The Real Finds Podcast, Episode 101: The Lease Clause That Bankrupts Industrial Tenants With Daniel S. North
A conversation between Gordon Lamphere, J.D. of Van Vlissingen and Co. and Daniel S. North, a partner in the Chicago office of Polsinelli, who advises developers, investors, landowners, and tenants across the full life cycle of commercial real estate transactions. Transcript edited for clarity.
Daniel North: There is already huge constraint on the amount of power that can be produced, where it’s coming from, and how quickly it can be supplied. I think over the coming years that topic is just going to grow exponentially more important. And it’s not just a data center problem, because the data centers need more power, but if the data centers need more power, that means there are also potentially greater constraints on supply for other asset types.
Gordon Lamphere: Hi, I’m Gordon Lamphere, and welcome to the Real Finds Podcast, where we have real conversations with key entrepreneurs, activists, and researchers shaping the real estate industry and, as a result, our world. On today’s podcast we’ll be speaking with Daniel North, a partner in the Chicago office of Polsinelli, where he advises developers, investors, landowners, and tenants across the full life cycle of commercial real estate transactions, from site acquisition, capital structuring, construction, and leasing to disposition. He’s a graduate of Loyola University School of Law with over a billion dollars in national property deals under his belt. Daniel has built an accidental niche in industrial real estate that took off during COVID and hasn’t slowed down. On the podcast, we dive into the rise of small bay industrial, we look at reshoring, how force majeure and risk allocation clauses have moved from boilerplate to front page, and why ultimately the power grid may be the most important and underappreciated story shaping the next decade of real estate development. If you’re planning on doing an industrial deal in Chicagoland, today’s episode is well worth a listen. Daniel, thank you so much for hopping on today.
Daniel North: Thanks for having me, Gordon.
Gordon Lamphere: So what got you into the world of real estate law?
Daniel North: Coming out of undergrad, I worked in politics and government for a little while, and then knew I wanted to be in the real estate space. I have some family in the space and was always attracted to the idea of building something you can see, a tangible thing, and being a part of that. While a lot of my friends and family with similar interests were going to business school, I thought my skill set was more well aligned for law school. I wasn’t sure if I would actually practice or go work for a real estate company, but I ended up starting out practicing, and over the last ten years I’ve really grown to love my practice and enjoy negotiating real estate deals from the legal side.
Gordon Lamphere: In terms of the market and how your practice has unfolded, one of the biggest trends we’ve seen, nationally and in Greater Chicagoland, is a huge push for industrial real estate development. What are you seeing from the law office that might be different from what some of our investors, developers, and brokers who listen are seeing?
Daniel North: Industrial has continued to dominate real estate investment and development. As I mentioned, I’ve been practicing about ten years, and it’s been an accidental niche for me that I didn’t necessarily seek out, but during COVID when everything else was slowing down, industrial was really picking up. It’s worked out well; it’s a really interesting area and I enjoy it. There are many factors behind the sustained growth. I think it includes moving beyond just e-commerce, the history of industrial based on the Amazons and online retailers, to today, where we see a lot of growth in manufacturing, reshoring, bringing manufacturing and related operations back onto US soil. Some of that is intentional, and some is a result of uncertainty, geopolitical tensions, all the things we see in the news every day. There are also systemic changes in terms of what’s needed, greater emphasis on cold storage and last-mile logistics. Five to ten years ago we saw a really big build-out of these huge industrial spaces located in strategic submarkets, but they’re not the last-mile spaces. That area got built out really well. So what we’re seeing more of now is small bay, focused on even more detailed location and access to various submarkets, where they’re holding less stock and there’s greater in-and-out of stock from those facilities.
Gordon Lamphere: You mentioned small bay. From the law side, how does small bay play out differently from some of the larger box projects?
Daniel North: From the legal side, it really ties to the things driving the differences on the business side, so we react and try to protect for those risks. The things that are different from the old million-square-foot facility, and those are still going on, I’m working on plenty of those big facilities still, but the small bay stuff has different risks and different focuses. There’s less capital and less debt involved, so the risk factors change and the contracting focuses on allocating and controlling those risks. There’s sensitivity around timing and delivery of those assets, even more so than the really large structures.
