decade prior – indicating that even as DFW added millions of square feet of logistics space, its small flex segment actually tightened over 10 years. This pattern repeats coast to coast. With so few new small units coming online (only 23 million sq. ft. of sub-50k SF space is under construction nationwide – a mere 0.3% of existing stock), the imbalance is persistent. Land constraints in infill locations and the economics of development mean the supply drought isn’t easily fixed. Consequently, small light-industrial is currently one of the most in-demand and undersupplied formats in the U.S. Many landlords report 95%+ occupancy and waitlists for units. Rents for these spaces have hit all-time highs in 2023–24 and continue climbing, even as rents for giant warehouse leases have begun to flatten. In short, if one were to rank flex formats by demand, light industrial “flex” tops the list, driven by e-commerce, local business growth, and sheer scarcity.

2. R&D Lab Space (Flex Labs): At the more specialized end of flex uses are laboratory and R&D facilities, which often still fall under the “flex” umbrella (typically low-rise buildings that might house labs, clean rooms, or tech workspaces in addition to offices). The demand dynamics here are highly concentrated in certain regions but have been extremely robust. The 2000s saw moderate growth in life sciences clusters like Boston, San Diego, and the Bay Area. But the 2010s and early 2020s witnessed a life sciences real estate boom without precedent. Fueled by biotech venture funding, pharma R&D needs, and events like the COVID-19 vaccine race, lab space became one of the tightest property sectors. In Boston/Cambridge, lab vacancies hovered near 0% in top submarkets (under 1% at times), pushing rents to over $100 per sq. ft. in prime buildings – unheard of for industrial/flex property. Similar crunches occurred in San Francisco’s Peninsula and San Diego’s Torrey Pines area. By 2022, developers nationwide were racing to convert offices into labs or build new lab-enabled flex buildings to meet demand. The cycle cooled slightly in 2023 as biotech funding slowed, leading to a temporary rise in vacancies. Even so, lab/R&D vacancies remained well below historical averages and demand in early 2024 was already rebounding – up ~6.3% in Q1 2024 versus late 2023, with Bay Area, Boston, and San Diego seeing a 29% jump in active requirements that quarterj. JLL noted that demand in these top markets is now back to 2019 (pre-boom) levels, signaling that the sector has normalized at a higher plateau. Crucially, life science and tech firms prefer quality: newer Class A lab buildings are leasing, while older Class B product struggles unless upgraded. This has kept development going – CBRE projected the U.S. lab inventory would increase 20% in 2023–2024 with record construction underway. That new supply is leading to a more balanced market, and vacancies may tick up from ultra-tight levels to merely tight. But looking long-term, drivers like biomedical innovation, healthcare investment, and public funding (NIH budgets, etc.) continue to support strong lab space absorption. Also, unlike generic warehouse, lab space is very location-specific – clustering near research universities and hospitals – meaning in those locales, demand remains intense. In summary, R&D lab flex space has been one of the most in-demand formats, particularly from 2015–2022, and while it experienced a cyclical pullback, it remains a high-demand, high-rent segment in 2025 (albeit one largely confined to key tech hubs). Startups are a major component of this demand, as new life science company formation has stayed resilient (VC funding in Q1 2023 was still ~20% above pre-pandemic norms). Thus, among flex types, lab space is unique: it commands the highest rents and capital per square foot, and investor interest is sky-high (life science properties traded at record-low cap rates through 2022). The constraint is that lab space requires specialized infrastructure (ventilation, heavy power, safety measures), so not every flex building can become a lab without significant retrofit. Those that have the right specs, however, are in hot demand.

