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Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast
Most Chicago landlords and property managers understand residential because they live it every day, leasing season, showings, renewals, maintenance calls, and the occasional headache that ruins your weekend.
Industrial is different.
In this episode, we brought in Bryan Sonn and John Duke Dennis to talk about the part of the Chicagoland real estate market that a lot of investors hear about, but don’t really understand, small and mid-sized industrial, especially in the O’Hare corridor and surrounding suburbs.
We talk about how they went from residential BRRRRs and management to industrial brokerage, industrial management, and eventually becoming owner operators. We also dig into a real deal example, the Mundelein building, what they expected, what actually happened, why the city became “kids in a candy shop” when they finally got inside, and how small changes like adding a drive-in door can materially change leasing velocity and the value of the asset.
If you’ve ever asked, “Is industrial actually easier?” or “How do those leases really work?” or “Why do people keep saying industrial is the backbone of the market?”, this conversation answers it.
Questions We Answer in This Episode
Q: What’s the housing provider tip of the week?
A: In a hot spring leasing market, don’t only negotiate on rent. Negotiate on move-in speed. If your rent is $3,000 and a tenant moves in 15 days early, that’s $1,500 you just picked up. Use early move-in as leverage when comparing offers, but don’t lose sight of tenant quality.
Q: Why did Bryan and Duke shift from residential into industrial?
A: Residential was working, but industrial was the passion and the opportunity. Their industrial business grew organically through owner relationships, then the industrial market created a window where sellers were motivated, liquidity mattered, and they could transition from manager to owner operator.
Q: Where did their industrial footprint start geographically?
A: The O’Hare market. Bensonville is where they really cut their teeth, then they expanded outward, including areas like Gilberts, and other suburban industrial pockets.
Q: What’s the simplest way to understand why industrial management can be “easier” than residential?
A: Monday through Friday and no domestic violence. Less emotion. Business decisions are practical. Most leases push a big portion of maintenance responsibility onto the tenant, and tenants tend to take pride in their space.
Q: How much maintenance gets pushed onto tenants in industrial?
A: They describe it as about 90% in many modern lease structures, with owners focusing more on capital items like roofs, bigger building systems, and long-term improvements.
Q: What’s a real story that showed them what industrial management looks like under pressure?
A: A microburst in Arlington Heights that ripped the roof off and dropped it onto cars in the parking lot. It turned into a major insurance claim situation, and they learned fast. One key takeaway, if you don’t have car insurance and you’re parked there when an “act of God” happens, you’re out of luck.
Q: Why did people call them “GC jeans”?
A: Because while the big industrial brokers wore suits, they were grittier, doing deals in jeans, even using Craigslist heavily in the early years to lease smaller industrial spaces. It started as a knock, then became a brand.
Q: What role did Duke play in the company and why does his background matter?
A: Duke was an options trader on the Chicago Board of Trade for about 16 years, partnered with Cliff, and later joined the team to help expand the commercial department. He brings underwriting discipline, fund structure knowledge, and a return-driven lens to the industrial strategy.
Q: Why does Duke believe industrial can outperform multifamily for investors?
A: Less competition, higher cap rates relative to multifamily, easier operations, and more flexible deal structures. He also points out that many residential investors don’t actually know their real annual returns once all expenses are included.
Q: What’s the Mundelein deal, and why do they keep using it as the example?
A: It’s a 60,000 square foot building they bought for about $4.5M, heavily vacant, and it became a masterclass in value-add industrial, delays, tax fights, city code surprises, tenant buildouts, and the reality of running a fund-backed project with real timelines.
Q: What was one of the biggest problems during the Mundelein acquisition process?
A: Time. The building was under contract for about nine months. They also fought over property tax prorations because the seller had a vacancy reduction that cut taxes substantially. Once the building started leasing up, that vacancy reduction would disappear and taxes would jump significantly.
Q: What’s one major construction and leasing lesson from Mundelein?
A: Small value-add items matter more than people think. A can of paint and cleaning go far. Adding drive-in doors can make hard-to-lease space suddenly leaseable, but each door can cost around $30,000, so you need to run the math and understand the tenant demand.
Q: How do tenant improvements get negotiated in industrial?
A: Tenants often want upgrades like additional drive-in doors or electrical upgrades. Instead of making them pay out of pocket, you can bake the cost into higher rent. If you’re advertising $11 per foot, you may land at $12 per foot by funding the improvements. That higher starting rent then compounds through escalations and supports a higher building value.
Q: What were some of the unexpected issues once the city started inspecting?
A: The city had not been in the building in a long time, so they effectively required multiple “layers” of code updates. They found issues down to outlet height requirements and electrical details. Every new tenant inspection could trigger new findings, sometimes with different inspectors looking for different things.
Q: Did they have to do a capital call because costs increased?
A: No. They budgeted aggressively for “what could go wrong.” They originally had a construction budget around $200,000 but expect it to land closer to $400,000. They came in with roughly $400,000 cash reserves to handle surprises.
Q: What happened with distributions for investors?
