National firms, outside investors court Springfield

The Springfield area is a vibrant market for commercial real estate, and local agents and brokers report strong interest from national companies, a trend toward redevelopment in premier locations and strong demand for income-producing investment properties. And according to some real estate industry veterans, the office/warehouse sector has grown more slowly than anticipated.

Retail demand

National companies continue to take an interest in the Springfield market.

“I’m seeing pretty strong demand for well-located retail,” said Barbara Beyer, owner of Beyer Commercial Realtors. “… Several national companies that are not currently in this area, their corporate people have been coming in to look at sites.”

Typically companies seek space in the 4,500- to 6,500-square-foot range, and demand is high for sites along U.S. Highway 65, she said.

Because national chains look for a certain demographic and a certain traffic count, their interest is adding fuel to a local trend toward redevelopment.

“Springfield, shall we say, has grown up,” said Mark Kerivan, spokesman for Murney Associates’ commercial sales department. Older facilities in high traffic areas are beginning to be knocked down and the property redeveloped. “South Glenstone – the Red Robin and Chick-fil-A – is a prime example,” he added. The site had previously been home to a series of automotive businesses.

Mike Mellinger, owner of Mellinger Commercial, was directly involved in the Red Robin/Chick-fil-A development, and as a result, he was deluged with calls.

“I can’t tell you how many people called and said, ‘Is there any extra space? Do you have anything extra?’ because it’s an area where there’s just not a lot of opportunities,” he said. “But when you look at the retail traffic, you look at Target and Home Depot and Lowe’s and Wal-Mart and Best Buy – that’s where everybody who’s anybody has at least one store.”

In addition to South Glenstone, Mellinger is seeing redevelopment along segments of Battlefield. “We’re working with some national people right now that are looking at doing a couple of locations, and in each case, probably 70 percent to 80 percent of their options are retrofits or something where they’re going to tear down and start over.”

Investor interest

Investment properties are gaining popularity in the local market.

“We have many more buyers than sellers,” said Ron Tappan, broker/manager at CJR Commercial Group, “particularly for shopping centers and office buildings that are leased up. And apartment buildings are moving pretty well.”

Investors, it seems, have a healthy appetite for the Springfield area, Beyer said.

“We’ve always had a strong local demand for investment properties, but we’re dealing with more and more out-of-state investors.”

Market stability and property prices are among the attractions.

“We get a lot of phone calls from out-of-town people who look at this market as being a pretty stable market with reasonable growth as opposed to either coast,” Tappan said. “And land here is still relatively cheap compared to even other places in Missouri.”

But while the market is solid, Beyer notes that it is promotion that has bolstered its success.

“I really feel it’s the great job (the Springfield Area Chamber of Commerce) and our city have done in getting the word out,” she said.

Saturation

Springfield’s office sector, meanwhile, is playing catch-up.

“We have had saturation of the office lease space across the board. A substantial amount of office space continues on the market as we speak,” Kerivan said.

Mellinger added, “Three or four years ago we were way overbuilt and there was office space everywhere. That is now slowly starting to tighten back up a little bit.”

Low interest rates drove up the supply, but Mellinger said that as interest rates are coming back up, over-supply is less of an issue.

“It’s less attractive for someone to go out and build 10,000 extra square feet if they’re going to use 5,000 for themselves,” he said.

In the office property spectrum, upscale offices are pretty well leased, Tappan said. “But the midrange and low-range office properties, particularly those properties that are somewhat obsolete, they’re having difficulties,” he said.

As a result, many landlords and owners are willing to negotiate on terms, but Tappan noted that it is not quite a tenant’s market.

Office/warehouse

Meanwhile, the office/warehouse sector “has not grown as fast as we would like,” Tappan said. “It’s still pretty good, but not as good as we’d hoped.”

Beyer added that leasing in office/warehouse is “decent,” but as relatively low interest rates continue, there is stronger interest in owning rather than leasing.

“I’ve seen pretty good demand from small companies wanting to buy in the 10,000- to 20,000-square-foot range, companies that maybe have been leasing and now want to get something a little bit larger and own it as well,” she said.

Ministorage has been a darling of the office/warehouse sector in recent years, but for the moment, it has leveled off.

“It comes and goes fast,” Tappan said. Generally, he added, owners wait until existing facilities are about 90 percent leased before they build more.