3. Hybrid Office-Warehouse Flex: This category can be seen as the typical multi-use flex building – often found in suburban business parks – offering, say, 30–60% office buildout in front and warehouse in back. These were once considered “middle-of-the-road” properties, not as essential as warehouses nor as prestigious as offices. But in the last 20 years, hybrid flex formats have proven their worth by attracting a steady (and lately growing) stream of tenants who need both functions. Examples include hardware tech companies, regional branch offices that require storage, light assembly firms, and government or educational institutions needing space for labs or archives. The demand for this format correlates with the overall trend of companies valuing flexibility. Post-2020, some firms gave up large centralized offices and instead opened smaller satellite offices – occasionally in flex settings – combined with distribution or training centers. The versatility of these spaces is a big selling point: as noted earlier, landlords can easily adjust the office-to-warehouse ratio by remodeling the interiors when tenants change. During the pandemic, this adaptability proved useful – for instance, an event supply company vacated, and the landlord quickly converted that unit from 80% warehouse to a 50/50 office-warehouse split to lease to a healthcare firm that needed both storage and administrative space. National statistics treat these hybrid flex buildings as part of “Flex” in market reports, and interestingly, 2023 data showed flex (as a category) had slightly negative absorption while big logistics had positive absorptionn. This was likely a temporary blip due to a few large users downsizing. On the ground, well-located flex parks are enjoying high occupancy and rising rents. For example, Westmount Realty, a major operator of light industrial parks, noted their Chicago-area flex portfolio (nearly 5.4 million sq. ft.) was 95% occupied in 2023, with “robust demand, rent growth, and higher occupancy rates” consistently across their multi-tenant flex buildings. In many secondary markets too, brokers report small and mid-sized businesses flocking to flex parks because they offer cheaper rents than pure office buildings while providing better functionality (loading doors, assembly space) than standard offices. Today’s most in-demand formats include these hybrid flex suites in strategic locations – especially near highways and airports, where companies can house sales staff and product inventory under one roof for efficient distribution. For instance, in Chicago’s O’Hare submarket, dozens of such flex buildings serve both corporate and logistics needs, benefiting from proximity to the airport; properties there reached 97% lease-up with 107 tenants ranging from two-person startups (2,000 sq. ft.) to large units for international firms. That mix exemplifies how hybrid flex has broad appeal. In sum, demand for generic flex/office-warehouse space is solid and has grown, though not as frenetically as e-commerce warehouses or labs. It remains a cornerstone of the flex sector, often quietly achieving high occupancy thanks to its adaptability. In 2025, the most in-demand of these formats tend to be those in prime infill locations (where there’s no room to build more), and those that have been modernized for energy efficiency and comfort, making them attractive to a wider range of tenants.

4. Maker Spaces and Incubators: A smaller but noteworthy typology is the communal maker space or incubator facility. These are typically specialized flex spaces operated by an organization (public-private partnership, nonprofit, or VC-backed) that subdivides space and provides shared equipment for entrepreneurs. While not a huge portion of industrial square footage, they have grown in number and impact in the last 10–15 years. Early examples like TechShop(a private membership-based maker space founded mid-2000s) showed the model’s potential, though TechShop itself closed in 2017 after expanding to multiple cities. The concept lives on through local initiatives: cities and universities have opened maker hubs to support hardware startups and workforce training. As mentioned, Chicago’s mHUB offers 10 fabrication labs (metal shop, electronics lab, etc.) in a 63k sq. ft. facility for hundreds of members. Greentown Labs in Massachusetts provides energy tech startups with wet labs and machine shops in a large converted warehouse. These spaces are in demand among early-stage startups that can’t yet afford their own fully outfitted flex space. They effectively incubate demand for flex – many companies “graduate” from an incubator to leasing nearby flex space once they grow. For instance, a robotics startup might spend 2 years in a shared incubator, then move into a 5,000 sq. ft. flex unit in the same tech park. The presence of incubators thus boosts overall flex occupancy in those innovation districts. Investor interest in this sub-niche is more about economic development and talent cultivation than immediate real estate returns. Still, some private operators (like MakeOffices tried with makerspaces, or WeWork at one point explored WeWork-style labs) have dabbled. The demand for makerspaces tends to track the innovation economy: places with many engineers, artists, or tinkerers (e.g. Detroit’s TechTown, San Francisco’s maker cohorts, or Raleigh’s HQ for hardware) see higher utilization. Importantly, the pandemic temporarily hurt communal spaces, but by 2023 many reopened and even expanded as the need for local prototyping (for PPE, etc.) became evident. Going forward, makerspaces remain a niche but vital feeder for flex space demand – essentially seeding tomorrow’s industrial tenants. In terms of scale, they don’t compare to the other typologies, but their influence on startup culture and adaptive reuse of older industrial buildings is significant. Cities are increasingly integrating makerspaces into redevelopment of industrial districts to drive inclusive growth.

