For businesses in the market to purchase a large warehouse or production facility, options are limited in the Springfield area.
This month, commercial real estate tracker Xceligent released its third-quarter area Market Trends report, which revealed a troublingly low level of available industrial space for both the public and private sectors. According to the report, there are only three industrial properties in the Springfield area with more than 100,000 square feet of leasable space and only 10 above 50,000 square feet.
With a total industrial vacancy rate of 4.4 percent reported by Xceligent, area developers are moving to build speculative warehouse and/or manufacturing facilities to meet expected demand.
At North Creek Business Park in northeast Springfield, commercial developer and property manager Tom Rankin is constructing a $2.9 million, 63,900-square-foot industrial warehouse via Rankin Development LLC.
Developer Warren Davis of Warren Davis Properties has set aside 20 acres on the back end of his Solo Cup property for the development of two 125,000-square-foot buildings as he continues to fill up the 1.35 million-square-foot industrial complex his company has owned for four years. Recent activity has left only some 340,000 square feet of space available, as last quarter, Reckitt Benckiser occupied 50,000 square feet.
A year ago, total industrial vacancies came in at 4.7 percent. The sector was one of two that improved in the third quarter, according to Xceligent’s report analyzing commercial activity in Springfield, Strafford, Rogersville, Ozark, Nixa, Republic and Willard.
Third-quarter office vacancies shrunk to 9.4 percent from 9.9 percent last year, while retail vacancies inched up to 5.2 percent compared to 5 percent in the same period of 2013.
Springfield’s vacancy rates are below nationwide activity in all three categories, according to the Xceligent report. The National Association of Realtors reports the average U.S. industrial vacancy rate at 8.9 percent, while retail vacancies are 9.8 percent and office lags behind at 15.7 percent.
During the past few years, area vacancies across all sectors have slowly declined as commercial space has filled up and speculative building – development without a specific tenant or buyer secured – has been virtually nonexistent.
David Mathewson, owner of Springfield-based appraisal firm National Valuation Services Inc., said the Springfield market tends to be more risk averse than others around the country.
“Springfield’s market is not one that will overbuild itself,” said Mathewson, who also is a local board member on Xceligent’s three commercial-sector boards. “We just don’t have a lot of spec construction. We never have.”
In the Springfield area, he said the picture varies by community. While the overall industrial vacancy rate is low, for example, the 6.8 percent rate in Nixa is too high.
“That market, in particular, was hit the hardest because a lot of the warehouse space there was for the construction industry – plumbers, electricians and suppliers,” Mathewson said, noting he’s observed a development uptick in some bedroom communities. “Now, we are starting to see construction inside of Marshfield come back.”
According to economic developers with the Springfield Business Development Corp., the industrial space pendulum has swung too low on the supply side. On Oct. 21, the SBDC, in conjunction with Warren Davis Properties, hosted a panel discussion on the need for more industrial options, followed by a tour of the available space at the Solo building, 1100 N. Glenstone Ave.
Jeff Seifried, manager of regional development for the Springfield Area Chamber of Commerce, served as moderator of the panel that featured Rankin, Rick Quint of Q & Co. LLC and Dale Sandy of Tank Components Industries.
“This is something we’ve been talking about at the Springfield chamber and the Springfield Business Development Corp. for more than 12 months now. Brokers in the room can attest that I think we are starting to feel that squeeze,” Seifried said, adding Solo Cup is one of the few properties developers can show to potential businesses considering a move to the Queen City.
Quint, whose company is building a loading dock on the north side of the Solo Cup building, cautioned about building before a buyer or tenant is in place. His company built a speculative industrial building in Terra Haute, Ind., that generated much attention but no tenants, so far.
“It has been there a year, and it’s still not leased. But you’ve got to have something for businesses to look at,” Quint said.
Sandy and TCI were on the receiving end of an industrial spec building last year, when the company moved into its Partnership Industrial Center West headquarters. After a search, he found a 60,000-square-foot shell building.
“That saved us three months on construction,” Sandy said, adding there were only two available buildings in Springfield that met the company’s size requirements when it began shopping the market in spring 2012.
