Industrial development is a bright spot in a challenging commercial real estate market, with a fairly stable balance of supply and demand. That doesn’t mean, though, that there aren’t challenges for potential tenants.

That includes manufacturers whose space needs vary based on customer demand.

One Portland-area developer is investing in a solution.

Schnitzer Properties is the owner of the Sherwood Commerce Center, a flex industrial development that can adapt to a tenant’s changing needs.

“We help supply space for a variety of businesses that have a diversity of employment and higher employment than big box companies,” Schnitzer Properties CEO Jordan Schnitzer said.

Gaylord Marine is one of them. The company makes galley ventilation systems for the U.S. Navy and cruise line customers.

Founded in 2000, Gaylord, which has about seven workers in its warehouse at any given time, was operating out of a 4,000-square-foot warehouse in another part of Sherwood and was looking to relocate.

However, president Todd Gaylord said the smallest warehouse size they could find was 10,000 square feet, until they found the Sherwood Commerce Center.

Gaylord Marine moved into a 7,800-square-foot space at the center last May.

Studson, Inc., a maker of safety helmets, is moving into a 41,600-square-foot space at the Sherwood Commerce Center in this month. It’s the third space the company has leased in three years after growing more than 300% in 2024.

CEO Ryan Barnes said the Sherwood Commerce Center allows the company to house operations under one roof with the option of expanding the leased space as needed to accommodate for growth. Around 20 people will be working out of the Sherwood space in either the office or warehouse.

“There just isn’t a lot of great distribution space with office or operational space,” Barnes said. “To be able to go into a brand-new shell and get the amount of space we need rather than be pushed or pulled into space that’s already existing is nothing that we’ve seen so far.”

The Sherwood Commerce Center is being constructed in three phases. Phase one, which consists of 445,000 square feet across three buildings, was completed in May. It's leased at about 50%.

Each building was constructed as one large room and individual tenant spaces are created as leases are signed. The buildings can be divided into spaces between 7,800 square feet and 100,000 square feet.

In addition to Gaylord Marine, current tenants include Olympus Controls, a robotics and machine automation company, occupying about 68,000 square feet of space, and FleetPride, a distributor of parts and services for heavy duty trucks and trailers, with 13,000 square feet.

The second and third phases of construction expect to break ground in the spring. Four buildings will be constructed bringing a total of 549,600 additional square feet of leasable industrial space. Those buildings can be divided into tenant spaces between 7,800 square feet and 193,000 square feet.

There isn’t a lot of competition with flex industrial space, mostly due to challenges with financing these types of projects.

Schnitzer said industrial buildings are typically constructed and financed with a specific tenant already in mind. Flex industrial on the other hand is speculative with not much pre-leasing before the building has completed construction.

Flex space is also more management intensive as leases are typically shorter to allow the tenant to evaluate the size of their leased space.

“It’s hard to borrow money for speculative flex investments,” Schnitzer said.

However, Schnitzer remains bullish on the economy for flex industrial tenants and anticipates future acquisitions and development.