Which formats are most in demand today? Based on the above, small light-industrial bays and high-tech R&D labsstand out as the top demand drivers, though in very different ways. Small-bay warehouse space is in widespread national demand (think thousands of mom-and-pop businesses needing a bay), while lab space is in intense regional demand (a few dozen top clusters). In terms of sheer market tightness, light industrial flex is essentially fully occupied in many markets (sub-5% vacancy nationwide). This makes it extremely sought-after by tenants (and investors hunting for yield). Lab space, where available, is also highly sought by life science firms, though its vacancy might be a bit higher now (5–10% in some markets) as it digests new supply. Hybrid office/warehouse flex is more of a steady workhorse – certainly in demand (especially for mid-sized firms, regional offices, etc.) but not in critical shortage except in select infill areas. Maker spaces/co-warehousing are growth areas meeting new kinds of demand, and while they may not rival the square footage of the other categories, their popularity among startups is rising. Notably, co-warehousing (micro-flex suites) can be considered a format on its own that’s booming; one 2025 trend report calls it “micro-flex” space and notes if you build it in the right location, it’s likely to lease quickly given demand from small businesses and e-commerce entrepreneurs. Overall, the crown for hottest format in 2025 likely belongs to last-mile light industrial facilities and life-science flex labs – both benefiting from long-term secular trends (e-commerce and biotech/tech innovation, respectively). Both formats are also commanding premium rents and investment attention. For example, investors are paying top dollar for small urban “last-mile” warehouses (Clarion Partners notes last-mile light industrial is a key focus, anticipating e-commerce will reach 35% of retail sales by 2035 and require hundreds of millions more square feet) and likewise, institutional capital is eagerly funding lab development in core markets. In short, flex space is no longer one-size-fits-all; understanding which subtype is in demand requires looking at the industry drivers in play (from Amazon’s logistics strategy to the latest VC biotech funding cycle).

Regional Spotlights: Flex Space Clusters and Success Stories

To illustrate these trends, let’s look at a few regions noted for their flex industrial activity – Austin, Denver, Silicon Valley, and Chicago – and what’s happening on the ground in each:

• Austin, TX – “Silicon Hills” Flexing New Muscles: Austin’s emergence as a tech hub has supercharged its industrial market in unexpected ways. Over the past decade, Austin has attracted not just software companies, but manufacturers of hardware, medical devices, and most recently, electric vehicles and space technology. The result is a transformation of Austin’s industrial areas: the city’s northwest and northeast corridors, once sleepy light industrial zones, are now dotted with innovative companies. For example, the Tesla Gigafactory east of Austin (while a huge single user) has spun off demand for myriad suppliers and startups that need smaller flex spaces around town. Austin’s life sciences sector is also growing, with notable biotech investments (the city’s Chamber notes life sciences as an emerging industry) – which means increased need for lab-capable flex. South Austin and suburbs like Round Rock see flex buildings housing everything from 3D printing studios to craft breweries experimenting with new brews. What sets Austin apart is its talent influx and relative affordability. Many California companies (including manufacturing startups) relocated or expanded to Austin for lower costs, immediately filling flex space. The city’s flex vacancy has been incredibly low – overall industrial vacancy in Austin was under 5% in 2024, and top-quality small units often lease up before construction is complete. A local developer quipped that in Texas, “build it and they will come” holds true for small-bay industrial – every new small-bay project in North Austin or down the I-35 corridor has seen strong pre-leasing. Austin also illustrates how flex parks can nurture clusters: for instance, several aerospace startups working on satellites and rockets have clustered in Austin’s industrial parks, contributing to the city’s bid to be a “Silicon Valley of Space” alongside Denver and Seattle. Moreover, Austin is pioneering new models like industrial condos – small business owners purchasing their own flex unit as an investment. Texas in general has seen interest in these “own-your-warehouse”opportunities. In sum, Austin’s flex space evolution underscores the interplay of tech growth and industrial real estate – the city’s flex market is a key ingredient in its rise as a diversified tech and manufacturing hub.