Gordon Lamphere: When we’re talking about these large structures, one thing that has been a worry for both large and small, but particularly some of our larger projects, is price and supply chain volatility. You see the tariffs, the conflict in the Strait of Hormuz, all sorts of issues over the last five years, even dialing back to the 2020 era. How are you seeing construction risk pricing play out from the legal side, where deals can sometimes have pretty variable pricing when you see a price shock?
Daniel North: Between tariffs, geopolitical uncertainty, products being stuck at ports, all these things contribute to greater uncertainty for contractors, developers, and lenders, and lenders in particular rely on predictability. So we’re seeing greater emphasis on and scrutiny of risk-allocating provisions in contracts. Contractors are less and less likely to accept a true GMP structure, a guaranteed maximum price where they’re taking on all or a large part of the risk for these factors you mentioned. Instead it’s more of a detailed negotiation and allocation of risk across a number of different provisions. Acceleration clauses and force majeure clauses are more heavily negotiated than ever. We’ve seen a shift in the types of provisions we focus on in contracts.
Gordon Lamphere: How have you seen the force majeure clause evolve over the last decade? For us it became somewhat of a concern, not ultimately for most of our projects, but still somewhat during 2020. How are you seeing that play out in light of recent economic and political instability?
Daniel North: It’s very similar to what I was just talking about with the overall change in how we negotiate these documents. When I started practicing ten years ago, the force majeure clause would largely have been considered a provision that only me and the attorney on the other side were really focused on, maybe sometimes even reading. There were probably times I worked on development agreements where folks were not focused on something like a force majeure clause; it was considered background legal stuff. Today, I’ve seen force majeure clauses extensively negotiated at the LOI stage, which was unheard of to me ten years ago. It’s become such an important piece that it’s almost considered a business term at this point, because it really is substantive to financing and your capital raise. The things that have changed are a more granular, more detailed focus. The provisions tend to be much longer than they used to be and spell out what’s included and what’s excluded.
One thing I’ve learned from one of the general counsel I work with, she’s taught me over the years, is that it’s important more and more today to differentiate, when we talk about supply chain disruption, between who’s going to take on the risk of simply delivering the supply. If there’s a slowdown in steel delivery, are we talking about the risk from a timing perspective, or from a pricing perspective? Those things can get conflated, because from one perspective you might say you could have gotten this deal faster but at a higher price. So a timing delay and a pricing change, the negotiation around exactly how those are described, who the risk is allocated to and how, are highly negotiated today, especially in industrial deals, which I spend a lot of my time on, and particularly with data centers, which I’m more and more spending my time and energy on. We see more focus on notice requirements, mitigation requirements. The force majeure clauses are better built out around detailed events. Instead of just saying something beyond this party’s control, we’re talking specifically now about pandemics and public health events, and sometimes we get really strong pushback on including those, government shutdowns, supply chain disruptions, tariffs. All these things are pretty heavily negotiated now, and we can spend real time going over what’s included and what’s excluded.
Gordon Lamphere: What was the most unique thing you saw included or excluded from a force majeure clause?
Daniel North: Good question. The thing that’s stuck out most to me the last couple of years is what I was alluding to, learning to focus on from one of my clients. It’s this idea that I might get protection in my force majeure clause for a supply chain disruption or delay, but if I’m only talking about the timing delay, then I’m leaving my client open to the risk that the other side says, well, you could have mitigated that timing delay and met our timeline by just finding another vendor. What’s important to account for is that the other vendor is going to charge more. There’s some reason you were able to get something from one party that you weren’t from another, and it’s almost always cost.
Gordon Lamphere: In terms of broad force majeure clauses and broader risk, one thing I’ve increasingly seen in contracts as we do transactions is an increased emphasis on cybersecurity risk. Are you seeing that play out? I definitely see it in the office section, and in the industrial section of a lot of smart industrial buildings. What are you seeing regarding cybersecurity?
