Missner Group CEO Says Formula Has Changed For Chicago Spec Development

The Missner Group CEO Barry Missner is used to speculative development in Chicago following a straightforward formula. 

In frothy markets, developers didn’t need to check every box to line up equity. In steadier times, if the math penciled on rents, land and comps, the capital followed.

But today, even projects that check all the boxes aren't a lock to land investors. 

“There aren't any guarantees today,” Missner said. “The equity has to get past whatever fear point there is to come back in.”

The shift has put developers like The Missner Group, which focuses primarily on industrial, at the center of the market’s new reality of looser debt financing but institutional equity pulling back. That leaves spec builders navigating higher rates, slower lease-ups and uncertainty around tariffs while trying to get projects off the ground.

Of the 33.1M SF of industrial space delivered in Chicago in 2023, only 61% had been leased through June, Colliers Director of Industrial Research Diana Perez told Bisnow last month.

Just 32% of the industrial properties that came online in 2024 have found tenants, she said. The vacancy rate on recent spec development is more than 15.2%, which accounts for most of the market’s overall vacancy. 

As a predominantly speculative developer, The Missner Group is grappling with the same headwinds facing much of the sector, like rising interest rates, shifting valuations and institutional investors pulling back. Tariffs and broader uncertainty are also dragging out lease negotiations, making it harder to capitalize new projects, Missner said.

“Capital investment likes to have some certainty, especially if you're building an empty building,” he said. “You're making a bet, so to say, on the fact that the building is going to get built, the developers can do their job, the market’s going to take care of itself and you're going to lease it up.” 

The Missner Group has been a staple in the Midwestern CRE landscape for eight decades, completing over $3B in projects across over 750 developments. The company expanded its construction focus to include full-scale real estate development roughly 50 years ago and has projects across a variety of sectors, including industrial, multifamily and office. 

Missner said financing through debt is more readily available today for developers building on a speculative basis than it was a year ago, with leverage and terms similar to before capital markets tightened. The bigger challenge now, he added, is on the equity side, which has become far harder to secure over the past year.

“The capital market shifts were going on and causing pain in our ability to develop well before the tariffs became an issue,” Missner said. “You have these layers of challenges.”

The company focuses on infill, multitenant projects in the 25K SF to 200K SF range. The smaller segment of the market has long been underserved as larger institutional developers chase bigger tenants, he said.

But there may be more opportunity in the smaller space, where vacancy is lower than in big-box warehouses in some markets. Now, with investors less willing to take big swings, Missner said deals in the $30M range, once dismissed by some capital sources as too small, are starting to look more appealing.

Speculative developers in the Chicago area may see a boost soon, with leasing trending up. Chicago’s industrial leasing environment performed strongly in the second quarter, in contrast to nationwide, as net absorption turned negative for the first time in over 15 years. 

Occupiers vacated 1.3M SF more than they leased nationwide between April and June, according to a Newmark industrial report. The U.S. vacancy rate rose 30 basis points to 7.4%, its highest point since 2013. 

But in Chicago, tenants signed 10.7M SF of new leases in the period, the highest quarterly total since Q1 2023, according to Colliers' Q2 industrial report. New leasing activity was up 43.5% from the first quarter's total of 7.4M SF.

“We saw an increase both in some activity and some conversion,” Missner said. “Very small sample size, so I don't want to lean too heavily on the overall market, but we've definitely seen some better sentiment.”