(Janesville, WI) By Jim Leute, Gazette
As a developer, landlord and builder, Jeff Helgesen knows a thing or two about keeping tenants happy. More often than not, he's been able to help when they need more production space. Helgesen is doing that again, and he's doing it in a Janesville market where vacant industrial space is almost nonexistent.
"There's just no space left in Janesville," said Helgesen, owner of Helgesen Development Corp. Helgesen's observation is borne out in data collected by the Rock County Development Alliance, which tracks vacancy rates in the most significantindustrial properties in the county.
Since 2010, Janesville's industrial building vacancy rate has fallen dramatically. Among several properties in Janesville, Helgesen owns the Helgesen Industrial Center at 2929 Venture Drive and another building at 101 Venture, just across Beloit Avenue. Formerly home to a parade of General Motor's suppliers, 2929 Venture sat empty after GM closed its Janesville plant in 2008.
Helgesen invested millions of dollars to remodel the 700,000-square-foot building, which is now fully occupied by two tenants: Miniature Precision Components has 460,000 square feet of space and John Deere Central Consolidated operates in the remaining 240,000 square feet.
Across Beloit Avenue, Cummins Emissions Solutions leases 187,500 square feet of space and employs about 60 people in another Helgesen building. Cummins needs more space, preferably under one roof, for its distribution and light assembly operation.
Helgesen proposed a 150,000-square-foot addition to the west end of 2929 Venture Drive. With building permit in hand, he awaited a decision from Cummins, which ultimately decided to rent a building Helgesen owns at 505 S.
Wuthering Hills Drive. For the time being, Cummins will work out of two Janesville facilities.
Helgesen said the 110,000-square-foot building on Wuthering Hills could be expanded to meet Cummins' needs if it wants a single location. "Or we could just build them a new building," he said.
Helgesen will likely wait to build the addition at 2929 Venture until spring, which should give him time to find tenants. Existing tenant MPC, he noted, is expecting growth for the next four years and has already nearly doubled the space it expected to use in the renovated industrial center.
James Otterstein, Rock County's economic development manager, said the industrial real estate market in Janesville is incredibly tight. "Buildings in the 150,000-square-foot to 200,000-square-foot range are very much in demand, and the options in Janesville are becoming increasingly limited," he said. A handful of properties-some larger than 100,000 square feet-are vacant, but Otterstein said that the market has effectively classified those as functionally obsolete.
Once a property gets this type of label, it's time to consider balancing highest and best use scenarios, he said. Then-if market conditions and cost warrant-demolition and redevelopment plans can proceed. "They are vacant because they are obsolete from a variety of perspectives," he said. "Price point doesn't matter. While they may provide some type of need for certain end users, these arrangements tend to be short-term in nature and a much different value proposition than what contemporary space offers."
While several potential projects are in the pipeline, Otterstein said companies and their brokers are typically waiting until the absolute last minute to make expansion, consolidation or relocation decisions "The reasons often are tied to very complicated financial, logistical and operational concerns," he said. "They typically go through a series of rationalization scenarios: 'If we were to have sales of X, it would result in output of Y? Can we do that in our existing footprint?'"
Often, Otterstein said, the answer is no and companies then look at a variety of expansion options before settling on one or two that would work best. By that time, the quickest path to market is usually leasing an existing building and renovating it, if necessary.
That explains why the Janesville market-once the home of plenty of available industrial properties-has been attractive. It also explains, he said, why there hasn't been a single business to build a new facility in one of the county's three certified shovel-ready business parks. While the parks offer a speed-to-market advantage that other sites can't match, they typically can't be put into production as quickly as an existing building.
"If someone walked into Janesville today looking for a 150,000-square-foot building, they could buy the 12-acre or so parcel, get all their permits, build it and be up and running in eight months, and that's really moving," Otterstein said of the shovel-ready parks. In most cases, however, a landlord can get them in an existing facility quicker, he said.
High industrial occupancy is good for a community because it typically reflects a vibrant manufacturing economy, potential for jobs growth and an increased tax base, Otterstein said. Still, he said, communities want an acceptable inventory of industrial
space so they aren't automatically dismissed from relocation or expansion conversations.
Otterstein believes the recent run on existing industrial property will have two outcomes. He suspects interest will grow in speculative building, and he thinks the relative lack of available buildings will drive prospects to the businessparks and other vacant parcels.
"We didn't want Cummins to leave Janesville," Helgesen said. "We worked hard to help retain them and help them expand their footprint in Janesville.
"I have another tenant that wants 200,000 square feet right now. I've got so much stuff going on in the Janesville and Milton area that it would make your head swim. Really good stuff."