Two studies wear the same name
The owner-user study is underwritten on the operating company. Its demand section is the company's own order book, customer base and growth plan, and its DSCR test is whether the company's cash flow, after rent to the entity that owns the building, covers the debt service at the lender's floor. The building matters as collateral and as a fit for the operation: clear height, dock count, power, truck access and the share of space the company will actually occupy. SBA finances only this kind of project: under 13 CFR 120.131 the borrower must occupy at least 51 percent of an existing building or 60 percent of a new one, and passive investment in real estate is not an eligible use of SBA funds.
The investor study is underwritten on the market. Its demand section is net absorption by size band, the tenants active in the submarket and the rent evidence for comparable space, and its coverage test is lease-up: how many months to stabilized occupancy, at what rent, with what concessions, against a construction loan that converts to permanent debt. Banks finance this kind of project with pre-leasing conditions and recourse. USDA Business and Industry can guarantee it too, in a rural area, because 7 CFR 5001.105(b)(12) lists the construction of facilities for lease to industrial businesses as an eligible use. SBA cannot.
The most common fault in an industrial file is a study written for the wrong reader. A lender underwriting a distributor's 504 loan does not need a tenant-demand forecast, and a bank underwriting a speculative small-bay park gets nothing from an operating company's business plan. So the first decision is who will occupy the building. That decision picks the program, and the program sets the tests.
| Who occupies | Program | What the study has to prove |
|---|---|---|
| The borrower's own business, 51 percent or more of an existing building, 60 percent of a new one | SBA 504 or 7(a) | Occupancy at closing, the equity tier, DSCR from the operating company's cash flow, the job standard, the environmental screen |
| The borrower's business, in a rural area, or third-party tenants in a rural area | USDA B&I | Rural eligibility, the eligible use, equity on the balance sheet, repayment from operations or leases, and, above $1 million for a new business, an independent feasibility study the Agency accepts |
| Third-party tenants in any market | Bank construction loan | Absorption, rent, lease-up, pre-leasing, loan-to-cost within supervisory limits, debt yield at stabilization |
Where to go from here
This page is the hub for MMCG's industrial work. Each property type and program has its own page, written to the questions that come up in that kind of file.
- Warehouse and distribution center feasibility study: build-to-suit, speculative and owner-user warehouses, with the small-bay and big-box split that drives the 2026 market.
- SBA warehouse feasibility study: the 7(a) and 504 rules for an owner-occupied warehouse, distribution or light industrial building under SOP 50 10 8.1, with a worked capital stack.
- Flex space and small-bay industrial feasibility study: office-warehouse, contractor bays, multi-tenant small-bay parks and industrial condominiums.
- Cold storage feasibility study: refrigerated warehouses and food processing under USDA B&I, SBA 504 at the special-purpose equity tier, and bank financing.
- Manufacturing facility feasibility study: plant construction, acquisition and expansion, with the 504 provisions written for small manufacturers.
- Industrial outdoor storage feasibility study: truck terminals, contractor yards and trailer parking.
Data centers and self-storage are covered on their own pages, since neither is underwritten as industrial space. The SBA feasibility study and USDA feasibility study pages cover the programs across every asset class, and MMCG's Feasibility Index reports SBA loss rates by program and industry.
The market the study is written into
The 2026 industrial market is two markets divided by size. In the bulk distribution segment, buildings of 200,000 square feet and more, vacancy varies widely with size and quality, and Class A buildings of a million square feet or more stand at 5.8 percent on JLL's count.
Below 100,000 square feet the picture is different. Cushman and Wakefield puts shallow-bay vacancy at 4.8 percent in the second quarter of 2026, the lowest of any size segment, against 6.9 percent for the national market and 8.1 percent for buildings over 500,000 square feet. CBRE's March 2026 brief on the segment reports that more than 80 percent of shallow-bay stock in major markets was built before 2000 and that buildings completed since 2010 make up only 5 percent of inventory. Demand in that segment comes from service businesses, trades, last-mile distribution and regional suppliers, which is to say the owner-user borrowers that SBA finances.
Manufacturing is at a turn. Census Bureau data put manufacturing construction spending at $170.7 billion at an annual rate in August 2026, down 19.2 percent from a year earlier as the megaproject cycle fades, while CBRE reports that manufacturers accounted for more than 12 percent of industrial leasing in the first half of the year. Cold storage carries surplus capacity at the top of the market: USDA counts 3.99 billion cubic feet of refrigerated space as of October 2025, private and semi-private capacity has nearly doubled since 2017, and Lineage's same-warehouse physical occupancy stood at 75.8 percent in the second quarter of 2026.
