Market shifts favor new industrial redevelopment
WYOMING — Stu Kingma often fields multiple phone calls per month from people interested in redeveloping Site 36, one of West Michigan’s most storied former industrial sites.
Despite that activity, he says he’s far from calling the reuse of the former General Motors stamping plant in Wyoming a done deal.
The associate broker with a focus on industrial property at NAI Wisinski of West Michigan in Grand Rapids has maintained the listing for Site 36 since March 2015. Kingma said he continues to work with other stakeholders — including the city of Wyoming and The Right Place Inc., the Grand Rapids-based regional economic development firm — to find the right single user or multiple users for the industrial site.
At this point, he remains unsure whether the site will draw in a big user from outside the region or local companies looking for space to expand or consolidate their operations.
“We believe there’s lots of local companies that could be a good fit there,” Kingma said. “We can all want lots of things, but at the end of the day, it’s the market that will really drive that.”
According to Kingma, favorable market conditions could help catalyze some sort of redevelopment activity at the relatively flat, 92-acre site near the corner of 36th Street and Clay Avenue SW, where GM closed a long-time plant in 2009 and later demolished it. With an ever-increasing shortage of existing industrial facilities in West Michigan, buyers have turned to purchasing developable land in recent months, he said, noting vacant property sales have accounted for about 20 percent of his overall business.
Put simply: Industrial users essentially have exhausted their options within the existing inventory, making new construction one of the only viable alternatives, he said.
“We’re selling buildings before they hit the market,” Kingma said. “The market has constricted enough to where users have to consider building. We believe the right time is now, or is getting there.”
AVOIDING ‘STATUS QUO’
While Site 36 has yet to attract a sale, other large-scale redevelopment projects have been active across West Michigan. In recent months, developers have announced major projects around the region, and in some cases, have started construction on industrial projects and redevelopments at former industrial sites.
For instance, Rockford Construction Co. Inc. has been working on the 260-acre Walker View Industrial and Commercial Park off I-96 and Walker Avenue, where FedEx Ground is building a reported 346,000-square-foot distribution facility.
In other cases, developers are breathing new life into former industrial properties with non-manufacturing uses. As MiBiz reported last month, a group of a dozen Muskegon investors have announced plans to convert the former Sappi Paper Plant site on the south end of Muskegon Lake into an unspecified, multi-million dollar mixed-use development with the possibility for housing, office, commercial and hotel space.
Additionally, the trend of reusing former industrial sites is more than just a West Michigan phenomenon. For example, developers in Pontiac this summer opened M1 Concourse LLC, a project that caters to automotive enthusiasts by offering a racetrack, car storage and possible future residential and commercial development at the site of a former GM manufacturing plant.
Speaking at the Michigan Economic Developers Association (MEDA) annual conference in Detroit last month, M1 Concourse founder and CEO Brad Oleshansky said his project hinged on recognizing uses beyond typical manufacturing while also embracing the site’s automotive legacy.
“There’s a unique opportunity these sites present,” Oleshansky said, noting that prior to the M1 Concourse redevelopment, he had no background in commercial real estate. “Talk about an idea that’s not traditional use, not industrial use. Don’t go the status quo. I think creativity is key to all these things and then people buy into your vision.”
OPEN TO POSSIBILITIES
While a shift away from manufacturing may have been the necessary route for redevelopment projects such as the M1 Concourse, stakeholders involved in Site 36 say the odds of that site attracting a non-industrial user remain slim to none.
NAI Wisinski’s Kingma and others contend that the site’s access to multi-modal transportation — including rail service on the property — and its available power infrastructure make it ideal for one or more industrial users.
“It boils down to critical mass for that site,” Kingma said. “I believe the site will be manufacturing-oriented, without question. The question is, in what form. Big projects are few and far between, so you have to be patient.”
Overall, Kingma and the various partners say that they’re open to all kinds of industries locating on the site, from automotive component manufacturers to agribusiness and food processors.
Indeed, the latter two sectors have been drawn to other large industrial projects in recent years, according to Steven Black, transaction manager at RACER Trust, a Livonia-based group that is working to remediate former GM sites in nine different states.
“Certainly, agriculture is a target industry for us at RACER Trust and our immediate partners,” Black said during a session at the MEDA conference. “The reason agribiz makes a lot of sense on these older, industrial sites is the infrastructure. … (With) the amount of wastewater and the kind of wastewater that they need to process, it doesn’t make a lot of financial sense for them to locate those facilities in rural areas. As our world population continues to grow, there’s nothing but upside from our perspective.”
A QUESTION OF STRATEGY
Stakeholders in Site 36 must also decide where to look for a potential user for the property.
Economic developers in Michigan frequently differ on whether it’s better to “hunt” for outside companies or work to grow existing firms through strategies known as “economic gardening.”
According to Kingma, deals involving large outside manufacturers tend to be rare. Moreover, as many West Michigan manufacturers experience capacity restraints, a homegrown user for the site seems to be the more likely source, he said.
Still, one statewide commercial real estate expert at the MEDA conference cautioned economic developers to look for both outside firms and expanding local companies rather than limit their search to just one type of user.
“It’s economic gardening and it’s economic hunting,” said Matt Cullen, president and CEO of the Dan Gilbert-backed real estate firm Rock Ventures LLC, which is based in downtown Detroit. “We need more of all of it.”