A 64,103-square-foot industrial building at 161 Starlite Street in South San Francisco has changed hands for $16.05 million, and its new owner has plans to slice it into more than 85 tiny flexible warehouse units aimed at small businesses. The buyer, WareSpace, says the property marks its first foothold in the Bay Area, betting that local entrepreneurs are starved for small, move-in-ready industrial space.
According to a press release from WareSpace, the company purchased 161 Starlite Street for $16.05 million and intends to convert the site into more than 85 flexible units, most ranging from roughly 200 to 2,000 square feet. As reported by Bisnow, WareSpace plans to renovate the 1965-built, single-story property into 86 move-in-ready microbay flex spaces, transforming what is currently a traditional warehouse into dozens of separately leasable suites.
WareSpace co-founder and CEO Joseph Ely told Bisnow the company sees a familiar pattern playing out in the Bay Area. “The Bay Area has a great small-business presence, but like a lot of other major cities, it has had a dwindling supply of small spaces,” Ely said, according to the outlet's report. Ely added that a search on LoopNet turned up only two available South San Francisco industrial spaces of 2,000 square feet or smaller, telling Bisnow, “The LoopNet search tells the whole story. There are no options for [small] businesses.”
Small-Bay Supply Keeps Shrinking
The scarcity Ely described lines up with the numbers. Small-bay industrial inventory in the area has declined by approximately 5% over the past five years, with no new small-bay supply currently under construction, per the same WareSpace release. Bisnow's reporting adds further context, noting that Peninsula industrial vacancy stood at 5.6% in the second quarter and that South San Francisco alone accounts for nearly half of the Peninsula's 35.1 million square feet of industrial space.
Separate market data reinforces the tight conditions facing small tenants. The Peninsula industrial direct vacancy rate was 7.3% in the second quarter of 2026, down from 7.8% a year earlier, according to a market report from Kidder. Total availability, which includes sublease space, actually rose to 10.1%, up 110 basis points year over year, the same report found. No new speculative or build-to-suit industrial projects were reported under construction in the Peninsula during the quarter, Kidder's data shows.
What Tenants Would Get
WareSpace markets the South San Francisco location on its website with an advertised Summer 2027 opening window, six- to 12-month lease terms, and all-inclusive pricing starting at $1,000 per month. The company's listing for the address at 161 Starlite St., South San Francisco, CA 94080 says the package covers loading docks, private units, utilities and on-site support, with no additional NNN or CAM fees layered on top.
Bisnow's report describes the underlying business model similarly, saying WareSpace bundles shared racking, loading docks, utilities, Wi-Fi, security, trash and cleaning into a flat monthly bill, and that tenants can shrink or grow their footprint at any time. The outlet reports the model is meant to serve small contractors, service firms, distributors, e-commerce companies and other small enterprises — the same category of tenant Ely says has been squeezed out of the market.
Timeline Still Depends on Permits
Bisnow reports that WareSpace will let the project go to bid only after building plans are approved and permits are secured, and that the company plans to gut the warehouse space once its existing four tenants move out. The existing building already includes restrooms, office space, loading docks and drive-in docks, according to the outlet, and WareSpace expects to spend a few million dollars more on renovation and subdivision work.
The project is expected to come online in the second quarter of 2027, per Bisnow's reporting, though the outlet notes that target could shift. Ely told Bisnow that permitting delays are a real risk right now, saying, “Building departments are inundated with plans and permits right now.” WareSpace's own marketing for the site separately advertises a Summer 2027 opening window; the exact date has not been independently confirmed.
WareSpace's entry into the Bay Area comes as the company expands nationally. The South San Francisco purchase, along with other recent acquisitions, brings the company to 34 facilities totaling more than 3.2 million square feet nationwide, according to the WareSpace release. Bisnow reports the company has already established its flex industrial model in Austin, Atlanta, Houston, Seattle and Chicago.
How South San Francisco Compares
The submarket WareSpace is entering has been active in its own right. South San Francisco led all Peninsula submarkets with 131,629 square feet of quarterly leasing activity in the second quarter, according to Kidder's report, and industrial asking rents there averaged $1.74 per square foot, below the Peninsula-wide average of $1.98 per square foot per month. The largest lease of the quarter anywhere on the Peninsula was signed where ZipLine took 24,194 square feet at 576 Eccles Avenue, per the same report.
The Starlite Street building itself has hosted larger tenants before. USAir Conditioning Distributors and Hoyt Shepston together leased a combined 46,000 square feet at 161 Starlite St. under separate five-year terms of 27,000 and 19,000 square feet, according to a report from CoStar. WareSpace's plan would replace that kind of large-footprint leasing with dozens of much smaller, flexible suites instead.
Micro warehouse space offers flexible warehouse units, and WorkBay advertises similar private industrial units. Whether South San Francisco's small businesses will fill WareSpace's version of that niche as quickly may depend on how fast the permitting process moves.
