Two sectors nobody is fighting over yet

Part one Secondary industrial

The narrative on industrial is that it overbuilt during the pandemic boom and is now digesting excess supply. That's true in the Sunbelt megamarkets. It is not true everywhere.

In the Midwest and select logistics corridors, supply additions have been limited and absorption is running ahead of expectations. Kansas City, Indianapolis, Cincinnati, and Columbus are showing tighter vacancy than their larger counterparts and the capital hasn't fully recognized this yet./

• Industrial outdoor storage (IOS): the sub-sector with pricing power

IOS vacancy hit 2.5% in Q4 2025 less than half the rate of traditional industrial. Rents average $13.14/sq. ft., a 17.9% premium over standard warehouse space, and that gap is widening year-over-year. Restrictive zoning and local opposition are limiting new supply in exactly the markets where demand is growing fastest: logistics corridors, EV infrastructure hubs, and domestic manufacturing clusters.

• Small-bay infill: under the radar and fully leased

Developers are responding to the oversupply story by shrinking project sizes. Small-scale infill near major freight hubs, think last-mile facilities with subdividable floor plates are leasing within months of completion. One recent project near O'Hare hit full occupancy before delivery. These assets are easier to finance, easier to exit, and attracting a class of buyer that can't compete in core markets.

• Reshoring + 3PL demand: the structural tailwind that hasn't peaked

CBRE projects industrial leasing volume will improve in 2026 driven by reshoring of manufacturing and outsourcing of distribution to third-party logistics providers. Secondary markets with proximity to rail, ports, and interstates, and available land, are the direct beneficiaries. Tariff-related supply chain shifts are accelerating this, not reversing it.

Markets to watch — industrial

Part two Net-lease medical office

Medical office is doing something almost nothing else in CRE is doing right now: it's getting more institutional attention at the same time it's getting less media coverage. That asymmetry is worth paying attention to.

The fundamentals are simple. More than 11,000 Baby Boomers turn 65 every day. That cohort visits healthcare providers 2–3x more frequently than younger patients. Medical tenants sign leases that average 7–10 years. They build out their spaces at significant cost, which means they almost never leave. Occupancy across the sector is running in the low-90s nationally and in Sunbelt markets, it's tighter than that.

• NNN medical outperforms traditional office by a wide margin

MOB cap rates in Q1 2026 range from 5.5–8.5% depending on tenant credit and lease term, with the national average for institutional-quality properties around 6.3%. That's 150–200 basis points tighter than traditional office. NNN-leased properties anchored by hospital systems or large physician groups are trading at 6.0–6.5%, and lenders are offering rates 30–50 bps below what they'd charge on a comparable conventional office deal.

• MedTail: the retail-to-medical conversion play

Healthcare providers are moving into vacant retail locations at an accelerating pace. Parking, visibility, and walk-in accessibility make former retail shells ideal for urgent care, primary care, and dialysis facilities. For investors, this creates a value-add conversion opportunity: struggling retail at retail pricing, repositioned at medical office economics. Several well-capitalized buyers are already pursuing this systematically.

• Net lease structure is evolving in the investor's favor

The definition of a prime net lease tenant is widening. Medical clinics and last-mile industrial operators are drawing capital that used to go exclusively to national retailers. Importantly, new deals now increasingly include rent escalation clauses, moving away from the flat-rent structures that made legacy net lease deals vulnerable to inflation. The structure is improving at the same moment demand for the asset class is rising.

Markets to watch — medical office

The positioning logic

Both of these sectors share a structural trait that most CRE plays right now don't: they benefit from constrained supply and demand that doesn't respond to economic cycles the way office or retail does.

Secondary industrial's supply pipeline is tightening because land, power, and development costs are making new projects harder to pencil. Medical office's supply is constrained because construction costs require rents $8+/sq. ft. above market to justify a new build. In both cases, existing inventory gets more valuable while the development math stays difficult.

That setup is rare right now. Most CRE sectors are competing on cap rate compression as capital returns. These two are benefiting from fundamentals that were improving before the capital showed up.

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_{We are not a tax firm. Not licensed CPA's, and we do not represent ourselves as such.}

The most durable CRE positions of this cycle are probably being built right now in the sectors that don't have a narrative yet. Industrial outdoor storage and net-lease medical office don't have a narrative yet. They have data.

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