From where I sit in Southern California managing a mix of retail, industrial, and office — yes, smaller is getting more interesting, but not for the reasons most people think. The big shift I'm seeing is on the operational side: smaller deals under $5M are priced more on local dynamics than on what institutional cap rate compression is doing, so there's more room to find real value. Mixed-use in particular has been solid for me — retail on the ground floor anchored by a service tenant (nail salon, insurance office, tax prep) with residential or office above tends to hold occupancy better through cycles. The caveat is you have to actually want to manage it. Small commercial without a competent operator gets ugly fast — lease structures, CAM reconciliation, tenant defaults all hit differently when you don't have a third-party manager absorbing the complexity. What types of assets are you seeing the most activity in?
From where I sit in Southern California managing a mix of retail, industrial, and office — yes, smaller is getting more interesting, but not for the reasons most people think. The big shift I'm seeing is on the operational side: smaller deals under $5M are priced more on local dynamics than on what institutional cap rate compression is doing, so there's more room to find real value. Mixed-use in particular has been solid for me — retail on the ground floor anchored by a service tenant (nail salon, insurance office, tax prep) with residential or office above tends to hold occupancy better through cycles. The caveat is you have to actually want to manage it. Small commercial without a competent operator gets ugly fast — lease structures, CAM reconciliation, tenant defaults all hit differently when you don't have a third-party manager absorbing the complexity. What types of assets are you seeing the most activity in?
1. If not, then its location/location; is your location and facility a hot property? That will rent out in 3 months.
2. If not, then it is a numbers game. Do you have enough properties to average out and carry one that is empty for a while. Smaller deals, mean it's easier to do more properties to leverage them against vacancies.
I think the answer to your question is more about the quality of both the location and property.
We are seeing the same thing -but it’s not that smaller deals are better, it’s just what’s working right now. The smaller mixed-use / office / retail-resi deals are just easier to manage and easier to make sense of.
And realistically, smaller units are usually easier to rent than larger spaces. There’s just more demand for them, so vacancy risk feels lower.
Great observation @Tracy Thielman, we’re seeing the same shift across our lending pipeline.
Smaller commercial deals are absolutely becoming more attractive for a few key reasons:
First, accessibility. With higher interest rates and tighter lending conditions, many investors are finding it more feasible to enter or stay active in deals with lower overall capital requirements. Smaller mixed-use and retail/residential assets offer a more manageable entry point without overexposing themselves.
Second, risk diversification. Instead of allocating capital into one large asset, investors are spreading risk across multiple smaller properties. This strategy creates more flexibility, especially in uncertain market cycles.
Third, operational control and exit flexibility. Smaller assets tend to be easier to reposition, lease, or sell. You’re not waiting on institutional buyers—you have a much broader pool of potential exits.
And finally, financing agility. Business-purpose lenders (like us) are able to move quickly on these deals, structure around the asset’s income potential, and close without the red tape often associated with larger commercial financing.
That said, larger assets still have their place—especially for experienced operators seeking scale and stabilized cash flow. But in today’s market, smaller commercial deals are offering a compelling balance of opportunity, flexibility, and speed.
Curious to hear—are most investors shifting by strategy, or is this more driven by current lending and market constraints?
