The manufacturing landscape is undergoing a profound transformation, driven by exponential technologies that are democratizing capabilities once reserved for only the largest industrial players. At Phoenix Industrial Redevelopment (PIR), we’re observing firsthand how these technological shifts are creating new opportunities for small and mid-sized businesses—and consequently reshaping tenant demands in the industrial real estate market.
The Democratization of Manufacturing Technology
For decades, cutting-edge manufacturing technologies were prohibitively expensive for all but the largest industrial corporations. A sophisticated robotic assembly system might have cost millions of dollars, required specialized facilities, and demanded a team of engineers to program and maintain. Today, that paradigm has shifted dramatically.
Modern collaborative robots (“cobots”) can be purchased for as little as $20,000, programmed through intuitive interfaces requiring minimal technical expertise, and deployed in standard industrial spaces with normal power supplies. This democratization of technology is placing advanced manufacturing capabilities within reach of even small operations with 2,000-5,000 square foot facilities.
Similar transformations are occurring across the manufacturing technology spectrum:
- Additive manufacturing (3D printing) systems have plummeted in cost while dramatically improving in quality and material options
- AI-powered quality control systems using computer vision can now run on standard computers with cloud connections
- IoT sensors and analytics platforms are available as affordable subscription services rather than massive capital investments
- Digital design and simulation tools previously requiring supercomputers now run effectively on standard workstations
This technological accessibility is fundamentally changing who can compete in the manufacturing sector—and what their real estate needs look like.
The Small Business Manufacturing Renaissance
As these technologies become more accessible, we’re witnessing a renaissance in small-scale manufacturing operations. Entrepreneurs and small businesses can now compete in specialized manufacturing niches that were previously dominated by large corporations with economies of scale.
Consider the case of a PIR tenant in our Portland property who manufactures custom medical device components. Five years ago, their production process would have required significant manual labor and quality control challenges. Today, they operate two compact CNC machines and a specialized 3D printer in a 2,500-square-foot space, producing precision components that meet strict medical standards—all with a team of just four employees.
This technological empowerment is creating an entirely new class of small manufacturing tenants with specific space requirements:
- Flexible power infrastructure to accommodate specialized equipment
- Enhanced data connectivity for cloud computing and remote monitoring
- Modernized HVAC systems for temperature-sensitive processes
- Moderate clear heights (15-20 feet) rather than the 36+ feet required by large distribution users
- Smaller loading areas with enhanced security for high-value shipments
AI and the Changing Nature of Industrial Work
Artificial intelligence is perhaps the most transformative technology reshaping small manufacturing businesses. While media narratives often focus on AI’s potential to replace human workers, the reality in small industrial spaces is far more nuanced and often positive for employment.
Small manufacturers are increasingly using AI as a force multiplier for their limited workforce:
- Computer vision systems monitor quality control, allowing human workers to focus on higher-value tasks
- Predictive maintenance algorithms anticipate equipment failures before they occur, reducing downtime
- Scheduling optimization maximizes efficiency without requiring additional space
- Design assistance tools help workers develop new products and modifications rapidly
These AI implementations typically don’t replace workers in small operations; instead, they enable small teams to accomplish what previously required much larger workforces. This transforms the economics of small-bay industrial spaces, allowing tenants to generate more revenue per square foot and potentially support higher rents over time.
Automation and Space Utilization Efficiency
Another key trend we’re observing is how automation is changing space utilization patterns within small industrial bays. Contrary to the assumption that automation requires larger spaces, we’re finding that well-designed automation often enables more efficient use of limited square footage.
Automated storage and retrieval systems, for instance, can utilize vertical space more effectively than traditional shelving, allowing small manufacturers to store more materials and finished goods in the same footprint. Similarly, compact robotic work cells can often replace larger manual production areas while increasing throughput.
This efficiency creates an interesting dynamic in the industrial market. While tenants may require less raw space for some operations, they often reinvest those savings into:
- Enhanced production capabilities with additional machines
- Small cleanroom or controlled environments for specialized processes
- Improved office and design spaces for their increasingly skilled workforce
- Research and development areas for product innovation
The net effect is typically a tenant who can afford higher per-square-foot rents while maintaining or even increasing their space needs—a win-win for both tenants and property owners.
The Reshoring Catalyst
The trend toward technological adoption among small manufacturers is being accelerated by the broader reshoring movement. As larger companies seek to bring production back to the United States to reduce supply chain vulnerabilities, they’re increasingly partnering with networks of smaller, specialized suppliers rather than building massive new facilities themselves.
These smaller suppliers, equipped with advanced technologies, can provide the flexibility, quality, and rapid response times that reshoring initiatives require. This creates a virtuous cycle where small manufacturers invest in technology to meet the demands of larger reshoring clients, further enhancing their competitiveness and growth potential.
For owners of small-bay industrial properties like PIR, this reshoring-driven technology adoption represents a significant opportunity. Properties that can accommodate these modernizing small manufacturers—with appropriate power, connectivity, and flexible configurations—are likely to see stronger demand and rent growth compared to older, less adaptable facilities.
The PIR Approach: Anticipating Technological Needs
At Phoenix Industrial Redevelopment, our value-add strategy for small-bay industrial properties is increasingly focused on anticipating and accommodating these technology-driven tenant needs. When we acquire and renovate properties, we’re making strategic investments in:
- Upgraded electrical systems with capacity for modern manufacturing equipment
- Enhanced data infrastructure including fiber connectivity where possible
- Flexible bay configurations that can adapt to changing equipment needs
- Modern HVAC systems capable of maintaining stable environments for sensitive processes
- Security enhancements to protect valuable equipment and intellectual property
These investments position our properties to attract and retain the growing segment of technology-enabled small manufacturers, who typically represent higher-quality, longer-term tenants with stronger growth trajectories.
Investment Implications: The Technology Premium
For investors in industrial real estate, understanding the impact of exponential technologies on small business tenants is increasingly critical. Properties capable of accommodating these evolving needs are developing what we call a “technology premium”—the ability to command higher rents and maintain higher occupancy rates even during market fluctuations.
Through our FixedFunds Program®, accredited investors can participate in this technology-driven opportunity without the complexities of direct property ownership. The program provides fixed 8.0% returns through either monthly income payments or compounded growth, backed by our portfolio of small-bay industrial properties positioned to benefit from these technological trends.
For those seeking tax advantages through 1031 exchanges, our 1031Funds Program® offers a similar opportunity through a Delaware Statutory Trust structure, with a 5.0% preferred return plus 50% participation in property appreciation—much of which we anticipate will be driven by the technology premium these properties can command.
Conclusion: The Technology-Enabled Future of Small-Bay Industrial
As exponential technologies continue to advance and become more accessible, we expect the transformation of small-bay industrial spaces to accelerate. The small businesses that occupy these spaces will increasingly leverage AI, automation, and advanced manufacturing techniques to compete effectively in a reshoring-focused economy.
Property owners and investors who understand and anticipate these technology-driven changes will be well-positioned to benefit from stronger tenant quality, higher rental rates, and enhanced property values. At PIR, our strategic focus on small-bay, multi-tenant industrial properties is directly aligned with these powerful technological and economic trends.
The future of industrial real estate isn’t just about large distribution centers and massive manufacturing facilities. It’s increasingly about flexible, adaptable spaces where technology-empowered small businesses can thrive, innovate, and grow—creating value for themselves, their communities, and property investors alike.
To learn more about how you can participate in the technology-driven transformation of industrial real estate through the PIR FixedFunds Program® or 1031Funds Program®, please visit our website or contact our investment team today.