Daniel North: Personally, I can’t say I have a ton of interaction with cybersecurity-focused issues. What I see more, in a similar vein, has to do with confidentiality and security. I mentioned data centers; I’m working on three different data center projects right now. The data center projects, more than anything, but also industrial, have extraordinarily high sensitivity to security. That probably encompasses cybersecurity as well, but also physical security at a site. Who has access to this site, and when? If I’m a developer or general contractor with an obligation to maintain or repair a building or come in on an emergency, that’s oftentimes at odds with a hyperscaler tenant who says we can’t have just anyone walking this facility. These are extraordinarily complex, confidential, and sensitive operations, so there’s a lot of negotiation around who can enter these facilities, what approvals they need, and how long that’s going to take. If there’s an emergency and you have two days to approve or deny me coming onto your property, you might have to address the emergency yourself. These things are thought about in great detail and often negotiated in contracts today.
Gordon Lamphere: One of the biggest issues we see with data centers from the brokerage and development side is the legal issues surrounding power and infrastructure. How are you seeing that play out with your developments? I’m sure it’s not easy to get the power load these facilities need.
Daniel North: The data center projects are power projects; it’s all about power. Almost every time we at Polsinelli have seen a data center come across, the developers have been focused on power for months or years leading up to the project. The hyperscaler tenants aren’t engaging with the developer until the developer says, yes, we have the site and we have the power all but secured, and all that’s left is to draft the contracts around it. So it’s absolutely the driving factor. From a legal perspective, the data center projects are just far more complex. Where an industrial facility is something I can run an entire project on myself with the support of the folks I work with regularly, a data center project involves a lot more cooks in the kitchen. We’ve got folks from our incentives group negotiating development agreements around the infrastructure with the city, how the city is going to be protected and benefit from this large development that often has public pushback, and an entirely separate group focused on power and infrastructure who do just that all day, every day, outside my traditional real estate practice. It’s a much more complicated transaction from a legal perspective, and the utility service agreements, making sure the energy supply is reliable, consistent, and going to meet the growth, because these projects are often phased, that’s the whole focus of the project and it drives everything else.
The power-first sequencing Daniel describes on the legal side is the same constraint we examined on the engineering and site-selection side with Whitaker Irvin Jr. in Hydrogen, Data Centers, And The End Of Energy Poverty and with Bruce Garrison in The AI Real Estate Goldmine Everyone’s Missing.
Gordon Lamphere: One of the things driving everything is the politics around data centers. How are you seeing that play out from the legal side? I can’t imagine it’s particularly easy to get these data centers put in some of these locations.
Daniel North: Development in general has always had a political aspect, just naturally. Industrial development has an even greater political component than development generally, and taking it one step further, data center development is very political. You have to have folks involved who can get things done with states, counties, municipalities, and utility companies, and navigate the public pushback I mentioned. Communities are sometimes understandably concerned about things they hear about data centers: water usage, electrical usage, whether their electric prices are going to go through the roof, noise if the facility is really close. Those are legitimate concerns. I think folks are going to find over time that the benefits of these data centers in your communities far outweigh these risks, and I think developers, builders, and hyperscalers are all committed to addressing these things and making sure people understand how they’re protecting these communities. Frankly, the developers and hyperscalers need these facilities and want to build them, so they’re actively addressing these concerns. I saw a post from one of my clients just this morning about how they’ve signed on to a White House initiative to help secure against price increases for electrical infrastructure in communities where data centers are being built. That’s a coalition of developers, hyperscalers, and folks in the industry coming together, saying this is causing significant pushback and we have a way to combat the risk. It’s about getting everyone to agree on a way to combat that risk, and then conveying that message to the public: look, this is what we’re doing, we’re controlling for price increases, so this is not going to be burdensome to you.
