I have a theory about flex space. It’s the best-performing commercial real estate asset type in the Carolinas right now and almost nobody outside the industry knows it.
Go to any real estate conference and everyone’s talking about industrial. Big distribution centers, last-mile logistics, Amazon-proof this and that. And yeah, those are fine deals. But the returns I’m seeing on small-bay flex parks are beating them. Consistently.
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Ceiling Height and Bay Size: 16+ feet clear with individual units under 3,000 SF is the sweet spot. Anything lower is worth 10-15% less. -
Highway Access: Visibility and truck access matter. Flex properties with easy interstate access trade 10-20% higher than secondary locations. -
HVAC and Electrical Load: Buyers want to know what power these tenants draw. Oversized HVAC for trade work is a premium feature. -
Tenant Mix Quality: Licensed contractors (HVAC, electrical, plumbing) are more stable than general services. Emphasize contractor concentrations in your tenancy. -
Management Load: Document how much time you spend on maintenance calls, lease renewals, and tenant issues. Buyers factor in 10% management cost even if you self-manage.
Why flex is crushing it
Tenant demand is absolutely insane right now. Every HVAC contractor, electrician, plumber, landscaper, and pool company in the Carolinas needs a bay. They want 1,500 to 5,000 square feet with a roll-up door and a small office. That’s it. And there’s way more of these small businesses than there is space for them.
What drives premium flex pricing
- 16+ feet clear ceiling height in units
- Individual bays under 3,000 SF each
- 8-12 tenant diversification (not single-tenant dependent)
- Highway frontage or visible access
- Licensed contractors as primary tenants (HVAC, electrical, plumbing)
What dampens flex valuations
- Low ceiling height (under 14 feet) limits tenant uses
- Only 3-4 tenants (single-tenant risk profile)
- Poor highway visibility or difficult truck access
- Heavy management burden with frequent turnover
- Older HVAC or electrical systems limiting tenant power draw
I own flex in Spartanburg and the Charlotte area. When a tenant moves out, the unit is re-leased in two weeks. Sometimes faster. And the rent I’m getting on the new lease is 10-15% higher than the old one. That’s been the story for three or four years straight with no signs of slowing down.
The reason nobody built new small-bay for almost a decade is the math. Developers can’t justify it. Construction costs are $100-130/SF all-in right now. A 20,000 SF flex park costs $2M-2.6M to build from the ground up. Then you need to lease it up. 12-18 months before you see stabilized income. The returns are decent but they’re not spectacular enough for the big developers who’d rather build a 500,000 SF distribution center and flip it to a REIT.
What that means for existing buildings
Supply is flat. Demand keeps growing. Rents go up. Cap rates compress. An ugly 1988 tilt-wall flex park that you couldn’t give away ten years ago is now trading at $120-140/SF. I’ve seen it happen over and over.
The other thing I love about flex is the diversification. A typical small-bay park has 8-12 tenants. One moves out? You barely feel it. Compare that to a single-tenant industrial building where one vacancy means zero income. The risk profile is completely different.
What separates a $100/SF flex building from a $140/SF one? Ceiling height and bay size mostly. Anything over 16 feet clear with individual units under 3,000 SF is the sweet spot right now. Throw in good highway access and you’re looking at top of market.
The downside (and why owners sell)
Flex isn’t perfect. More tenants means more management headaches. More HVAC units to maintain. More lease renewals to negotiate. More Saturday morning phone calls about the overhead door that won’t close. I get it. A lot of owners are reaching a point where they’re over it. The building is worth a lot, they’re tired of managing it, and selling makes sense.
If you own flex in Asheville or anywhere in NC and SC, you’re probably sitting on more value than you realize. The market for these buildings is as strong as I’ve ever seen it. Buyers like me are actively looking for them.
Seller takeaway
If you own flex space in NC or SC and are considering a sale, call Roth Capital at 704-600-3839. The market for flex buildings is the strongest it’s been. Jim Kittridge can give you a value estimate based on current demand and cap rates.
Call me if you want to know what yours is worth. I’ll give you a number in 48 hours. No listing, no broker, no games. 704-600-3839
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