COVER STORY, APRIL 2008

INDUSTRIAL PARKS ON THE RISE
Development explodes at Southeast ports.
Jia Gayles

Increased port activity has injected the Southeast industrial market with new life. The positive outlook is directly influenced by the $5.25 billion Panama Canal expansion project, expected to double its capacity by 2014, and increased Asian trade at Southeast ports of entry. Industrial developers are raising speculative buildings first to put their projects on the map, but build-to-suits round out the remaining pad sites to allow for tenant customization. Moving forward, the industrial market will continue to bring space online near ready-made distribution hubs such as ports and airports to meet steady growth demands, while keeping an eye out for possible side effects of the anticipated downturn in commercial and residential markets.

Farmington Hills, Mich.-based Schafer Development is building New Berlin Commerce Park, a 1 million-square-foot, 75-acre industrial park in Jacksonville, Fla.

“The widening of the Panama Canal zone is obviously going to relieve the Long Beach, Seattle and West Coast-oriented areas,” says Terry W. Smith, principal and CEO of Nashville Commercial, a member of the Cushman & Wakefield Alliance. “[Companies] are not going to have to come in on the West Coast and then come by [cross-country] freight. Anything that lessens delivery time from point of manufacturer to the shelf is going to make the whole distribution supply chain easier.” One of the developments responding to increased port activity is the New Berlin Commerce Park in Jacksonville, Florida, planned by Farmington Hills, Michigan-based Schafer Development. The three-building project will offer 1 million square feet of space for industrial, distribution and business uses.

The facility is adjacent to the new $220 million TraPac Container Terminal at Dames Point, scheduled to open next January, which was built for Mitsui O.S.K, Ltd. The terminal provides direct trade access to Asia and doubles the port’s capacity.

In addition to welcoming the Trapac Terminal, JAXPORT, the Jacksonville port authority, is currently negotiating a contract with South Korean-based Hanjin for a $360 million container ship terminal, and the Army Corps of Engineers is conducting a study for plans to deepen the entire harbor to 45 feet. “The continuing growth of the port of Jacksonville and the new terminals opening will [position] Jacksonville as one of the top East Coast container ports,” says Adam Ossipove, vice president of acquisitions for Schafer Development. “There is a pent-up demand for industrial, and there has been a lack of properly zoned real estate for people to build.” The site for New Berlin Commerce Park was previously zoned residential; however, Schafer was able to get the property rezoned and combine four separate individual parcels to create the 75-acre lot. Construction is slated to begin in the third quarter.

Additionally, the development company will begin construction on Lakeside Station Business Park, a 3 million-square-foot facility projected for completion in the first quarter of 2009. The project is located in Plant City, Florida, and will begin construction on the first 500,000-square-foot building in the third quarter of this year. US-41 Industrial Park, a 1.7 million-square-foot industrial park in Hillsborough County, Florida, near the city of Tampa, is also slated to begin construction in the third quarter; Main Street Commerce Park, a 810,000-square-foot project located at the interchange of Interstate 95 and Pecan Park Road in Jacksonville, will begin construction in the first quarter of 2009.

Hillwood Investment Properties is developing Charleston Trade Center, a 750-acre master-planned industrial park in Berkeley County, S.C.

