# Industrial Benchmarks & Market Standards

> **What this is:** A U.S.-focused reference for industrial and logistics underwriting, covering market signals, building-function benchmarks, leasing assumptions, and practical underwriting guardrails by industrial subtype.
> **How to use it:** Load this alongside the industrial market, lease, physical, underwriting, financing, or IC memo skills. Use it as directional guidance, not as a substitute for submarket comps, broker intel, or lender quotes.

This knowledge base is designed for acquisition underwriting and diligence of industrial real estate. Industrial performance is highly subtype-specific, so the most important benchmark question is not "What is the national average?" but "How does this building compare to the actual competing stock for its use case?"

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## Core Subtypes

| Subtype | Typical Use | Key Underwriting Drivers |
|---|---|---|
| Bulk Distribution | Regional and national distribution, large-format logistics | Clear height, cross-dock vs rear-load, trailer storage, truck court depth, power, freeway / intermodal access |
| Shallow-Bay / Small-Bay | Small and mid-size distributors, contractors, service industrial | Bay depth, loading ratio, parking, infill location, tenant granularity, rollover depth |
| Flex Industrial | Light industrial plus office build-out | Office finish ratio, parking, HVAC, tenant improvements, release depth |
| Infill Logistics | Last-mile distribution near dense demand | Land scarcity, access, labor, trailer and van circulation, rental premium vs older stock |
| Single-Tenant Net-Leased Industrial | Credit or operating company occupancy in one building | WALT, tenant credit, residual use risk, build-to-suit specificity, releasing cost |

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## Market-Level Indicators

Use these as directional indicators, not rigid pass / fail rules.

### Vacancy and Occupancy Context

| Market Read | Typical Meaning |
|---|---|
| Tight | Healthy demand and limited supply of competing product. Can support stronger release assumptions if the building is competitive. |
| Balanced | Normal leasing market. Releasing assumptions should still depend on subtype, building quality, and local tenant depth. |
| Elevated Vacancy | May reflect oversupply, weak local demand, or obsolescence in older stock. Do not assume elevated vacancy hits every building equally. |

### Demand Signals to Review

- Net absorption trend over trailing 12 months
- Leasing activity trend
- Size of current construction pipeline
- Amount of new deliveries still competing for tenants
- Share of recent activity in newer buildings vs older buildings
- Evidence of 3PL, manufacturing, retail, and cross-border logistics demand

### Macro Drivers That Matter

- E-commerce growth and inventory strategy
- Nearshoring and North American freight flows
- Port, rail, and intermodal access
- Local labor depth and wage profile
- Power availability for automation-heavy users

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## Building Competitiveness Benchmarks

Industrial underwriting should benchmark function, not just age.

### Clear Height

| Relative Position | General Interpretation |
|---|---|
| Modern competitive bulk | Frequently 36' to 40' clear, sometimes higher in specialized product |
| Competitive modern mid-box / shallow-bay | Often 28' to 32'+ clear depending on market and tenant profile |
| Older functional stock | Can remain viable below modern targets if location is strong and user needs are lighter |
| Potentially obsolete | Materially below current market expectations for its subtype, especially if paired with weak loading or circulation |

### Loading and Circulation

Important benchmarking items:

- Dock-high door count
- Grade-level door count
- Rear-load vs cross-dock configuration
- Truck court depth
- Trailer parking count
- Car parking count
- Drive-around capability

General rule:

- More loading and deeper circulation matter most in large-format logistics.
- In shallow-bay and flex industrial, parking, ingress / egress, and unit divisibility can matter as much as dock count.

### Power and Automation Readiness

Modern occupiers increasingly care about:

- Higher power capacity
- 3-phase service
- floor flatness and slab quality
- column spacing that supports automation
- IT and operational infrastructure

If a building lacks these characteristics, do not assume it competes with current top-tier product even if its location is strong.

### Fire Protection

Inspection and underwriting should identify:

- ESFR vs older sprinkler configuration
- compatibility with planned racking / storage pattern
- special considerations for cold storage or specialized commodities

Fire protection is both a leasing issue and an insurability issue.

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## Lease Economics Benchmarks

Industrial cash flow is shaped by lease structure more than by a simple occupancy percentage.

### Revenue Items to Benchmark

- Base rent per SF
- rent steps
- reimbursements
- free rent or abatement
- percentage of rent from top tenant(s)
- WALT by revenue and by square footage
- mark-to-market on rollover

### Release Risk Benchmarks

Higher risk:

- short WALT with concentrated revenue
- heavy office finish in a weak flex market
- specialized build-to-suit layout
- large expiring tenant in a thin submarket
- outdated clear height / loading configuration

Lower risk:

- diversified multi-tenant roster
- functional shallow-bay in constrained infill market
- modern bulk with strong logistics access and active tenant demand
- strong tenant credit with durable term and releasable shell

### Downtime, TI, and LC

There is no reliable national one-number benchmark. Underwrite these case by case using:

- tenant size
- subtype
- building competitiveness
- local tenant depth
- market softness or tightness

Use a more conservative view when:

- the expiring tenant occupies a large share of the building
- the space has specialized improvements
- office finish is above market
- the market has elevated competing vacancy

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## Operating Expense Context

Industrial often has stronger expense recoveries than multifamily, but recoveries are never automatic.

Review:

- reimbursable vs non-reimbursable expenses
- gross-up mechanics
- management fee treatment
- roof / structure / parking lot / dock-equipment allocation
- utilities and separately metered services
- capital improvement recovery language

Underwriting warning:

- Do not treat all industrial assets as perfectly NNN.
- Modified gross and hybrid structures can leak expenses in ways that materially reduce effective NOI.

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## Capital Planning Benchmarks

Separate CapEx into three buckets:

1. Immediate repairs
2. Near-term replacement reserve items
3. Competitiveness upgrades

Typical high-signal industrial capital items:

- roof replacement or membrane work
- dock equipment and door replacement
- slab and pavement work
- power upgrades
- lighting and warehouse HVAC improvements
- office demising or office reduction work
- sprinkler upgrades
- trailer-yard or circulation improvements

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## Underwriting Guardrails

Use these as practical guardrails for industrial analysis:

- Do not underwrite market rent upside without a reletting path and a defensible downtime / TI / LC view.
- Do not treat rent roll concentration as acceptable just because the current tenant is paying.
- Do not use modern bulk-distribution benchmarks for shallow-bay or flex assets.
- Do not ignore functional obsolescence in markets where new product is absorbing faster than legacy stock.
- Do not let strong macro industrial sentiment override weak asset-specific release risk.

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## Last Updated

Last updated: 2026-04-22

## Scope Limitations

- U.S. only
- Directional benchmarking for acquisitions and underwriting
- Not a substitute for broker quotes, appraisal comps, lender guidance, engineering review, or legal advice

Validate current local market conditions before using any time-sensitive rent, vacancy, leasing, or capital-market assumptions.
