In discussions about the resurgence of American manufacturing, headlines typically focus on major corporations announcing billion-dollar factories or massive reshoring initiatives. These high-profile projects certainly capture attention and signal important shifts in our industrial landscape. However, at Phoenix Industrial Redevelopment (PIR), our years of experience in the small-bay industrial market have revealed a different, equally powerful force driving the reindustrialization of America: the thousands of small manufacturing businesses operating in relative obscurity while creating extraordinary value.
These “hidden champions”—small manufacturing tenants typically occupying spaces between 1,000 and 5,000 square feet—form the true backbone of the American manufacturing renaissance. Their contributions often go unrecognized, but their collective impact on the economy, innovation ecosystem, and resilience of domestic supply chains is profound.
The Invisible Manufacturing Ecosystem
When a major manufacturer like Tesla or Boeing announces a new factory, they dominate the news cycle. What rarely makes headlines is the network of 50-200 smaller manufacturers and specialized service providers that will inevitably form around these anchor operations, providing critical components, specialized services, and technical support.
These small manufacturers typically share several characteristics:
- They employ between 5 and 50 people
- They occupy facilities between 1,000 and 5,000 square feet
- They specialize in highly specific products or services
- They maintain lower profiles despite their essential role
- They often demonstrate remarkable longevity
In our portfolio of small-bay industrial properties across the country, we routinely see how these businesses form vital links in complex supply chains. A 2,000-square-foot precision machining operation might produce critical components used in everything from medical devices to aerospace applications. A small composites fabricator in a 3,500-square-foot bay might create specialized parts that enable larger manufacturers to build lighter, stronger, more efficient products.
These operations rarely appear in economic development announcements or corporate press releases, yet they represent the dense, interconnected tissue of American manufacturing—the foundation upon which larger, more visible operations depend.
The Specialized Expertise Advantage
What allows these small manufacturers to thrive in an era of global competition and relentless cost pressure? The answer typically lies in their development of deeply specialized expertise that creates defensible market positions.
Rather than competing on scale or absolute cost, small manufacturers typically excel by focusing on:
Technical Specialization
Many small manufacturers possess specialized technical knowledge that is difficult to replicate. A metal finishing operation might perfect processes for treating specialized alloys, or a small electronics manufacturer might develop expertise in ruggedized components for extreme environments. This specialization creates natural barriers to entry and often commands premium pricing.
Flexible Production Capabilities
While large manufacturers optimize for volume and consistency, small operations often excel at flexibility and customization. They can economically produce limited production runs, create specialized variations, or rapidly prototype new designs—capabilities that are challenging for larger, more rigid manufacturing operations.
Deep Industry Knowledge
Small manufacturers frequently develop profound understanding of the specific industries they serve. A machine shop specializing in components for food processing equipment builds not just technical expertise but also comprehensive knowledge of regulatory requirements, operational challenges, and emerging trends in that vertical. This contextual knowledge becomes as valuable as the technical capabilities themselves.
Rapid Problem-Solving
When production challenges arise in complex supply chains, small manufacturers often demonstrate remarkable agility in developing solutions. Their flat organizational structures, direct owner involvement, and specialized focus allow them to respond to technical problems with speed and creativity that larger organizations struggle to match.
The Reindustrialization Multiplier Effect
As the United States experiences a manufacturing resurgence driven by reshoring initiatives, technological advancement, and changing global dynamics, these small manufacturers create a powerful multiplier effect throughout the industrial ecosystem.
Supply Chain Density
The presence of diverse small manufacturers creates what economists call “supply chain density”—the concentration of specialized capabilities within a geographic region. This density becomes self-reinforcing as it attracts additional manufacturing investment seeking to benefit from the established ecosystem. Regions with strong networks of small manufacturers become natural destinations for larger operations looking for robust supplier bases.
Knowledge Diffusion
Small manufacturing operations serve as critical vectors for knowledge diffusion throughout industrial ecosystems. Technologies, techniques, and best practices spread through these networks as workers move between companies, firms collaborate on projects, and informal knowledge-sharing occurs through professional networks. This knowledge diffusion accelerates innovation and capabilities throughout the manufacturing sector.
Entrepreneurial Launchpads
Small manufacturing spaces often serve as entrepreneurial launchpads where new production businesses can establish themselves with relatively modest capital requirements. A skilled machinist might launch a specialized operation in a 1,500-square-foot space, gradually building capabilities and clientele before expanding. These entrepreneurial opportunities create pathways for manufacturing knowledge to translate into new business formation, driving continued sector growth.
Workforce Development
Small manufacturers play an outsized role in developing the skilled manufacturing workforce. They frequently provide entry points for workers to learn specialized trades and develop technical capabilities through direct mentorship and hands-on experience. This practical skills development complements formal educational programs and helps address the persistent skilled labor gaps in the manufacturing sector.