What ties these segments together in 2026 is cost rather than demand. In most markets the rent a new building needs to earn a development yield 150 basis points over the exit cap rate sits above market asking rent. Smaller buildings cost more per square foot than big boxes and carry more office finish, so the gap is not smaller for an owner-user building; what changes is that the operating company, not a tenant, decides whether the rent can be paid. That is why the owner-user study spends its effort on the business and the investor study spends its effort on the submarket.
The programs, side by side
| SBA 7(a) | SBA 504 | USDA B&I | Bank construction | |
|---|---|---|---|---|
| Fits | Owner-user acquisition, smaller construction, projects with working capital, equipment and fees in the loan | Owner-user construction and larger acquisitions where real estate dominates; heavy equipment | Rural businesses and rural facilities built for lease; cold chain and food aggregation under 5001.105(b)(15) | Speculative and build-to-suit development; owner-user projects outside SBA size or occupancy rules |
| Maximum | $5 million; $10 million combined with 504 since July 4, 2026 | $5 million debenture, $5.5 million for small manufacturers and energy projects; 40 percent of project cost | $25 million per borrower, $40 million for value-added agricultural cooperatives | Supervisory loan-to-value limits of 80 percent for construction and 85 percent for improved property |
| Borrower equity | 10 percent for a startup or change of ownership; lender policy otherwise | 10 percent standard, 15 percent for a business of two years or less or a special-purpose building, 20 percent for both | 10 percent balance-sheet equity for an existing business, 20 percent for a new one | Typically 20 to 45 percent of cost depending on pre-leasing and sponsor |
| Occupancy | 51 percent existing, 60 percent new construction | Same | None; lease buildings eligible | None |
| Term | Up to 25 years for real estate plus construction | 25 years real estate, 10 years equipment | Up to 40 years for real estate | Construction period, then permanent or sale |
| Feasibility study | SBA may require one under 13 CFR 120.160(b); the lender decides | Same; the CDC or lender decides | Required above $1 million to a new business, 7 CFR 5001.306(a)(3)(i) | Lender policy; routine for speculative projects |
| FY2027 fees | 0.55 percent annual; upfront 2 to 3.75 percent; no upfront fee on loans of $700,000 or less to manufacturers, food supply chain and rural businesses | 0.50 percent upfront, 0.203 percent annual; both waived for manufacturers, food supply chain and rural businesses | FY2026 terms: 3.0 percent upfront, 0.55 percent annual, 85 percent guarantee under $5 million and 80 percent above; FY2027 notice not yet published | Origination and commitment fees per lender |
SOP 50 10 8.1 governs every SBA loan that receives a loan number on or after October 1, 2026; its main changes concern the purchase of an existing business, and it does not add or remove any feasibility study requirement for real estate. The occupancy rules, equity tiers, job standard, fiscal 2027 fees and combined limits for an owner-occupied industrial building are set out on the SBA warehouse page listed above, and the programs across asset classes on the SBA 504 feasibility study and SBA 7(a) feasibility study pages.
On the USDA side the news is less settled. The fiscal 2026 B&I terms in the Federal Register notice of March 9, 2026 expired on September 30, no fiscal 2027 notice had been published as of October 2026, and the Administration's fiscal 2027 budget proposes to end the program. Lenders with B&I projects in hand have reason to obligate them early, and the study is written to the fiscal 2026 terms with that stated.
What the industrial study contains
For a new owner-user building the study establishes the business: what it sells, to whom, with what history and what backlog, and why the current premises no longer serve. It programs the building from the operation, tests the site against the zoning use table and dimensional standards, confirms utilities and the lead time for power, screens the environmental history of the site and of adjoining uses against the industries SBA lists as environmentally sensitive, and builds the cost table from hard cost, site work, soft cost and land. It then sets the capital stack at the applicable equity tier, projects the operating company's cash flow through occupancy of the new building, states the rent the operating company will pay to the real estate entity, and reports DSCR at each year with sensitivities to sales, margin and interest rate. Where part of the building will be leased to third parties, it tests that space against submarket rent and absorption and treats the income conservatively.
For an acquisition the study adds the building: age, condition, functional fit, deferred maintenance, the existing rent roll and lease expirations where there are tenants, and the price against replacement cost and comparable sales. Where the business is being bought with the building the study follows Appendix 15 of the SOP, normalizes the trailing income and tests whether the historical coverage floor survives the normalization.
For a speculative or build-to-suit project the study defines the market area, measures inventory, vacancy, absorption and rent by size band, identifies the tenants active in the submarket and the space they take, inventories competitive supply under construction and planned with delivery dates, projects lease-up by month, builds the cost table and the development yield, and reports the rent the project needs against the rent the market pays. It states DSCR at stabilization and the debt yield the permanent lender will see.