• Denver, CO – Startups, Satellites and Breweries: Denver’s economy has diversified beyond its historical energy and telecom base, and its flex space reflects that shift. These days, the Mile High City’s flex industrial tenants include aerospace startups (Colorado is a top state for space industry, with many suppliers to NASA and the commercial space sector), as well as a thriving craft beer and cannabis industry (both of which utilize a lot of light industrial real estate for brewing, cultivation, and distribution). Denver has also become a logistics center for the Rockies, so last-mile warehouses are in high demand around the metro. An interesting dynamic in Denver is the repurposing of older industrial stock: for example, the trendy RiNo (River North) district, which was once warehouses and factories, now mixes art studios, breweries, and tech workshops – essentially making former industrial flex space part of the urban creative fabric. Meanwhile, in suburbs like Broomfield or Centennial, newer flex parks cater to tech hardware firms (a drone startup here, a laser-tech company there) and to service companies. Denver was an early market for co-warehousing as well – Saltbox opened a Denver location, recognizing the city’s large number of e-commerce entrepreneurs and outdoor gear startups needing space. The outdoor recreation industry (ski, bike, hiking gear companies) is big in Colorado, and many of those businesses occupy flex space for design and distribution of their products. Denver’s vacancy has risen a bit with new construction, but like elsewhere, small-unit vacancy remains well below large-unit vacancy. The flex segment is buoyed by steady population growth in Colorado (more people = more small businesses and more consumption needing warehouses). Additionally, Denver’s location as a regional hub means companies often set up a Rocky Mountain distribution center there – sometimes that’s a 500,000 sq. ft. facility, but often it’s a network of smaller 10,000–50,000 sq. ft. spaces closer to where people live (e.g. in Colorado Springs, Ft. Collins, etc., connected to Denver). Overall, Denver exemplifies a middle-American flex market on the rise, propelled by a mix of tech, lifestyle industries, and logistics, with startups playing a key role in each of those categories.

• Silicon Valley, CA – The Original Flex Incubator: Nowhere is the historical importance of flex space more evident than Silicon Valley. The region’s famed Stanford Industrial Park (now Stanford Research Park) in Palo Alto was created in the 1950s as one of the first planned flex/R&D campuses – and incubated companies like Hewlett-Packard, which literally started in a garage. By the early 2000s, Silicon Valley had hundreds of aging low-rise R&D buildings hosting hardware and semiconductor firms. Over the last 20 years, much of that landscape has been transformed: some old flex buildings were demolished to make way for modern offices (e.g. Facebook and Google expanded into former industrial land), but many survived and thrived by adapting. For example, the explosion of AI hardware and autonomous vehicle startups in the 2010s filled countless Santa Clara and Sunnyvale flex buildings with labs and garages tinkering on self-driving cars and robots. The life cycle in the Valley often sees a company start in a flex unit, succeed and expand to take over multiple adjacent units or build a custom HQ, and then new startups backfill the space. Demand in Silicon Valley’s flex submarket has been persistently strong, especially for buildings that can support labs (for the region’s booming life sciences sector around South San Francisco and San Jose) or electronics prototyping. Even as big tech companies built fancy campuses, many kept ancillary flex space: Google, Apple, and others quietly maintain small industrial spaces for skunkworks projects or hardware labs that wouldn’t fit in a typical office tower. During the COVID era, Silicon Valley saw record absorption of lab space for COVID research and testing startups, pushing flex rents further upward. While 2023–24 brought some cooling (with a few biotech downsizings), venture capital in the Bay Area remains high, and every new cohort of VC-backed startups needs somewhere to plug in their equipment. The Peninsula’s challenge is a lack of land – hence some developers pushing multi-story tech industrial projects (like a proposed multi-level R&D building in Fremont to pack more flex space vertically). In essence, Silicon Valley’s relationship with flex space is deep: it was the cradle of many global tech firms, and continues to be indispensable for hardware-related innovation. The region’s flex spaces are among the priciest in the nation (as they compete with office uses for land), but demand stays strong because the next Stanford grad in a garage could be the new Google – and she needs a flex lab to get started.