Gordon Lamphere: It’s not always the most burdensome thing, but it certainly is risky. Real estate development is not an easy path, and that’s one reason developers can make a lot of money; you’re taking a huge risk and laying it all on the line for a project. As you’ve done so many developments as a lawyer, what are you seeing in terms of the clauses that matter most when negotiating a development or construction agreement? If I’m a developer and this is my first gig, what are some of the clauses I should be highlighting for my attorney to make sure they’re taking a look at?
Daniel North: It’s all about risk allocation, as any legal contract is, but especially for commercial real estate development. It’s all about who’s taking the risk on timing, who’s taking the risk on pricing, and who’s taking the risk when something goes wrong. The provisions and issues we see most heavily negotiated and spend a lot of time on have to do with the schedule and milestones, how we define and determine those milestones. Substantial completion means something different to every party involved. If you’re the tenant, you might say substantial completion means I can start bringing my stock in and out of the facility, it’s completely done. Substantial completion from a developer’s perspective might be very different; it might mean I’ve done what I’m contracted to do, but whatever you’re doing inside the facility, especially if you’re doing a tenant build-out yourself, my substantial completion has occurred before you go and do that. So how we define and set triggers for milestones is highly negotiated and very important. Change orders, who’s going to take on the risk of change orders, who’s going to pay those additional costs, who has the ability to approve them, do they have to approve them, are we going to get deemed approval? If I send a change order request and you aren’t paying attention or not responding quickly enough, but I need to keep working to meet my milestones, sometimes your approval might be implied. There’s also heavy negotiation around default triggers and cure periods. What truly is a default, and how long do I have to fix it, from both sides of the contract? Parties care a whole lot about that, especially in industrial, where businesses on the tenant side are strategizing and planning around these facilities, so delivery and the milestones between commencement and substantial completion are very important.
Another thing that sticks out is assignment rights, something heavily negotiated in all these asset types. A lot of the developers I work with are not holding assets long term; they’re taking down land and over two to three years building it, leasing it up with a strong tenant on a long term, and then selling it to long-term holders. So the ability to come in and out of transactions, whether during development or after, is incredibly important. Assignment rights, who we can assign to, when we can assign, and the criteria for whether I need the other side’s approval, and how much we build out those criteria versus leaving it to the future to figure out when we get there. More and more we’re seeing those types of provisions negotiated at the contract stage, leaving far less ambiguity to be dealt with later.
The zoning, entitlement, and risk-allocation gauntlet Daniel walks through is the legal complement to the ground-level operating risks Ron Rohde described in his industrial outdoor storage deep dive, and to the broader industrial outlook we covered with Chad Griffiths in Commercial Real Estate Doomers, Gurus, And Industrial Opportunity.
Gordon Lamphere: One of the things we don’t need to deal with later, we can tackle right now, which would be a huge advantage for anybody listening, is to think about asset-specific legal strategies they can apply on developments, purchases, or leases. Let’s start with industrial. If you had one asset-specific legal strategy you think is important to apply on an industrial project, what would it be?
Daniel North: Industrial development is all about speed to market. A trend I’ve seen in industrial development documents over the last ten years is standardization of some of the processes, forms, and designs of these buildings, all of which increases efficiency and the ability of the parties to get their product to market. If there were one thing I’d tell industrial developers to focus on more than anything, it’s flexibility and optionality in your lease-up structure. The more flexibility and optionality you can negotiate on the front side can pay dividends, especially in today’s market with geopolitical tensions, government shutdowns, and these different factors we’ve talked about. The ability to retain some flexibility, I might start out developing a site for this use and this prospective tenant, and this is particularly applicable to a spec building, the ability to shift that over time and have flexibility both from a capital perspective and particularly from a lender perspective. Lenders want predictability, but we’re seeing more and more need for developers to have this optionality, and lenders have gotten more comfortable accepting that there are certain metrics and parameters that have to be met, but they can contract to allow for some flexibility in terms of how the market or tenant demand may change over the course of starting to finishing a project.
Gordon Lamphere: If you had one asset-specific legal strategy for multifamily, what would it be?