In every file the study follows MMCG's methodology, documents the program tests that apply, states its conclusion as feasible, feasible with conditions, or not feasible, and expresses each condition in the lender's terms: a price, a rent, an equity amount, a pre-leasing threshold, a phase.
The client receives the report in PDF, formatted for the SBA, USDA or conventional loan package; the working Excel model, with inputs the client and lender can change; executive summary slides for partners and credit committees; and recommendations on design, sizing and site suitability.
Market and credit evidence comes from CoStar, CBRE and JLL industrial market reports, Moody's Analytics, ESRI ArcGIS Business Analyst, the Bureau of Labor Statistics, Dun and Bradstreet and RMA Annual Statement Studies, and each figure in the study names its source.
The numbers lenders test
Industrial leases are triple net, so the operating statement is short and the capital questions are long. The study reports the following in every file where they apply.
DSCR is tested at the lender's floor, typically 1.20 to 1.25 times for an owner-user loan measured on the operating company's cash flow after rent, and 1.25 to 1.35 times at stabilization for a speculative project. SBA's Appendix 15 sets 1.25 times historical DSCR for an initial acquisition and 1.15 times for a business expansion. Loan-to-cost and loan-to-value are reported against the OCC's supervisory limits of 80 percent for construction and 85 percent for improved property, and against the tighter figures banks apply to speculative industrial projects. Debt yield at stabilization, net operating income over the loan, is the figure that decides whether the construction loan can be taken out.
Development yield is the study's central ratio for a new building: stabilized net operating income over all-in cost, where all-in cost is hard cost plus soft cost, site work and land. The required rent follows from it. A building that needs a 7.5 percent yield on an all-in cost of $120 per square foot must earn about $9.00 per square foot net before vacancy and reserves, and about $10.10 after the 11 percent allowance for vacancy, credit loss and non-recoverable expense that MMCG applies to speculative space, whatever the market pays. The gap between that figure and the submarket's asking rent is the first number in the determination.
Break-even occupancy is reported for multi-tenant buildings, and sensitivity tables cover rent, absorption, construction cost, interest rate and, for owner-user files, the operating company's sales and margin.
Published construction costs for 2026 vary widely by building type, and the study prices each project from local evidence rather than from a national average. As a guide to scale, contractor and design-build quotes published this year put a pre-engineered metal shell for dry storage at $45 to $75 per square foot of hard cost, a conventional small-bay shell of 25,000 to 50,000 square feet at $60 to $110, flex and light industrial space with office finish at $60 to $100, light assembly at $100 to $150, general manufacturing at $150 to $250, chilled cold storage at $125 to $210 and frozen storage at $175 to $285, in each case before site work, soft cost and land. Rider Levett Bucknall's second-quarter 2026 index reports escalation settling near 1 percent per quarter. Those ranges come from vendors, and the study says so where it uses them.
Property types we analyze
Warehouse and distribution buildings of every size, from a 20,000 square foot owner-user building to a regional bulk facility. Flex, office-warehouse, contractor bays, multi-tenant small-bay parks and industrial condominiums. Cold storage and refrigerated warehouses, food processing plants and packing houses. Light and general manufacturing, assembly and fabrication plants. Industrial outdoor storage, truck terminals and trailer parking. Industrial parks and business parks, where the study covers the park's absorption schedule and lot pricing as well as the first building. Each has its own page above.
Scope, turnaround and fees
An MMCG industrial feasibility study is delivered in 9 to 16 business days from engagement and receipt of the project file, with rush delivery from 5 business days. Fees begin at $4,900 for a single-site owner-user warehouse or flex study. Cold storage, food processing, manufacturing projects with process equipment and USDA B&I studies, which carry more scenarios and the independence documentation the Agency expects, are quoted on scope. Payment is 50 percent at engagement and 50 percent at delivery. MMCG accepts no referral fees, contingent fees or financing arrangements, and revisions required by the lender, CDC or Agency are made at no additional cost under MMCG's contractual acceptance commitment.
Case studies
Five model studies on real, publicly listed properties, each built from public data only and each ending in a determination with conditions.
- Industrial Case Study 1: SBA 504 acquisition of a 36,533 square foot multi-tenant warehouse in Fort Wayne, Indiana. Not feasible at the $4.0 million ask; feasible as restructured at $3.6 million, 20 percent equity and an operating-company rent of $11.50.
- Industrial Case Study 2: USDA B&I acquisition of a 1,302-pallet cold storage plant at the Cordele inland port, Georgia. Not feasible at the ask with 20 percent equity; feasible as restructured with an anchor contract, 25 percent equity and a 30-year amortization.