• Chicago, IL – Industrial Backbone Meets Startup Spirit: Chicago might not be the first place one thinks of for “startups,” but the city and its surrounding region have become a hotspot for certain types of entrepreneurship – especially in manufacturing, food, and logistics tech. Chicago’s advantage is its central location and massive transportation infrastructure (rail, trucking, air cargo at O’Hare). It has long been a powerhouse industrial market (the second-largest in the U.S. by some measures). Over 20 years, Chicago’s industrial flex sector has evolved from mostly traditional uses (machine shops, warehousing) to a diverse mix that includes high-tech manufacturing startups and urban micro-warehouses. A prime example is the Elk Grove Village area near O’Hare Airport. Once filled with legacy manufacturers, this area has been revitalized into light industrial business parks that are thriving on new demand. Westmount Realty recently sold a portfolio there – 21 flex/industrial buildings totaling ~757,000 sq. ft. – that was 97% leased to 107 tenants at time of sale. Those tenants ranged from “two publicly traded automobile manufacturers, and an international salt producer” to “smaller startups with as little as 2,000 square feet”. This underscores how Chicago’s flex parks host both global firms and tiny startups side by side. The multi-tenant flex business park model has been very successful in Chicago, providing space for the city’s huge base of small manufacturers, food processors, and service companies. Chicago’s flex demand is driven by its diverse economy: on one end, a lot of e-commerce distribution (being a logistics hub, Chicago has seen tons of big-box construction, but also intense use of smaller last-mile centers to serve the metro’s 10 million people). On another end, Chicago has a burgeoning manufacturing startup scene – for instance, mHUB Chicago (mentioned earlier) fosters new product companies, some of which spin out and lease their own production space in the area. The city’s legacy of food production means many food startups (craft snack makers, meal kit companies) use flex space for kitchens and packaging. Plus, Chicago’s Midwest location makes it ideal for light assembly and 3D printing companies that want to distribute nationally from the center of the country. According to reports, Chicago’s industrial vacancy hit historic lows (~3.5%) in 2023 despite massive new construction, showing how deep the demand runs. Notably, while coastal markets cooled in 2023, Chicago’s industrial leasing remained strong, highlighting robust local demand drivers. In summary, Chicago exemplifies how a traditional industrial stronghold can adapt to new flex uses: its flex spaces are filled not just with old-school manufacturers but also modern startups, and both are thriving due to Chicago’s strategic location and large market. Regions like Chicago also remind us that startups needing flex space aren’t only coastal or Sunbelt phenomena – the heartland’s entrepreneurs (in fields like ag-tech, robotics, or food science) are actively using and transforming industrial flex real estate as well.

(Other regions could be discussed – e.g. the Raleigh-Durham area for biotech flex, Los Angeles for media and last-mile, Miami for import/export small warehouses, etc. – but the above examples suffice to show the pattern: across diverse geographies, flex space is adapting to and enabling new waves of economic activity.)

Pricing, Occupancy, and Investor Trends in Flex Industrial

To round out the analysis, let’s examine some data on current pricing, occupancy rates, and investor interest in U.S. industrial flex space, particularly as of 2024–2025:

• Occupancy & Vacancy: As detailed earlier, occupancy is remarkably high in the flex sector. Nationally, flex/light-industrial vacancies are around 3–4%, significantly below the overall industrial vacancy (~6–8%). In practical terms, a 3% vacancy means essentially full occupancy – just frictional space between tenants. Many prime submarkets report 95–100% occupancy in well-located flex buildings. For example, multi-tenant parks in Chicagoland sit at 95% occupied; small-unit industrial in parts of South Florida is so scarce that vacancy is under 2%. Such tight occupancy gives landlords pricing power and tenants few options – hence why small businesses often scramble or even bid up rents to secure a bay. Contrast this with the big-box segment: after the 2020–22 building boom, national industrial vacancy (which includes the big warehouses) more than doubled from sub-4% to nearly 9%, easing pressure on rents for those larger facilities. But that glut largely bypassed the flex segment, since almost all new supply was big boxes. Indeed, one study noted that even if a recession hit, small-bay vacancy would likely remain below its historical average (~5.4%) because so little new supply is coming. The slight uptick in flex vacancy in 2024 (some markets saw a 0.3% rise) has done little to change the landlord-favorable dynamics. Occupancy is expected to stay elevated. High occupancy also means low turnover, which is why investors like the space – tenants often renew as they have nowhere else to go for similar cost/quality.

• Rent Levels & Growth: Flex space rents vary widely by market and build-out (lab space can rent for 5–10x the rate of a basic warehouse). Generally, though, rent trends have been very positive for owners. According to CommercialEdge, as of April 2024 the average in-place industrial rent nationally was $8.49 per sq. ft., up 6.7% year-on-year. Many coastal and tech markets see much higher asking rents: Los Angeles, for instance, has industrial rents in the mid-teens per sq. ft. or higher; Boston was noted for having one of the largest rent “spreads” for new leases (new deals $4–6 above in-place rent) as of 2024. Specifically for flex: because it’s often multi-tenant, rents per square foot are usually higher than for bulk warehouse (reflecting the smaller unit size and partially finished space). And they have been climbing. NAR’s data for mid-2024 showed that among industrial subcategories, logistics (bulk) space rent was up 4.1% YoY, while flex space rents rose 2.8% YoY – a bit slower than big warehouses, but still positive growth even as the market cooled. Importantly, this followed two years of double-digit rent spikes in 2021–22 for industrial. In many cities, small flex units have seen cumulative rent growth of 20–40% over five years. For instance, a small bay in Dallas that leased for $6 per sq. ft. in 2018 might lease for $9+ per sq. ft. in 2023. Landlords also report that new leases are being signed at a premium over expiring leases, though that premium shrank in 2024 as overall market rent growth moderated. Nonetheless, asking rents for small-bay space are at all-time highs in most markets and still edging up, whereas rents for the largest warehouse spaces have flattened due to higher vacancies. Lab/R&D rent trajectories have been even more extreme – top lab markets saw rents jump 50% or more over a 5-year span. Even secondary life science cities (Salt Lake, Pittsburgh, etc.) experienced notable rent appreciation as new lab space came online at higher price points. All said, flex space is no longer “cheap” space: businesses are paying a premium for these versatile, well-located units. Yet, relative to renting separate office and industrial premises, a flex space is still cost-effective, which is why demand stays high despite rising rents.

• Capital Values & Investment: Investor interest in industrial flex is at an all-time high. Industrial was the best-performing real estate asset class of the past decade, and that has translated into heavy investment volumes. By 2019, industrial transaction volume was rivaling office and multifamily; in 2021–22, it surged further. Institutional investors have drastically increased allocations to industrial, and within that, many are now carving out strategies for light industrial. For example, Blackstone, Prologis, and others traditionally focused on big warehouses have acquired portfolios of small last-mile facilities to get infill presence. Specialists like BKM Capitaland Stockbridge aggregated multi-tenant industrial across the Sunbelt, betting on rent growth – a bet that has largely paid off. Pricing: Capitalization rates for industrial compressed to historically low levels by 2021 (many light industrial deals traded at cap rates of 4–5%, reflecting high investor confidence). In 2023, with interest rates up, cap rates rose a bit (the NAR reported an average industrial cap rate ~7.3% in mid-2024, but prime flex assets in coastal markets still see sub-5% caps). Investors are willing to pay more for flex assets in markets with limited supply – effectively baking in expectations that rents will keep climbing. We have also seen creative investment models: the industrial condo trend (sell small units to users) in places like Texas was mentioned; crowdfunding platforms offering fractional investment in light industrial (targeting high yields from these multi-tenant assets) have grown; and even some venture capital is intersecting with industrial via PropTech startups that optimize warehouse utilization, etc. The consensus in the investment community is that industrial (including flex) has strong long-term fundamentals – e-commerce and domestic supply chain needs aren’t going away – so many view any short-term softening as a chance to acquire assets. Indeed, Clarion Partners in 2024 called it a “good entry point” to acquire logistics assets given the modest valuation dip and strong outlook. Flex properties, with their diverse tenant mix, are seen as offering stable income (many tenants = lower risk of any one default). Some investors do caution that management-intensive nature of multi-tenant industrial (lots of small tenants to handle) means operational expertise is key. This has led to consolidation: big owners with property management platforms are buying mom-and-pop owned industrial parks to apply professional leasing and bump rents.

