Private Capital Flowing Into California's Industrial Small Infill Sector
The amount of private capital in industrial real estate, particularly in the sub-$25 million and urban infill space, is spiking, especially in California, according to a report from JLL.
Private bidding volume is up 19% year-over-year, climbing to $36.2 billion through August 2026, compared to $30.4 billion during the same period last year.
In California, it accounted for 42.9% of industrial investment volume in H1 2026.
While institutional buyers remain highly active, they are largely concentrating their capital on $75M+ bulk assets and portfolio deals, according to the report.
This has left a clear path for private capital to drive the smaller infill market, where they are capturing strong yields, low vacancy/capex and faster lease-up times.
Small bay industrial has rapidly risen to become a preferred industrial sub-asset type for both institutional and private capital investors, Erik Hanson, senior director of JLL Capital Markets, told GlobeSt.com.
"There are several factors that have led to this dynamic, including sticky tenancy, balanced lease rollover, limited capex, and a strong yield profile compared to traditional long-term core real estate," Hanson said.
"Most importantly for California, there are extreme barriers to entry limiting the development of new small bay product, which makes existing product rare and attractive."
Private and high net worth investors accounted for 46.3% of all U.S. industrial transaction volume in the first half of 2026.
In the shallow bay space specifically, private buyers hold a 64.1% market share through H1 2026, which is more than triple the institutional share of 20.6%.
Source: GlobeSt/ALM