Spec Build Strategy Shifts

Spec Build Strategy Shifts

Matt MellottMatt Mellott, CCIM/SIOR

The Society of Industrial and Office Realtors, a global commercial real estate industry credentialing association, hosted its annual conference in late Fall 2022. Matt Mellott attended, with one looming takeaway with considerable implications for industrial development across Montana and the rest of the country.  

Industry experts warned that bank financing for speculative construction (specifically, industrial, but could apply to any commercial project) is very challenging to find right now. As the Fed requires larger reserves from large global banks like JP Morgan Chase and Wells Fargo, these large institutions have hit pause for spec industrial lending. The result is that, for the time being, commercial lending is very likely only available on build-to-suit projects with a credit tenant already in place. 


In Montana, that’s a big deal because of the relative lack of in industrial product on the market. In Missoula, research shows a sub-4% vacancy rate, with Bozeman coming in under 1% vacancy. Effectively, that means almost no industrial buildings are available for lease. As companies grow and evolve, they’ll be trapped in outgrown spaces. And, new companies won’t be able to enter the market unless they build new, luck into the rare space that becomes available, or lay down roots in a town within 20 – 40 miles of their desired location.


SterlingCRE sees continued demand from tenants and users considering their options for a Montana expansion. Demand includes large-bay flex warehouse with loading docks, small-bay workshop spaces and facilities with higher ceilings heights and ESFR fire suppression. 



The takeaway for landowners considering speculative industrial development: it may be time to rethink the strategy to target build-to-suit tenants instead. Mellott suggests that the investment into designing a conceptual site rendering is often well worth the costs to demonstrate commitment to a development vision – even if that vision shifts with a new build-to-suit tenant secured

quonset hut