• Data Trends: Data from brokerages reinforces the flex strength. For instance, a 2025 small-bay industrial report noted that national small-bay vacancy was at an “astonishingly low” 3.4% and that in many metros small units lease faster than they can be built. It highlighted that oversupply concerns affecting big box do not apply to small-bay – in fact, even if broader industrial vacancies rise, the “space shortage” in small flex will persist. Rent growth forecasts for industrial were tempered (perhaps 2–3% per year nationally for a couple years), but that average hides a two-sided story: large warehouse rents might stagnate in some regions, while light industrial rents could continue rising due to scarcity. In essence, the flex segment may continue to outperform. Another trend is adaptive reuse: as retail and office struggle, investors are exploring converting vacant big-box retail stores or suburban offices into light industrial or lab space. This could add a bit of supply to flex in coming years (for example, dead malls becoming distribution hubs, or old office parks in Silicon Valley being rezoned for R&D manufacturing), which is worth watching. However, those conversions face political and zoning hurdles, so they won’t flood the market easily.

In summary, the data paints a picture of high occupancy, rising rents, and keen investor appetite for flex industrial properties. Compared to 20 years ago, when industrial was often an “alternative” asset class with relatively higher yields due to perceived risk, today it’s a core holding for many investors, sometimes even valued above office or retail. Flex space specifically has proven its resilience – with small tenants renewing through economic cycles and new demand sources constantly emerging (startups, new services, etc.). The combination of limited supply and diverse demandsuggests that flex industrial will remain a landlord’s market in many regions. For tenants (startups included), this means planning ahead for space needs and being open to creative solutions (such as co-warehousing or sharing space) to secure affordable facilities.

Conclusion: Flex Space as a Cornerstone of the Modern Startup Ecosystem

Over the past two decades, industrial flex space in the U.S. has transformed from a quiet workhorse into a dynamic, sought-after platform for innovation and commerce. What was once typified by generic business parks and “mom-and-pop” tenants has become a landscape of last-mile delivery hubs, biotech labs, hardware incubators, and artisan workshops. Key forces – technological advancement, the e-commerce revolution, shifting work patterns, and supply chain reconfiguration – have all converged on the flex space sector, dramatically boosting demand for flexible industrial real estate while new supply remained constrained.

For startups in particular, flex spaces have proven to be indispensable. They offer the physical foundation upon which many young companies are built – the garages, labs, and workshops where ideas are turned into products. In the 2000s, a startup might have seen leasing industrial space as a hurdle; in the 2020s, it’s often a competitive advantage to snag quality flex space in the right location. Whether it’s a robotics team needing a high-bay workshop, an e-commerce founder needing a small warehouse for inventory, or a biotech scientist needing a ready-to-use lab, industrial flex properties have provided the launchpad. Startups, in turn, have infused these spaces with new energy and purpose, driving landlords to innovate and investors to take notice.

Geographically, we see that flex space growth is a nationwide phenomenon, though it manifests in different ways – from Austin’s tech-fueled flex boom to Chicago’s reinvention of legacy industrial parks, from Silicon Valley’s perennial R&D hubs to Denver’s blend of aerospace and craft manufacturing. This ubiquity underlines an important point: as the U.S. economy has shifted towards knowledge-intensive and service-oriented activities, it still fundamentally relies on physical spaces to create and move goods. Industrial flex spaces are the often-unsung heroes enabling that physical economy for businesses large and small.

