On Chicago’s South Side, a once-vacant expanse is now the site of speculative opportunity. Ryan Companies’ Pullman Crossings is bringing 330,000 square feet of new industrial space to market in 2025. It’s a bold play in a year when many developers have shelved speculative construction.
“Smaller and mid-size products will be the focus of developers and tenants,” said Kyle Schott, vice president of real estate development at Ryan Companies. “We have seen a shift from large suburban greenfield development to smaller in-fill projects to accommodate tenants looking for an upgrade within their current urban markets while large scale distribution recalibrates their needs.”
That pivot is reshaping industrial development across greater Chicago. With large-block leasing thin, inflation cooling and tariffs casting a long shadow, momentum has shifted to well-located, mid-sized product. The second half of 2025 may not bring a full rebound, but it’s shaping up to be more active than the first.
“Activity on renewal leasing has been strong, as businesses value maintaining their strategic locations, supply chain networks and established employee bases,” said Adam Moore, senior regional director and market leader for First Industrial Realty Trust. “Leasing decision-making from companies considering new supply chain investments for growth continues to be measured. Further clarity on tariffs and the direction of the economy is important to the demand side of the equation.”
Large block requirements above 1 million square feet remain rare. Instead, deals are materializing in tighter size bands, where users are focused on quality.
“Deals are still getting done for the best sites, but overall decision making has slowed while investors and tenants work through uncertainties in the market,” Schott said.
With elevated vacancy in the 500,000-square-foot-and-up range, most developers have paused large-scale spec. What’s emerging instead is targeted new product in undersupplied categories: sub-200,000-square-foot buildings, infill locations and best-in-class space.
“We expect new speculative construction to remain disciplined and are hopeful for increasing velocity in tenant demand for incremental space,” Moore said. “There’s noticeably less new space coming to market and many leasing decisions were deferred in the first half. This creates the potential for a release of pent-up demand as the year progresses.”
First Industrial’s First Park 94 in Kenosha is one of the few sites positioned to catch that release. With infrastructure in place and pads rough graded, the park offers faster build-to-suit delivery timelines than a traditional ground-up start. A recently completed 120,000-square-foot move-in-ready facility is already drawing interest from prospective tenants.
Pullman Crossings is another example. Its third phase, delivered in April, added 170,000 square feet of speculative space. The final 160,000-square-foot building is slated to complete in September.
“Whereas last mile gained all the attention during Covid, it appears that tenants no longer have limitless funds to be immediately next to their customers,” said John Basile, executive vice president at NAI Hiffman. “There is now a more balanced approach, and while last mile still plays a critical role, it needs to pencil out financially. My Amazon Prime next-day delivery often seems to come next-next day, but somehow we survive.”
Cold storage is another segment drawing attention in 2025. While speculative development remains rare overall, Chill Development’s Plainfield project and Karis Cold’s facility at 3815 S. Ashland are testing investor appetite in a niche where demand is expected, but not guaranteed, to outperform.
Construction timelines have stabilized, and capital is available for projects with strong fundamentals. Still, developers are watching the macro picture closely as they evaluate the next wave of speculative starts.
“Interest rates appear to have peaked, and come down 100 basis points in the last 12 months, and inflation has stabilized,” Basile said. “Banks are eager to lend money, especially for owner-occupied projects.”
“For more standard deals, the availability and cost of debt, along with the outlook for renewed rent growth, are critical considerations,” Moore said.
Submarket performance continues to vary by product type and investor goals. Institutional interest remains strong in infill corridors like O’Hare, I-55 and Central DuPage.
“Submarkets like Northwest Indiana and Southeast Wisconsin have been attracting increased investment,” noted Josh Bauer, vice president and investment officer with Prologis. “Some developers are focusing on next frontier submarkets, like Plainfield, while others are working to monetize their land positions in submarkets like I-80.”
“We remain highly confident in the long-term strength of the Chicago market,” said Bauer. “With a portfolio that covers both infill and emerging areas, our local team’s deep market knowledge positions us well to identify new development opportunities and support our customers in finding or building facilities tailored to their specific needs.”
But within city limits, local policy may influence future investment decisions. One emerging factor is the Hazel Johnson Cumulative Impact Ordinance, which would require industrial developers to assess how new projects may contribute to cumulative pollution in surrounding communities.
“(It) could have an impact on future and existing industrial development within the city limits,” Schott said.
Even as development remains measured, absorption is trending positive. Many in the market, expect deferred leasing activity to convert to signed deals in the second half of the year.
“We are very bullish on the Chicago market,” said Bauer, sharing that the Prologis portfolio spans infill and frontier locations. “Our team here knows the markets extremely well, which gives us an advantage discovering a new piece of land to develop or help a customer find or build the perfect building to meet their needs.”
This is no longer a volume game—it’s a timing game. Developers who focus on execution-ready sites, align with evolving tenant needs and stay nimble in response to policy and capital shifts will lead the market through the second half of 2025.