- Industrial Case Study 3: SBA 504 new metal fabrication plant on a 14-acre site in Spartanburg County, South Carolina. Not feasible as a 50,000 square foot plant under the state's 10.5 percent manufacturing assessment; feasible as a 40,000 square foot first phase with a fee-in-lieu agreement and 15 percent equity.
- Industrial Case Study 4: SBA 504 purchase of a 16-unit flex park in Oklahoma City by the contractor that will occupy half of it. Not feasible as proposed; feasible as restructured with the contractor in 51 percent at market flex rent and 15 percent equity.
- Industrial Case Study 5: SBA 504 purchase of a 4.82-acre truck terminal in Macon, Georgia by a regional carrier. Feasible with conditions on the conditional use permit, the Phase I and the paving scope, with the 7(a) and conventional alternatives compared.
Frequently asked questions
What is an industrial feasibility study, and how does it differ from a market report, an appraisal or a business plan?
A project-specific analysis of whether a particular warehouse, flex, cold storage, manufacturing or yard project will earn enough, from tenants or from its own operation, to repay its cost and meet the lender's underwriting tests. A broker's market report tracks vacancy and rent across a metro; the study applies them to one project. An appraisal states current market value; the study tests forward-looking viability and debt service. A business plan is the borrower's own strategy; the study is the independent, lender-facing test of its projections.
Does SBA require a feasibility study for a warehouse or industrial loan?
SBA may require one under 13 CFR 120.160(b), and SOP 50 10 8.1 leaves the decision to the lender or CDC; the SBA feasibility study page sets out the rule. For industrial property, lenders request a study for new construction, for a startup or newly formed operating company, for a large expansion and for any building with special-purpose features, because those are the files where the credit depends on projections rather than history.
Does USDA require one?
For a Business and Industry guaranteed loan of more than $1 million to a new business, yes: 7 CFR 5001.306(a)(3)(i) requires a feasibility study prepared by an independent qualified consultant acceptable to the Agency, with the scope set by the Agency. Below $1 million the Agency may require one where the application does not establish technical feasibility or economic viability.
Can an SBA loan finance a warehouse I plan to lease out?
Not as an investment. The borrower's operating business must occupy at least 51 percent of an existing building, or 60 percent of a new building at completion with the remainder brought into occupancy within ten years. The usual structure is an eligible passive company that owns the building and leases it to the operating company, which guarantees the loan. Up to 49 percent of an existing building, or 20 percent of a new one permanently, may be leased to others.
What is the difference between an owner-user study and a market study?
The owner-user study proves that a specific business can carry a specific building; its demand evidence is the business. The market study proves that a submarket can absorb space at a rent; its demand evidence is the market. Lenders need the one that matches the borrower, and a file that mixes them answers neither question.
How much does an industrial feasibility study cost?
MMCG's fees begin at $4,900 for a single-site owner-user warehouse or flex study. Cold storage, food processing, manufacturing with process equipment and USDA B&I studies are quoted on scope, since they carry more scenarios.
How long does it take?
Standard delivery is 9 to 16 business days from engagement and receipt of the project file, with rush delivery from 5 business days.
What equity does an industrial borrower need under SBA 504?
Ten percent for an established business buying or building a general-purpose building, 15 percent where the business has operated for two years or less or the building is limited or single purpose, and 20 percent where both apply. A general-purpose warehouse, flex or manufacturing building is usually in the 10 percent tier; cold storage with more than half its area refrigerated is commonly treated as special purpose.
Which industrial uses trigger a Phase I environmental site assessment under SBA rules?
SBA's list of environmentally sensitive industries includes most manufacturing subsectors, with an exception for assembly-only operations, as well as trucking with service bays or fuel tanks, metal and chemical wholesaling and dry cleaning. Warehousing and storage, NAICS 493, is not on the list, but the test applies to prior uses of the site as well as the borrower's own, so the history of an older building decides the question more often than the borrower's industry code.
Do you cover industrial projects in my state?
Yes. MMCG prepares industrial studies nationally, and state-level market and program notes are on the state feasibility study pages.
About MMCG Invest
MMCG Invest, LLC prepares lender-facing feasibility studies for SBA 7(a) and 504, USDA Business and Industry and conventional financing across the United States. Studies are signed by the firm and prepared under the direction of Michal Mohelsky, J.D., Practicing Affiliate of the Appraisal Institute. MMCG Invest, LLC, 27 Maiden Ln, Suite 625, San Francisco, CA 94108.
Where we work
The same study, prepared to the lender requirements of the state the project sits in.
