Signature Associates

With tight industrial inventory, developers turn to outlying metro areas

Low industrial real estate vacancy rates and ongoing construction backlogs are pushing industrial projects to more rural and outlying areas.

In the Grand Rapids area, an increasing number of industrial sites that have sat dormant for years in outlying parts of Walker and Hudsonville are now being bought or developed, said Stu Kingma, associate broker at NAI Wisinski of West Michigan.

“Not all of those properties are being acquired by developers. A lot of them are being developed and constructed by users who need a bigger spot,” Kingma said. “We certainly haven’t seen this amount of activity with land on the outskirts of the city.”

Brent Case, vice president of business attraction for The Right Place Inc., said industrial development moving farther out into metro areas is “still good for our region.”

“We’ll keep growing out in surrounding counties, which will continue to add infrastructure and accommodate those bigger facilities,” he said.

Infrastructure challenges

With the outward push, developing rural properties can still present steep hurdles, especially because municipal involvement is required for zoning or permitting while various utility infrastructure may need to be added, said Robert Horn, senior vice president of JLL’s West Michigan office. That could add at least two years to a project timeframe, he noted.

“Municipalities are catching up, but surrounding states have done a little bit of a better job of having a quicker turnaround time from when you submit building permits,” Horn said. “Michigan is starting to catch up and address that as offices open up from being closed during the pandemic.”

Jeff Mayes, executive director of business customer care for Jackson-based Consumers Energy, said the utility is “absolutely” seeing an outward push of industrial development. Consumers provides electric and natural gas services to customers across the state.

“West Michigan has had so much success attracting and growing business in the region, now the pressure is: Where are those next industrial sites to support not only the traditional investments the industry’s making, but we’re now seeing large needs for mega sites,” Mayes said. “These are very large sites that require a great deal of gas, electricity and other infrastructure. That’s the real work the state, local communities and utilities are working to support.”

The lack of shovel-ready sites was one of the main reasons Ford Motor Co. chose to invest outside of Michigan for its new electric vehicle and battering manufacturing facilities, a move economic development leaders called a setback as they seek more resources from the state.

Lakeshore Advantage is “actively working” with the state to get more large tracts of land added to the industrial inventory in West Michigan, Vice President of Business Solutions Amanda Murray told MiBiz. 

“In Ottawa and Allegan (counties), we have a decent amount of smaller parcels that could be developed, but we’re seeing a lot of movement in the electric vehicle space and in the supply chain, and a lot of those projects require larger tracts of land,” Murray said.

As well, Consumers Energy maintains an “energy ready site selection center” that helps companies find locations that meet their needs.

While utility availability is among the factors companies consider when choosing a site, Mayes said Consumers’ database helps identify the “best type of energy customer for the best location. It’s not just low or no cost (to add infrastructure), but where existing gas and electric infrastructure is located, reliability information and time frames it would take to build-out service.”

Communities find success

Walker and Battle Creek, for example, have found recent success by targeting large industrial development and both have seen a surge in new projects over the past few years.

Battle Creek Unlimited President Joe Sobieralski attributes the city’s success in the industrial market to forward-thinking leaders who saw the value of establishing the Fort Custer Industrial Park — about 6 miles west of downtown Battle Creek — when the federal government downsized the Fort Custer military training base. It now serves as a strong economic development tool that has helped the community diversify from the cereal industry, Sobieralski said.

“For a community of our size and the job market conditions, to continue to get good looks and consideration of companies looking to relocate into our community has been phenomenal,” Sobieralski said. “Yes, we can point back to the last year or two in the uptick of activity, but I don’t know if we would be here if the foundation had not been laid decades ago.”

The industrial park is almost fully occupied with more than 80 companies and 13,000 employees. Portage-based Clark Logic LLC, in partnership with South Bend, Ind.-based private equity firm Great Lakes Capital, purchased land from Battle Creek Unlimited in early 2020 to construct a 270,000-square-foot speculative facility at the industrial park, which Sobieralski expects to be leased quickly. 

The city of Walker has also seen major industrial investments this year, with Speedrack Products Group Ltd. breaking ground this summer on a $65 million headquarters at 3060 S. Industrial Drive NW. 

Most recently, the former MLive Media Group and Grand Rapids Press printing facility in Walker was sold on Sept. 24 to Pontiac-based Lee Contracting Inc. The 236,000-square-foot facility at 3100 Walker Ridge Drive will serve as the firm’s first location outside of Pontiac.

Sizable speculative projects also include a 21,350-square-foot building planned for north of I-96 by Land & Resource Engineering, and a 285,000-square-foot speculative industrial manufacturing building at 3501 Fruit Ridge Ave. NW being developed by Ada-based Honeycrisp Ventures LLC. 

The industrial build-out in Walker exemplifies the encroachment on more rural land. The Walkerview Industrial Park broke ground in 2016 on a former apple orchard. Horn said the pressure on agricultural land from industrial development is “only natural.” 

“We can use the city of Walker as an example of an area that was agricultural, and when infrastructure was put into place, we’re seeing industrial projects more and more,” Horn said. “Once the infrastructure is put into place, immediately buildings start going up.”

Posted By: MiBiz on October 10, 2021.  For more information, please click here to read the source article.

To receive the In The Know from Signature Associates, please click here to be added to our mailing list.