OWhen a Southwest Michigan development group received more applications in 2021 for industrial space of 1 million square feet or more than in the past 10 years combined, executives knew they faced challenges. a challenge and that they had a business opportunity on their hands.
Michigan’s industrial market lacked inventory of large-scale industrial space, which often caused companies to weigh their out-of-state options, said Greg Dilone Jr., director of development for Portage. Clark Logic LLC and Capital of the Great Lakesa real estate private equity firm based in South Bend, Ind.
However, the two companies have partnered to add new industrial inventory in southwest Michigan by developing speculative projects through Industry Partners USA LLCa joint venture that the two companies formed in 2019.
Industrial Partners USA recently completed the first phase of the joint venture’s inaugural Battle Creek project, which has been fully leased. They plan to open in April 2023 the second phase of the project, located off Watkins Road and Mercury Drive, which is expected to add 243,000 square feet of space. Additionally, Industrial Partners USA is currently developing a 36.5 acre industrial facility in Portage, a 110 acre site in Pavilion Township and two projects in the Village of Mattawan.
When Clark Logic first considered the possibility of developing new industrial properties, company president Jamie Clark was ambivalent about the idea, but came to fruition when his diversified warehousing, logistics and real estate services joined the Battle Creek project.
“After receiving the opportunity to build the Battle Creek site, the realization of the opportunity to expand Clark Logic – then only 2.5 million square feet of facilities – became increasingly clear, and we We’ve hit the gas pedal to get a foothold with the strongest sites along the I-94 corridor in Kalamazoo,” said Clark Logic President Jamie Clark. MiBiz in an email. “We now have over 4.5 million square feet and are growing faster than ever.”
Industrial Partners USA now has more than 300 acres of land under control in various phases of industrial development, and the partners are working to secure six additional sites for an additional 1,000 acres of expansion, Dilone said.
To date, all of Industrial Partners’ projects are speculative builds, reflecting strong demand in the industrial market. Specific projects also generally provide developers with a faster path to meet some of the demand for industrial space, Dilone explained.
“We work with all of the major manufacturing partners in Southwest Michigan, and on a day-to-day basis, we understand market demand and what they need,” Dilone said.
Even with the high demand for industrial facilities, building large-scale industrial projects during a period with long lead times and high material costs has come with its own set of challenges, Dilone added, citing that costs projects are at least 50% higher today than they were three years ago.
“We are focusing on the municipality and aligning with them and the state to find incentives that can offset our construction costs and provide us with a track for a successful project start-up,” Dilone said.
Industrial Partners executives visited “no less than 100 sites around Kalamazoo” as part of the process to reduce the joint venture’s focus to the four sites it has today, he said, noting that the company has chosen to set up in municipalities that “have been the best and the fastest to work.
“Four of our sites have rail, which has also been a strong point,” he said.
Industrial Partners USA worked with Battle Creek Unlimited on the development of its three-phase project on a 77-acre site located in the Fort Custer Industrial Park. The economic development group contributed a new road to the site in an investment of nearly $1.5 million.
One of the biggest industrial development needs right now is site preparation, Dilone said.
“Battle Creek Unlimited has been very good and has been buying and zoning land for decades and preparing it in some way to speed it up,” he said. “In other municipalities, land will have a future industrial land use designation, but is not currently zoned industrial.”
The developer expects to open its Pavilion Township project, located just east of Portage, this month. The first phase of the project includes 295,200 square feet of industrial specification space that already has several tenants inquiring about long-term leases, Dilone said. When completed, the Pavilion Township project will include nearly 1.2 million square feet of industrial space. The project also received $11.5 million in brownfield incentives.
Industrial Partners USA’s plans for the Portage project, which began last July, call for a 240,000 square foot facility designed for a single tenant. The project is backed by $2 million in brownfield incentives and started as a purpose-built building but was leased to a local manufacturing company for last-mile distribution, Dilone said.
The development group is in the early stages of development of its two industrial projects in the village of Mattawan, where it plans to start in 2023-2024.
When Industrial Partners USA enters a community for an industrial project, the company realizes that its projects will also likely create a need for additional housing, especially given the additional employees the projects could bring to an area, Dilone said. .
Dilone, who worked only with Clark Logic for about nine years, was exposed to housing needs after the company partnered with Great Lakes Capital, which also builds multi-family and mixed-use properties.
Great Lakes Capital typically seeks sites to develop into multi-family projects in areas where it is involved in an industrial project, Dilone said. The company has projects that are “somehow under development” in Battle Creek and Kalamazoo that could start in 2023-24. In addition, it also has a site under contract to build a multi-family project in Mattawan.
“We also look for these types of sites,” Dilone said. “We know there could be a demand for a few thousand employees.”