Daniel North: For multifamily, there’s a big focus on financing constraints, cost control, and contingencies. Broadly, there’s always the topic in the background of rent control. Depending on what market you’re building in, you have different comfort levels with how much independence you’ll have in pricing your units. That can be incredibly important to a lender, a developer, and a downstream buyer of a leased-up building. The idea that my revenue growth might be capped by something largely out of my control adds another risk factor that all these parties have to consider, and it makes where you’re going to build that multifamily development an even more complicated decision. A fair bit of my multifamily work is in student housing, which has some unique issues. One that sticks out is that it’s a calendar-driven, date-driven development. School is going to start this week of this month, so I need to understand from the university when students are going to be looking to move into these buildings, and it’s important that a developer has a relationship with the institutions they’re building around. From a developer’s perspective, I’m always trying to build in cure periods, force majeure extensions, and timing flexibility, but for a student housing project in particular, you can build in as much flexibility as you want, but at the end of the day, if you’re trying to deliver a facility for the first residents and the academic year 2027, you have to deliver it before folks start moving in and before classes begin. So those timelines and the ways you account for meeting or missing them become incredibly important.
Gordon Lamphere: We’ve mentioned data centers already. If you had to give one important thing to look at for data center development, legally speaking, what would it be?
Daniel North: I think phasing. The data center projects I see are really only possible because of phasing. Data center projects are driven by and focused on wattage, the amount of wattage the facility can deliver, more so than square footage. If I’m doing a gigawatt, a huge facility, we’re not building one huge gigawatt facility; instead we’re building multiple smaller, tens-of-megawatts facilities over time, likely over several years. That phasing is incredibly important from numerous perspectives. From the utility perspective, there are constraints on how much power can be delivered pretty much everywhere in the country. The power grid has limitations, so no utility provider is going to say build as much as you want and we’ll deliver the power. Instead, you’re working with utility companies to determine how much you can build each year over the course of X years to get to the total that this hyperscaler or data center user needs for your region. The phasing is important because it also allows you to break up the infrastructure costs. Data centers carry a huge upfront cost and risk because of the amount of infrastructure needed, more so than any other asset type. So the ability to break that upfront risk and cost up, maybe you’re not paying it exactly tied to the proportion of your wattage being built each year, but you’re also not paying it all up front. Maybe we do a third of the infrastructure work at the beginning and you pay for it, and we finance and pay for the rest as we move into the next phases.
Gordon Lamphere: We’re going to move into the next phase of the podcast. It’s a great opportunity to learn more about you and where things might be going in the real estate world. One question I always love to ask: what’s the one thing the real estate industry isn’t talking about enough?
Daniel North: I think we hear about it a ton, but we’re still not talking about it enough, and that’s the power grid. The next ten years is going to see, obviously with data centers, but development in general, a ton of demand on the power grid. In the United States, and particularly in certain regions, there’s already huge constraint on how much power can be produced, where it’s coming from, and how quickly it can be supplied. That topic is going to grow exponentially more important. It’s not just a data center problem, because if the data centers need more power, that means there are also potentially greater constraints on supply for other asset types. It’s above my pay grade to know the solution, but it’s a complicated issue that involves government, utility companies, and folks in the industry, developers and users. The supply of power is really going to drive a lot of future development decisions. Beyond power, infrastructure in general, roadways, transportation, all these things play into what we can develop, and where and when.
Daniel’s grid-constraint thesis is the connective tissue across this whole run of episodes, and it anchors the distributed, latency-driven future we mapped in Inference AI Is Rewriting The Commercial Real Estate Site Selection Playbook.
Gordon Lamphere: In terms of developing things for the future, power is certainly a huge issue. But ten years from now, if we’re looking ahead, what do you think will have changed the most about the commercial real estate industry?
Daniel North: I think there’s going to be an even greater emphasis on allocating the risk factors we talked about earlier in the show. There’s an interest on all sides of these transactions to more eloquently build out what the risks are and how we allocate them, rather than leaving those decisions for the future. So I think real estate attorneys are going to grow more and more important to these transactions, frankly, because being thoughtful about risks, phasing risk, and allocating risk is going to grow more important to the ability of developers and builders to get transactions approved, financed, and to raise capital.
