Why Springfield's warehouse vacancies are worrisome

For more than a year, city leaders and business developers have discussed whether Springfield needs more speculative industrial space — empty, existing warehouse and manufacturing buildings where new or growing businesses could move.

That was the focus of a recent panel discussion hosted by the Springfield Business Development Corporation inside the former Solo Cup plant being renovated by Davis Properties on Glenstone Avenue.

Two panelists, Rick Quint who owns Q & Company and Tom Rankin of Rankin Development, are currently working on speculative industrial spaces. Quint's company will build two new industrial warehouses for Davis Properties behind the main Solo Cup building; Rankin's company has started construction on a new warehouse in North Creek Business Park.

Jeff Seifried, Manager of Regional Development for the Springfield Area Chamber of Commerce, told investors attending the discussion that Springfield has a relatively low industrial inventory vacancy rate, with 4.3 percent of buildings empty and available.

When you compare that with a third quarter national average of 7 percent released this week by Cushman & Wakefield commercial real estate services, and around 11 percent in Omaha, Neb., where city leaders recently visited, that means Springfield may not be competitive when local or outside companies seek larger existing space.

"You've got to have product in the marketplace," Rankin said. "If you are looking for warehouses, you expect to have product to go look at."

When companies are looking for a community to locate in, they will travel to see a building, said Seifried, who also serves on City Council. "They will not travel to go see a piece of land. It's more advantageous if you have space to show."

Without enough of the right inventory, the city could lose new business — and jobs — to other communities, SBDC leaders say.

"We hear that we are losing projects from consultants because we don't have available space," Seifried said, especially properties that are 20 feet high or taller.

There's a reason for that, Rankin said.

"We're coming out of a recession. Nobody was building (industrial) buildings in 2008 on. There wasn't demand for large warehouse space. That demand is just now coming back. So the buildings that were sitting on the market vacant have been getting absorbed over the last several years and I think we find ourselves in the position now, that there's not much to look at."

When a growing company seeks a place to expand its footprint, cities that have available space with attributes the company needs will "go to the top of the list, and cities that don't, drop off the list," Quint said.

Some municipalities will construct buildings on a speculative basis for that reason, he said. Springfield is not one of them, though the SBDC supports efforts of private developers.

While speculative space might boost community economics, renovating or building that speculative space is a financial gamble for developers who don't have a client secured.

Davis Properties and Rankin Development are willing to take that risk.

No perfect space

Springfield's Partnership Industrial Center's East and West parks are home to many large manufacturing and warehouse distribution companies including Tank Components Industries owned by President and CEO Dale Sandy, the third panelist. However PIC East is full and PIC West only has undeveloped land available.

Sandy described seeking larger space when TCI was ready to grow. There weren't many options at first, he said, besides a 60,000-square-foot building — not large enough — and an old pickle plant. He finally settled on the shell of an empty industrial space built nearly eight years ago in PIC West.

The space isn't designed how he would have dictated, Sandy said, but his company made it work. And there were benefits. His purchase was discounted because the building sat empty so long, and starting with a shell saved three months of construction time. "It would be very difficult to have it perfect," he said.

But that highlights the trouble with building speculative space. "Owners are so specific on what they want — the columns and height of a building — to guess at what they want is almost impossible," Quint said.

Constructing a building that could sit empty for years is a financial risk. That's why, even with encouragement from the SBDC, it's a big decision.

Rankin is counting on a growing market need.

"There is not a very good inventory currently of newer, taller ceiling warehouse buildings for lease," he said. "I'm trying to fill that void with the spec building I have going up."

Old spaces and new

For eight years, Quint has worked with Warren Davis and Patrick Harrington of Davis Properties to renovate warehouse properties, including the former Solo Cup plant which Davis purchased in 2010 for a reported $7.9 million. To date, about 1 million square feet out of around 1.35 million has been leased at the renovated manufacturing facilities.

Around 350,000 square feet of manufacturing or warehouse space is still available, with around 30,000 square feet of office space behind the giant iconic Solo cup, according to Davis Properties website. Work continues to add north side loading docks to the warehouse.

Ryan Mooney, Senior Vice-President of Economic Development for the Springfield Area Chamber of Commerce, said Davis and Harrington, through the work of Q & Company, "saved what could have been a massive eyesore in the community."

Quint calls buildings like the Solo Cup plant, solid "old battleships" that rebuilt today would have a huge price tag. "They look a little rusty," Quint said, "but once we get them cleaned up and wipe the dust off, it's amazing how good they look."

Renovating the Solo Cup plant certainly increases Springfield's industrial inventory and it wouldn't have been possible without tax abatements approved by City Council in December 2012. For 10 years, the abatement is 100 percent, freezing value of the property at the level before improvements. For the next 15 years, Davis will pay taxes on half the appraised value.

Economic Development Director Mary Lilly Smith said Harrington told her near the end of last week's tour that the Solo Cup project never would have been possible without that abatement.

"I just look at it and think what if they hadn't had this vision, what would we have done with that (Solo Cup plant)?" Smith said. "Typically you don't find anyone who needs 1 million square feet."

The Solo Cup building, however, won't attract companies looking for warehouse space with high ceilings and fewer support poles. The two new Davis Properties buildings planned for the former Solo Cup Plant's east side should resolve those limitations.

"They are both spec buildings. That takes a little bit of nerve," said Warren Davis during the tour.

The Solo Cup property came with 85 acres Quint explained, including about 20 acres in the old parking lot east of the building. The new buildings — one at 102,000 square feet, costing $4.5 million; the other 132,000 square feet, costing $6 million — will each have 32-foot ceilings and fewer columns.

There are a few hurdles still to cross before breaking ground but Quint said the city is working with the company. Fortunately, said Quint, who builds around the country, there is a lot of collaboration in Springfield and he expects the buildings could be ready by spring.

Rankin's warehouse, which broke ground about two and half months ago, will have 63,900 square feet of space, 28-foot clear ceilings and eight loading docks with an option for 16. Once he leases that building — the seventh in North Creek park which Rankin owns with partner Charlie O'Reilly — he plans to build another like it at 70,000 square feet. (Find details at rankinco.com.)

Rankin agrees that more inventory is good for the community and economic growth but adds one caution.

"From the developer's standpoint, you have more money at risk," Rankin said. "You don't want to all of a sudden have five people building spec buildings and then we are overbuilt. That's true in this business in any city you're in: trying to meet supply and demand."

Touring the former Solo Cup Plant

A recent tour of the old Solo Cup Plant, built in 1952 as Lily Tulip, showed how much has changed since renovations began after Warren Davis purchased the building in 2010.

When Solo Cup was at its maximum capacity, the company owned or leased 1.35 million square feet. Of that, about 1 million square feet has been leased through Davis Properties for industrial use. The smallest available space left is close to 90,000 square feet, or a company could combine spaces to make about 350,000 square feet.

While conducting a tour last Tuesday, Davis Properties co-owner Patrick Harrington pointed out ceilings that were cleared out to offer the most height possible at 20 feet. Safety exit hallways were added and windows were exposed. Rick Quint's Q & Company has been digging down on the building's north side to add loading docks to the large warehouse space, much of which is built into the underground. "That was one of the biggest challenges we had with this building," Harrington said. "How do we put docks in there to access all the space when half the building is underground."

Learn more about the space at warrendavisproperties.com.