Near Charleston, South Carolina, Hillwood Investment Properties is taking advantage of the bustling harbor with the development of Charleston Trade Center in Berkeley County. “Companies are looking at an East Coast port strategy as a way to diversify their supply chains, particularly for businesses coming from the Far East,” says Gary Frederick, senior vice president of development for Hillwood Investment Properties. “[Hillwood] focuses on identifying opportunities to build value along the supply chain, and we saw a unique set of circumstances with the port of Charleston.” According to the South Carolina State Port Authority, more than 20 million square feet of warehouse and industrial space is proposed for the area, and development of the 280-acre terminal at the former North Charleston Navy Base will increase Charleston’s port capacity by 50 percent at build-out. Phase 1, valued at $525 million, will complete two-thirds of port expansion and is expected to open in 2013. The port authority also has a $128 million capital improvement plan for 2008, which includes the $28 million expansion of the Wando Welch Terminal. Hillwood’s Charleston Trade Center project is a 750-acre master-planned business park featuring approximately 9 million-square-feet of Class A distribution and manufacturing facilities. The project is located 20 miles from the port, and a new interchange has been proposed adjacent to the site. Funding for the Sheep Island Interchange is currently before the South Carolina legislature. “Berkeley County has 35,000 planned [residential] units along the I-26 corridor,” Frederick says. “Availability of labor in close proximity to [Charleston Trade Center], and a new interchange that will bring commercial services will put everything in the same general location.” Developers believe that the county’s impending growth, a blend of industrial, commercial and residential, will spur a “live, work, shop, play” community. Approximately 8 million square feet of industrial space and 1 million square feet of office/retail space are planned for the project, scheduled to begin construction in the first half of this year, with the first speculative building completed by year-end 2009. Grubb & Ellis | Barkley Fraser will market the property.

During the past 3 years, AMB Property has pulled out of landlocked sites that weren’t airport related and focused on port accessible sites, including AMB Morgan Business Park located 11 miles from the port of Savannah in Bloomingdale, Georgia. “One of the things we really liked about Savannah was its tremendous container growth during the last 5 years,” says Jay Cornforth, senior vice president and managing director of AMB’s North American east region. “Last year, Savannah had double-digit container growth…and continues to get more Asian trade through its port.” AMB Morgan Business Park will boast more than 3 million square feet. The first speculative building is near completion and will be followed by three build-to-suit options, ranging from approximately 350,000 square feet to more than 1.3 million square feet. “We feel the proper way to enter the market is to build a generic functional building,” Cornforth says. “The larger buildings will be a little more tailored and our preference is to wait for that user to dictate the design elements.” The project will also be LEED-certified in accordance with AMB Property’s global sustainability initiative, which will make it the first of its kind in the Southeast. As far as worrying about any market downturn, Cornforth says, “Our properties are strategically located at major seaports and airports where world trade is growing, which better insulates us.”

Birmingham, Ala.-based Graham & Company is developing Airport Distribution Center in Richmond, Va.

Developers are also motivated to build new industrial product near airport hubs. Birmingham, Alabama-based Graham & Company/CORFAC INTERNATIONAL is developing Airport Distribution Center in Richmond, Virginia. The industrial park will be comprised of four buildings, totaling more than 700,000 square feet. The first speculative 115,957-square-foot, rear-loaded speculative building was completed in February and features 30 docks and 32’ clear ceilings. “This is the first speculative building in the northeast quadrant in almost a decade,” says Cliff Porter, executive vice president of Richmond-based Porter Realty/CORFAC INTERNATIONAL and exclusive leasing agent for Airport Distribution Center. “We expect to be well received, particularly in the airport market, because there is so little product of this type available.” The next two buildings will be 208,000-square-foot, front-loaded products. The first facility is expected to start construction this fall and be completed in the spring of 2009, and the second will begin construction in that spring and is slated for completion the following fall. The final building is a build-to-suit option that will commence construction upon securing a tenant; building size can range from 125,000 to 170,000 square feet. The location of the property, near Interstate 295 and the I-895 Connector, also puts it in close proximity to the James River and provides for easy access to south Richmond. As for Richmond’s connection to increased port activity, Porter says, “Until six months ago, growth at Virginia’s port was not discernibly impacting Greater Richmond; however, since the beginning of 2008, it does appear that port users and major companies are beginning to look at the city as a viable alternative to the immediate Hampton Roads area for their distribution needs.”

Industrial development forges ahead as tenant demand for space around port and airport hubs grows and developers seek to diversify their port strategies. Population in the Southeast is also growing, with more people seeking a greater quality of life in warmer climes. The combination of increased world trade and population paints a bright future for the Southeast industrial market. “The southeast is going to continue to foster [growth],” Terry Smith says. “We are going to have a much easier window to the world. It’s nothing but up for the future.”

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