MB484: The Asset Class Most Multifamily Investors Overlook—That Could Help You Scale Faster - With Cody Payne

Financial Freedom with Real Estate Investing

Michael Blank

Business, Entrepreneurship, Investing

4.7 • 577 Ratings

🗓️ 11 August 2025

⏱️ 39 minutes

🔗️ Recording | iTunes | RSS

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Summary

Small Bay Industrial (a.k.a. Flex Space) wasn’t on your radar—and for good reason.

But what if the most overlooked asset class in commercial real estate turned out to be one of the most profitable? In this episode, Cody Payne, SVP at Colliers, breaks down why Small Bay Flex Industrial is quietly exploding—and why more active and passive investors are taking notice. Cody shares how he transitioned from leasing to owning, how syndication plays a role in the space, and why this niche might outperform retail and office over the next decade. Whether you’re looking to diversify your portfolio or find a less management-intensive asset, this is an episode you don’t want to miss.

Key Takeaways

Why Flex Industrial Is Heating Up

The asset class has evolved: from basic metal garages to glass-fronted multi-use spaces.
Demand is surging as small businesses, gyms, e-commerce, and retail users flood in.
Triple-net leases and low tenant improvement costs make this a capital-efficient play.

How to Add Real Value with Small Bay Assets

Simple cosmetic upgrades (like storefront glass) can attract higher-paying tenants.
Reconfiguring larger units into smaller ones can boost PSF rent.
Strategic side yards and outdoor storage add ancillary income.

Investor Returns: What to Expect

Typical stabilized deals offer 8–10% cash-on-cash returns with low capex.
Value-add plays or development deals can push IRRs significantly higher.
Cap rates range from 6–8%, depending on market and quality.

Management Made Simple

Triple-net leases reduce headaches—tenants handle their own maintenance.
Very few after-hours calls; most businesses operate during daytime hours.
Easy to find third-party managers who understand this asset class.

Syndication in Small Bay: A New Frontier

Cody’s early deals involved rolling his broker fee into equity—low-risk entry point.
Syndication works well, especially for stabilized assets or light value-add.
Investors like the stability, tenant diversity, and ease of management.

Navigating the Market: Deal Flow and Financing

Good deal flow in most metros if your buy box is realistic (e.g., 7–8% cap).
Financing is accessible: 25-year terms, 65% LTV, and ~6.25% interest.
Banks used to avoid this asset class—now they’re chasing it.

For full episode show notes visit: https://themichaelblank.com/podcasts/session484/

Transcript

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0:00.0	Hey, dealmakers, and welcome to the show where it's all about financial freedom with real estate.
0:03.8	Let's do this.
0:09.2	All right, today we've got a treat for you.
0:10.4	We're talking with Cody Payne, senior VP at Colliers, and he's one of the most active dealmakers in the industrial flex space.
0:17.4	I don't think we've ever had someone on the show about this asset class, and I really
0:21.6	like learning about different asset classes. It's always good to just know what's going on and
0:27.8	look at the pros and cons, and sometimes the market shifts as well. So before we're going to show,
0:32.2	I want to talk about the different asset classes, because obviously we talk about multifamily,
0:36.8	and there's many reasons
0:38.1	we like multifamily over really any other strategy as well. But sometimes, you know, there are
0:45.4	other niches and sometimes they're worth looking into. For example, this industrial flex space or
0:50.4	small bay, small bay real estate that he's talking about here. And for example, we've
0:56.0	had a number of students, even though we teach multifamily, what we really teach is syndication,
0:59.9	which is basically how do you raise money to buy real estate? And we've had people use syndication
1:04.8	to syndicate car washes or to convert a hotel into an apartment or self-storage, you know, as recently as a couple
1:13.9	months ago, Russ Ryan and Russ and Ryan.
1:18.9	And so the reason that people are doing that is to have a preference for that particular
1:22.4	asset class.
1:23.2	Another gal is doing a ground-up 40-unit ground-up development project because she's got a construction background.
1:29.2	So you can really syndicate anything.
1:31.6	And sometimes people do things because they have a certain affinity or background in that asset class.
1:36.8	Right.
	...

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