Looking ahead, the outlook for flex industrial space remains strong. There are challenges: economic cycles will test some small tenants, high interest rates may slow new construction (further tightening supply), and not every shiny startup will succeed (potentially leaving space vacancies here or there). Yet the structural drivers – e-commerce logistics, onshoring, high-tech R&D, and the growth of small business entrepreneurship – suggest continued high demand. In fact, the next wave of innovation (think: electric vehicle supply chains, space commercialization, AI hardware, personalized medicine) will likely generate new categories of startups, all of which will need flex spaces for labs, production and distribution. Meanwhile, older industries like construction, automotive repair, and food distribution will continue their steady usage of flex real estate. On the supply side, barriers to adding small flex space (land scarcity, zoning, developer focus on bigger projects) mean that the space crunch will not be resolved quickly. This points to sustained low vacancies and healthy rent growth in most markets.

For investors and developers, industrial flex has gone from being a secondary segment to a core growth strategy. We can expect more creative solutions – from multi-story urban flex developments to integrated “live-work-make” districts – to maximize the utility of limited industrial land. Cities, too, are recognizing the value of flex industrial as job creators and are more inclined to preserve and zone for these uses, reversing an earlier trend of industrial land loss. Initiatives to modernize older stock (adding solar panels, better loading facilities, fiber connectivity) will keep those assets relevant for future tenants.

In conclusion, the past 20 years have solidified industrial flex space as a pillar of the U.S. commercial real estate landscape and a cornerstone of the startup ecosystem. It has evolved in step with economic changes – becoming higher-tech, more service-oriented, and more entrepreneur-friendly – all while retaining its fundamental flexibility. For startups, flex spaces offer the room to experiment, build, and grow; for investors, they offer stable and growing returns; for communities, they provide jobs and essential services. In a world that increasingly values agility, industrial flex real estate has proven it can adapt and thrive – and it will continue to warehouse our goods, house our innovations, and flexibly meet the needs of the next generation of businesses. The humble flex space has truly come of age, emerging as a crucial enabler of American innovation and industry in the 21st century.

Sources:

• Bluerock Industrial Sector Overview – definitions of bulk, light industrial, flex, etc.bluerock.combluerock.com

• REJournals (May 2023) – Chicago flex parks case study, occupancy and tenant mixrejournals.comrejournals.com

• PersonalWarehouse 2025 report – drivers of small-bay demand, vacancy stats, supply shortagepersonalwarehouse.compersonalwarehouse.com

• BKM/CoStar (Dec 2024) – small-bay nationwide vacancy 3.4%, 115M sq.ft. demolished, 3% inventory growth vs 20% job growthbkmcapitalpartners.combkmcapitalpartners.com

• CoStar News (Aug 2022) – co-warehousing concept and Saltbox examplecostar.comcostar.com

• JLL & CBRE Life Science Reports (2023–24) – lab space demand above pre-pandemic, 6.3% growth in Q1 2024, record construction pipelinejll.comcbre.com

• NAR Commercial Real Estate Insights (Aug 2024) – industrial absorption down, flex rent growth +2.8%, logistics +4.1%, flex negative absorption in 2023 overallnar.realtornar.realtor

• Clarion Partners (2024) – industrial demand drivers (e-commerce, onshoring, inventory), 1.1 billion sq.ft. needed by 2028, 70% stock pre-2000clarionpartners.comclarionpartners.com

• PREA/Clarion (2022) – industrial outperformance, 43% return in 2021, unprecedented sector growthprea.org

• CommercialEdge (May 2025) – national industrial rent $8.49, +6.7% YoY, vacancy 8.8% after new supplycommercialedge.comcommercialedge.com

• Additional industry news via NAIOP, Colliers, etc. – trends in small vs big industrial demand, regional highlightsp.