Flex parks are my favorite asset type to underwrite because the math is so clean. Multiple tenants, NNN leases, predictable expenses. When I pull up a rent roll on a 10-unit flex park, I usually know within 15 minutes what I’m going to offer.
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Unit Count and Size: Do you have many small units (2,000-5,000 SF) or few large units (10,000+ SF)? -
Occupancy Mix: Are units occupied by independent contractors, small mfg, or larger corporate tenants? -
Rent Variance: Do smaller units command a premium per-SF rent, or are all units renting at the same rate? -
Divisibility: Could units be further subdivided if market demanded smaller spaces?
Start with the rent roll
I look at every unit. What’s the tenant paying? When does the lease expire? Is it NNN or modified gross? Are they current on rent?
What Works for Small-Bay Flex
- Units 2000-5000 SF (sweet spot for contractors and small manufacturers)
- Staggered lease expirations (2-3 units turnover each year)
- Independent contractors and small businesses as primary tenants
- Premium per-SF rents on smaller units (12-16 dollars per SF vs 9-11 for large spaces)
- Flexible specs (standard ceiling, standard loading, standard electrical)
What Reduces Small-Bay Value
- Large bay layout (10000+ SF units) instead of small units
- All tenants on same 5-year lease (creates big vacancy cliff)
- Shared common areas requiring heavy landlord investment
- Functional obsolescence (low ceiling, no loading, narrow aisles)
- Tenant mix that requires high-touch management (special permits, niche industries)
The strongest flex parks have a mix of established tenants on 3-5 year NNN leases with staggered expirations. That means no more than one or two leases rolling in any given year. If all ten leases expire in the same year, that’s concentrated risk. I’ll still buy it but the cap rate goes up.
Market rent check
Are the tenants paying market rent or are they below? If they’re paying $7 NNN and the market is $10, there’s upside. But I’m not paying you for that upside. I’m pricing based on today’s income. When those leases roll, I’ll push to market. That’s my return for taking the risk.
If they’re above market? That actually makes the building more risky because tenants might leave at renewal. I see this sometimes in Raleigh flex parks where a tenant signed a lease in 2021 at peak rents and the market has adjusted slightly since.
Physical condition
Flex parks are relatively simple buildings. The big ticket items: roof, paving, HVAC units (one per unit usually), and overhead doors. I add up the deferred maintenance and subtract it from my income-based value.
A 10-unit park with ten rooftop HVAC units that are all 18 years old? I’m pricing in $60K-80K for replacements over the next few years. That’s just reality.
The final number
NOI divided by cap rate, minus capital items. That’s my offer. For well-located flex parks in Greenville and the Charlotte area, I’m typically at 7-8% cap rates. Smaller markets or older buildings, more like 8-9%.
Seller takeaway
Small-bay flex parks are cash flow machines if the unit mix is right. If you own a flex park and want to know what your unit count and tenant mix mean for value, call Roth Capital at 704-600-3839.
If you’ve got a flex park and you want to see how the math works on your specific building, call me. 704-600-3839.
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