Gordon Lamphere: When we talk about things like raising capital, that was always a challenge at the start of my career, to put yourself out there and either raise money or take on something huge. One thing we love to ask on the podcast: at the start of your career, if you could have given yourself one minute of advice, what would it be?
Daniel North: I always enjoy hearing folks answer that, because it’s a tough question. Personally, as a real estate attorney, I’m in the industry but I didn’t go to business school, I’m not at a developer, I’m seeing the industry from a different perspective. Where I add the most value as a real estate attorney is in my understanding of the industry and the ability to talk about these topics. If I went back ten years to see myself coming out of law school, the focus on learning these documents and provisions and how to negotiate these deals is incredibly important, and I would not have taken my foot off the gas on that at all. But I would tell myself to focus also on the business side of it, get to know folks like yourself who are seeing lots of deals, and folks like my clients who have the best understanding of what the risks are and what’s keeping them up at night, and understand their business perspective, because for good legal work, that should drive the contracting. Being in touch with the industry, being involved, going to events, and hearing smart people talk about these topics would be one thing I’d tell myself. And then just reading the news. I read general news a lot every day; I’d tell myself to start reading real estate news earlier in my career too. Your show is a great example. There’s a ton of great content out there today focused on our industry, and the more a young attorney can understand what’s happening in the industry, the trends, and what developers care about, the better attorney you’re going to be.
Gordon Lamphere: There’s a huge difference between a great attorney and a great real estate attorney, and a great real estate attorney is typically someone who actually knows how deals operate and where the market’s at. That’s great advice. One of the ways we get great advice on the podcast is from the men and women in the arena who tell us the next person to have on. Who should be the next voice we reach out to?
Daniel North: To tie our entire discussion together, I’d say someone at the intersection of a lot of these issues, someone who has an inside perspective on infrastructure and the policy around infrastructure, how we get things done to improve our infrastructure from an electrical standpoint and a transportation and logistics standpoint, but who’s also tied into the capital markets. I wish I had a name or a particular title for you, but someone who works at the intersection of the policy issues and the capital and investment, the true business perspective of this, could have really great insights into all the issues we talked about today.
Gordon Lamphere: We have a couple of names coming on the podcast in the next couple of weeks, including some folks who work for large energy-related businesses and a couple of capital allocators in that space. Before we go, if somebody wants to get in contact with you, what’s the best way?
Daniel North: Pick up the phone. I love taking phone calls and talking to folks about projects, issues, and ways my firm and I can help them. You can find my phone number or email on my firm’s website. I love hearing from folks and trying to connect people with clients and put people together to help get deals done and solve problems.
Gordon Lamphere: We’ll put your contact information in the details below on this podcast. Daniel, thank you so much for hopping on today. We have to have you on in the future.
Daniel North: Thanks a lot, Gordon. Really enjoyed talking with you.
Gordon Lamphere: Thanks again to Daniel, we appreciate his insights. If you enjoyed the podcast, please give us a like, a five-star rating, and a review. Your comments and subscriptions truly matter and help us continue to get quality guests. You can find us on YouTube, Spotify, or wherever you get your podcasts. I’m Gordon Lamphere of the Real Finds Podcast. Thank you for listening.
Van Vlissingen and Co. has been the Midwest’s oldest commercial real estate brokerage, development, and management firm since 1879, and today is independently ranked the #1 commercial real estate agency in Chicagoland, home to the #1 independently ranked agent, Gordon Lamphere, and the region’s #1 ranked commercial property management team. If you own, manage, or invest in industrial, data center, or development-stage property across Lake County, the North Shore, the Northwest and O’Hare corridors, DuPage and the I-88 corridor, Will County, or southern Wisconsin’s Pleasant Prairie, Kenosha, and Racine markets, contact Van Vlissingen and Co. at 📞 847-634-2300 or 🌐 vvco.com. For a market-wide view of where these dynamics sit today, see our State of the Chicagoland Commercial Real Estate Market for Q2 2026.