Selling a Flex, Small-Bay or Office-Warehouse Building

A flex, office-warehouse, showroom or small-bay building with tenants sells with its leases. The rent roll, the unit plans and each town's rules for new tenants become part of the sale.

We're part of a family-owned business that has been operating for over 15 years, and we buy these buildings in Philadelphia, its Pennsylvania suburbs and South Jersey. A building with a dozen small tenants, or one with half its units empty, is the kind we expect to see.

What is a flex or small-bay industrial building?

A flex building mixes office or showroom space with warehouse or light industrial space, so occupants can use it in different ways. A small-bay building is split into smaller units that can be leased to several tenants. Definitions vary by firm. CBRE, for one, uses the term shallow-bay for buildings under 50,000 square feet with clear heights of 14 to 28 feet.

Industry groups have defined these terms for decades, and their definitions differ. NCREIF, a real estate industry group, describes industrial flex space as "single story buildings with 10-18 foot ceilings with both floor height and dock height loading." It adds that flex "includes wide variation in office space utilization," from retail and personal service to light industrial use. Prologis, the industrial real estate company, says flex buildings often have more than 30 percent office space.

The Urban Land Institute and NAIOP, both industry groups, published their guides in 2003 and 2005. Treat those figures as long-standing labels. The CBRE figures below are current market data. Prologis describes showroom buildings, one of its flex types, as "a combination of offices, warehouses and showrooms."

Is there demand for small industrial buildings around Philadelphia?

Buildings under 50,000 square feet had the lowest vacancy of any size range in CBRE's Philadelphia market, at 5.0% in the third quarter of 2026, against 11.1% overall. Their occupied space still fell by 165,000 square feet in 2026 through September. CBRE's R&D and flex buildings were 8.1% vacant and gained 159,000 square feet of occupied space in the quarter.

The table comes from CBRE's third-quarter 2026 figures for its Philadelphia market, which takes in South Jersey and Northern Delaware. CBRE's average direct asking rent for buildings under 50,000 square feet was $11.49 per square foot a year, triple net, and $13.37 for R&D and flex buildings.

CBRE's January 2026 outlook said costs generally ruled out building anything under 100,000 square feet. Its August 2026 midyear review said developer opportunities "remain clearest in the very small (<100,000 sq. ft.) range." In the third quarter, CBRE counted 173,000 square feet under construction in buildings of 50,000 to 99,999 square feet, and none under 50,000.

Nationally, CBRE's March 2026 brief on shallow-bay buildings found that nearly half of that inventory was built before 1980 and more than 80% before 2000. It said shallow-bay asking rents in 2025 were more than 50% higher than in 2010. CBRE ties demand for this space to "small and mid-sized businesses that serve local economies."

What do buyers look at in a flex or small-bay building?

Buyers of a flex or small-bay building look at the office share, clear height, loading and parking, and how the space splits into units. They also study the tenants: who they are, how long their leases run, what they pay and who covers taxes, insurance and repairs. Another question is whether each unit has its own utility meters.

Loading is worth a close look. NAIOP defines a dock-high door as one that usually opens at a height of four feet from the truck court. A drive-in door is one that vehicles can use "without a change in elevation." The Urban Land Institute's guide notes that some multi-tenant buildings have drive-in doors instead of docks, or both. Others share a few common docks among all tenants.

Parking follows the office share. The Urban Land Institute put parking for some R&D flex buildings at four spaces per 1,000 square feet, about what office buildings need. It put office showrooms at 2.5 spaces per 1,000. A building with more office space than its parking can serve may suit fewer tenants.

Leases and tenants in a small-bay building

In a 2025 study of nine major U.S. markets, not including Philadelphia, CompStak and Faropoint found that in 2024 and 2025, multi-tenant small-bay leases averaged just under four years. The study said that was nearly 37% shorter than the average lease in big warehouses in 2025. It counted buildings of 150,000 square feet or smaller as small-bay. Expect a buyer to read every lease and ask each tenant for an estoppel letter confirming its terms.

A flex building can mix net leases, where tenants pay some or all of the taxes, insurance and upkeep, with gross leases, where the rent covers them. A rent roll that shows which kind each tenant has saves a buyer time. Our what we buy page explains who pays what under each lease type.

A building with vacant units, month-to-month tenants or a tenant behind on rent can still sell. Our page on tenants behind on rent or about to leave covers those cases, and the same page explains when tenants find out about a sale. If a large tenant is moving out, our page on a tenant leaving covers the move-out checks.

Do towns require a certificate when a flex building gets a new tenant?

Some towns require a new use and occupancy permit or certificate when a tenant changes, not only when the building sells. In Montgomery County, Conshohocken requires one "each time a change of tenant occurs," and West Norriton wants a separate application for each tenant space. Philadelphia doesn't require a new certificate when tenancy changes, as long as the approved use stays the same.

Each row comes from the town's own code, fee schedule, application or website, and the list isn't complete. West Norriton's form calls for a certificate on a "change of occupant (tenant changes)." Hatboro's code requires an inspection and an occupancy permit before commercial or industrial premises are reoccupied after a sale or after "a new tenant" is obtained. Lower Providence has a separate "Non-Residential Change of Tenancy" application. Conshohocken's form lists a $350 commercial fee under 6,000 square feet and $5 per 100 square feet over that. Florence's code covers new nonresidential tenants, but its housing page describes the program as residential, so confirm the current practice with the township.

Several of these rules put the duty on the owner as tenants come and go, so a buyer will ask whether each unit's certificate is current. Ask your town what it requires before a new tenant moves in. Our county pages list fees and other resale rules for Bucks, Montgomery, Delaware, Camden, Burlington and Gloucester counties.

In Philadelphia, zoning is the other check. The zoning code names light industrial work, assembly, offices, research and development and local distribution among the purposes of its I-1 Light Industrial district. The City Planning Commission also voted in June 2026 to approve a bill that would remap some ICMX (Industrial Commercial Mixed-Use) land as CMX-3, a commercial mixed-use district. Our Philadelphia page covers zoning and an industrial sale.

Too much office, or ceilings too low

Flex buildings built for one era's tenants can carry more office than today's users want, or ceilings that limit storage. Some of that can change: office finish can come out and units can be combined or split. Clear height is much harder to change. A buyer weighs what the space can do as it stands against the cost of changing it. Our seller's guide covers how buyers decide what a building is worth.

Our page on older and obsolete buildings covers how buyers judge dated specs, and our page on a building that needs repairs covers roofs, paving and systems.

What to have ready

• A rent roll listing each unit's size, tenant, rent, lease dates, deposit and who pays which costs
• Every lease, with its amendments
• Floor plans for each unit, even rough ones
• Utility accounts and which units have their own meters
• Certificates of occupancy, by unit if your town issues them that way
• Recent tax bills, insurance and any expense reconciliations with tenants
• Any tenant rights to buy the building or expand into the next unit

Selling a flex building to us

Send the address and a rent roll if you have one. We walk the building with you, look at the units and the systems, and read the leases. Then our written as-is offer lists the price, a proposed closing date and the costs each side covers. We charge no commission and no fees.

We can't promise a set number of days. When you sell to us, you choose the date, within the required steps and the due diligence period in our offer. For a building with tenants, those steps include the tenant estoppel letters. How It Works covers each step. If you're planning a 1031 exchange, our page on partner splits and 1031 timing covers the IRS deadlines. Your accountant and your qualified intermediary can confirm how they apply to your sale. See everything we buy for other property types.