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Industrial space in high demand

Speculative buildings are quickly snapped up, developers say

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On July 11, Lippert Components Inc. moved into its second Springfield plant, a building built on speculation – meaning to appeal to an industrial customer but without a specific buyer in mind.

The 100,000-square-foot building at 4140 W. Webster St. in the northwest part of the city was leased to Lippert for an undisclosed price by local developer Roberts Industrial Properties.

A subsidiary of Elkhart, Indiana-based LCI Industries (NYSE: LCII), Lippert plans a $1.5 million investment and the addition of 90 employees at the new plant, according to past Springfield Business Journal reporting.

Just a couple days after the company moved in, the factory, which makes marine furniture for watercraft, was already in production.

Eric Roberts, co-owner and agent for Roberts Industrial Properties, completed work on the building July 1, and he said it was a point of pride to help bring good jobs to the city.

The second plant supplements Lippert’s 3220 E. Cherry St. operation, a 56,000-square-foot building the company has occupied since 2020.

Roberts Industrial Properties website lists three properties for lease, at 1300 W. Poplar St. and 3734 South Ave. in Springfield and 140 Midwest Lane in Strafford. There are also two listings for build-to-suit land, 1120 N. Farm Road 123 and 2630 N. Westgate Ave.

At press time, online real estate marketplace LoopNet lists nine industrial properties for sale in Springfield, including six industrial buildings, two flex buildings and one retail warehouse. The site also lists 11 properties available to lease.

 Risky business
It’s tricky work, building industrial spec buildings for unknown occupants, according to Matt Morrow, president of the Springfield Area Chamber of Commerce, but such buildings are in high demand by companies seeking to relocate.

“Many of these projects are looking for larger footprints than we’ve seen in the past,” he said. “Almost all of them look for taller ceiling heights. It’s very common for them to want 32, 34, 36 feet, whereas older buildings may be 24 or 26 feet.”

Vicki Pratt, the chamber’s senior vice president of economic development, was asked to describe the ideal spec building, if there is such a thing.

“There is no ‘perfect,’” she said. “I always bristle a little at that. Every project is different.”

Food grade spaces, warehouse distribution, nonfood manufacturing – they all call for something a little different, Pratt said.

But she acknowledged a marketable spec building might be 50,000 square feet, but built to be expandable, on roughly 25 acres of land. Ideally, it would be 36 feet high. The closer to the interstate, the better, and rail access is also desirable.

Of course, many companies are looking for much larger sites.

“Even if you had a 50,000-square-foot spec building and you weren’t meeting what they were asking for, there’s already 50,000 square feet there, and someone’s going to get excited about that,” she said.

The industrial spec buildings for sale in Springfield range in size from 7,630 to 34,238 square feet with purchase prices from $24 to $92 per square foot, according to LoopNet. Leasable industrial space ranges from 2,060 to 140,326 square feet with rates from $2.40 to $10 per square foot.

 Springfield prospects

In Springfield, Amanda Ohlensehlen, the city’s director of economic vitality, has been on the job only three months, but said she is seeing a lot of activity from businesses seeking to locate in the area, despite mounting economic pressures.

“We are still getting a strong response and have a variety of active projects that we’re working with,” she said.

When companies seek to locate in the city, Ohlensehlen said myriad factors go into vetting their requests for information. Her office looks at what properties are available and if any existing buildings may meet their needs.

“If it’s a company that doesn’t already have a physical presence in the region and wants to expand, they’re not necessarily looking at the corporate limits [of the city]; they just need to find something that suits their needs,” she said.

In that case, it would not be uncommon for her office to make a referral to another community with available sites. The goal is to try to remove barriers for businesses and win more projects throughout the region, she said.

Springfield is desirable to companies, Ohlensehlen said, because of its central location, good climate and connectivity to major interstate routes.

“We really can leverage the strength that we have in the market,” she said.

Like Pratt, Ohlensehlen said each company has different requirements for square footage, ceiling heights and more. As a result, there is a risk to investing in spec buildings.

“A building could be built to the wrong specs and a tenant would not be found quickly,” she said. “There’s certainly a risk to developing a building without an end user in mind. Depending on the use, they could have very different requirements.”

Area interest
Developer Rich Kramer of Rich Kramer Construction Inc. is working to fill Strafford’s industrial park, which he co-owns with Bob Kramer. He agrees there is risk to spec buildings.

“It does take a lot of foresight and intestinal fortitude, plus good banking relationships to be able to do it,” he said.

But a couple of months ago, Rich Kramer said he had the experience of finishing a 400-by-400-foot spec building and putting it on the market, only to have it snapped up by Amcon Distributing Co. within two days.

Also in Strafford, Kramer and partner Brian Murray have a 127,400-square-foot building that will be on the market in the first quarter of 2023, for $78 per square foot, and they are starting on the preliminary design of a 160,000-square-foot building as well. Site prep also just began on a 28,800-square-foot building, to be priced at $2.5 million.

“We just started the dirt work, and we’ll be done in January next year,” he said. “We’ll maybe have that sold in the next two weeks.”

Kramer said he is seeing a lot of activity.

“There’s a lot of quote activity, which usually leads to new projects,” he said. “It helps if it’s subdividable, if you have proper truck-trailer turnaround, the ability to add trailer parking and for it to have enough parking for employees. You have to have a lot of flexibility, which can take more land.”

Trailer parking is another must-have for some companies, Kramer said. “We had it, and it sealed the deal – kind of iced it for us,” he said of the recent sale.

He noted that there has been enough activity for him to add to his staff, and that has been a blessing, even as he believes a recession is imminent.

In Republic, Andrew Nelson, the city’s Builds Department administrator, said his phone is ringing from interest in new residential developments and some vacant commercial parcels.

“We’ve had a few inquiries into our industrial spaces and warehouses,” he said, adding that he has fielded some inquiries from larger, logistics companies after Amazon.com Inc. (NYSE: AMZN), which opened a 1.3 million-square-foot fulfilment center in Republic in August 2021.

“If we had spec warehouse space ready for infill, there’s a lot of people out there looking for that,” Nelson said. “We have a low inventory of ready-to-occupy warehouses, and we’re trying to work with some of our development partners to see if we can get more of that kind of warehousing space available.”

Purina prospects?
The Nestle Purina PetCare Co., which manufactured cat litter, ceased operation in June in the Partnership Industrial Center. Its 34,238-square-foot building, at 2555 N. Partnership Blvd., is for sale through R.B. Murray Co., which has issued a call for offers, with a deadline of July 15.

The chamber’s Pratt said available inventory can change in an instant, but there were roughly 10 spec industrial buildings for sale in the Springfield area, eight or nine for lease.

She said Purina currently is disassembling and moving out machinery.

“We know just because of the traffic though our offices that there’s very high interest in that particular building. It’s ready to go. Everything’s there,” she said.

Food-grade buildings are especially in demand, she said.

“If there is a food-grade building and it’s halfway decent, it’s not going to sit empty for more than a minute,” she said. “It’s just crazy. You cannot find them, and there continues to be considerable growth in that industry sector.” 

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