The Real Estate Implications for Investors
For real estate investors considering exposure to the industrial sector, understanding the vital role of small manufacturers offers important insights:
Structural Demand for Small-Bay Space
As reshoring accelerates and domestic manufacturing grows, the structural demand for small-bay industrial space will continue to strengthen. While much new construction focuses on large-format distribution and manufacturing facilities, the supply of well-located, properly configured small-bay space suitable for specialized manufacturing remains constrained in most markets.
Value-Add Opportunities in Adaptation
Many older industrial properties can be adapted to meet the needs of today’s small manufacturers through targeted improvements. Modernized power infrastructure, enhanced HVAC systems for climate control, improved loading capabilities, and technology infrastructure upgrades can transform dated industrial spaces into ideal environments for specialized manufacturing operations.
Location Premiums Near Manufacturing Hubs
Small-bay industrial properties located near major manufacturing operations or within established industrial clusters typically command rent premiums and experience lower vacancy rates. The ecosystem advantages of proximity drive consistent demand from small manufacturers seeking to integrate into regional supply chains.
Tenant Stability and Growth Potential
Small manufacturing tenants often demonstrate remarkable stability compared to other industrial users. Their specialized equipment, established workflow patterns, and local workforce connections create significant friction to relocation. Additionally, successful small manufacturers frequently expand their space needs over time as their businesses grow, creating built-in growth potential for property owners.
The PIR Approach: Serving the Hidden Champions
At Phoenix Industrial Redevelopment, our investment strategy is specifically designed to serve the needs of these vital small manufacturers. Our approach includes:
Strategic Property Selection
We target industrial properties in the 20,000 to 100,000 square foot range with individual spaces from 1,000 to 5,000 square feet—ideal configurations for small manufacturing operations. We focus on locations with strong industrial ecosystems, transportation access, and workforce availability.
Manufacturing-Optimized Improvements
When we acquire properties, we implement targeted improvements designed to meet the specific needs of small manufacturers:
- Enhanced electrical infrastructure to support equipment loads
- Upgraded HVAC systems for climate-controlled processes
- Improved loading capabilities for material handling
- Flexible space configurations to accommodate growth
Long-Term Partnership Approach
We view our relationship with small manufacturing tenants as long-term partnerships rather than transactional landlord-tenant arrangements. This approach includes:
- Understanding each tenant’s business and space requirements
- Accommodating growth needs through flexible lease structures
- Providing suitable expansion options within our portfolio when possible
- Maintaining regular communication to anticipate changing needs
Cross-Pollination Opportunities
Our multi-tenant industrial parks create natural environments for cross-pollination among complementary businesses. We’ve observed numerous instances of tenants forming business relationships, sharing technical knowledge, and even collaborating on projects—creating added value beyond the physical space itself.
Investment Vehicles for Exposure to Small Manufacturing
For investors seeking exposure to the small manufacturing segment without the complexities of direct property ownership, PIR offers two strategic investment programs:
The FixedFunds Program®
Our FixedFunds Program® provides accredited investors with fixed 8.0% returns through either monthly income payments or compounded growth. This program is backed by our portfolio of small-bay industrial properties occupied by the hidden champions of American manufacturing. The minimum investment is $50,000, with stepped-up interest rates available for larger investments:
- Tier 1 ($50,000 to $499,999): 8.00%
- Tier 2 ($500,000 to $999,999): 8.25%
- Tier 3 ($1,000,000+): 8.50%
The 1031Funds Program®
For investors with existing real estate holdings seeking a tax-advantaged approach to industrial investment, our 1031Funds Program® offers Delaware Statutory Trust interests qualifying as replacement property for 1031 exchanges. This program features:
- 5.0% annual preferred return paid monthly
- 50% participation in property appreciation upon sale
- Minimum investment of $500,000
- Professional management through our affiliate Grid Property Management
- Quarterly closing schedule for reliable 1031 exchange planning
Conclusion: Recognizing Manufacturing’s Unsung Heroes
As the reindustrialization of America continues to gain momentum, the small manufacturers that form the backbone of our industrial ecosystem deserve greater recognition for their essential contributions. These hidden champions create not just economic value through employment and production, but also strengthen the fabric of American manufacturing through their specialized expertise, flexibility, and resilience.
For investors, the small-bay industrial properties that house these vital businesses represent a compelling opportunity to participate in the manufacturing renaissance while benefiting from stable occupancy, reliable rental income, and appreciation potential. Through PIR’s investment programs, accredited investors can gain exposure to this dynamic sector without the complexities of direct property ownership.
The headlines may continue to focus on major manufacturing announcements, but the true strength of American industry lies in the thousands of small, specialized operations quietly creating extraordinary value in modest spaces across the country. By understanding and serving the needs of these hidden champions, Phoenix Industrial Redevelopment creates value for both these essential businesses and our investment partners.
To learn more about investment opportunities in small-bay industrial properties serving America’s manufacturing renaissance, contact our investment team today.