A: They planned to pay distributions this quarter but withheld them until the building is fully stabilized and they feel safe given leasing volatility, tenant surprises, and broader market uncertainty.
Q: How did value change from purchase to more recent appraisals?
A: They bought around $4.5M. A later appraisal referenced was around the low $6M range, and the goal is to push closer to $7M once leasing is finished, rent adjustments are completed, and the building stabilizes.
Q: What’s the key risk lever they keep watching?
A: Interest rates. Their underwriting originally assumed lower borrowing costs than what they ultimately locked. They discuss how commercial values are rate-sensitive, and refinancing timing depends on both stabilization and rate environment.
Q: What’s the difference between their earlier JV approach and the fund structures they discuss?
A: Earlier deals were joint ventures with fewer people and direct ownership. Mundelein used a 506(b) structure, raising after the property was under contract. Their next approach is a 506(c)-style “blind pool” where capital is raised in advance, so they can move faster and reduce the chaos of long closings and investor drop-offs.
Q: Why do they focus on the $2M to $10M industrial niche?
A: It avoids the biggest institutional money above $10M, and it avoids the smaller owner-user competition under $2M that can overpay because they plan to occupy the space and self-manage. In $2M to $10M, you can still underwrite management properly and compete against fewer serious buyers.
Q: Is there a play for someone trying to buy a smaller industrial building around $800K to $1M?
A: It’s tough because those buildings are scarce and highly sought after, and pricing can get detached from rent fundamentals. If you don’t already have the deal source or “a guy,” it’s hard to find a true win on the open market.
Q: What’s the supply constraint argument for small-bay industrial?
A: They don’t build small buildings the same way anymore. New construction favors big box because cost to build is too high unless you’re building at scale. Smaller buildings under about 50,000 square feet can’t be replicated at today’s replacement costs, so supply stays tight.
Q: Why do they believe Chicagoland remains a top industrial market long-term?
A: Chicago is a major distribution hub with strong highway infrastructure, air freight advantages, and rail connectivity. Demand is supported by delivery-driven consumer behavior, shifting retail needs, and growth in uses like youth sports facilities that occupy industrial-style spaces and tend to stay for a long time.
Q: What was the Chicago fact at the end, and what was the answer?
A: They asked what Mundelein was called before adopting its current name in 1926. The answer was Rockland.
Show Notes
00:41 Housing provider tip, negotiate earlier move-ins to capture extra rent
01:33 Introducing Bryan Sonn and Duke Dennis, and why this industrial episode matters
03:01 Why the shift toward industrial accelerated, and what changed around 2017
05:01 O’Hare corridor roots, Bensonville, and expanding outward
06:31 Why commercial management is simpler, Monday through Friday, less emotion
07:46 Microburst story, roof in the parking lot, insurance realities
09:11 “GC jeans,” gritty leasing tactics, and how the market caught up
12:01 Duke’s underwriting view, cap rate differences, and thinner competition
19:15 Tax and insurance stops explained, and why it’s powerful for owners
21:01 Evictions in industrial vs residential, personal guarantees change behavior
22:10 Mundelein purchase basics, value-add realities, and why paint matters
24:11 City code surprises, HVAC placement, sprinkler issues, open permits
25:01 Drive-in doors as value-add and the rent math behind tenant improvements
33:00 Vacancy tax reduction fight, delayed closing, and why it hurt fundraising
35:00 Taking over at a loss, leasing strategy, and controlling tenant quality
Takeaways for Chicago Property Managers and Landlords
In spring leasing season, faster move-ins can be worth as much as rent bumps, but tenant quality still comes first.
Industrial management is less emotional and often pushes most day-to-day maintenance back onto the tenant.
Small industrial value-add is real, paint, cleaning, lighting, doors, and the right buildouts can change leasing velocity.
City inspections can become the biggest wildcard, especially when a building hasn’t been inspected in years.
Drive-in doors and electrical capacity are not cosmetic, they’re leasing drivers and rent multipliers.
The $2M to $10M niche can reduce competition versus institutional buyers and owner-users.
Industrial values are rate-sensitive, stabilization plus interest rates determines refinance timing.
Chicagoland’s distribution fundamentals keep demand strong, and small-bay supply is hard to replace.
Guest Name: Bryan Sonn and John Duke Dennis
Contact: 847-207-2108 (Text first, mention the podcast)
Email: bryan@gcrealtyinc.com
Email: duke.dennis@gcrealtyinc.com
Because finding good tenants and property management shouldn’t feel like online dating.
Dear Investor,
If you are an investor in either the city or suburbs of Chicago, I would love to speak with you about how we can help you on your real estate journey. At GC Realty & Development LLC, we help hundreds of Chicagoland real estate owners and brokers each year manage their assets with both full service property management and tenant placement services.
We understand that every investor’s goals are unique, and we love learning about each client’s individual needs. If there is an opportunity to help you buy back your time by managing your rental property or finding quality tenants, please check us out.
Best Investing,
Founder, Partner, Podcast Co-Host, and Investor
