Commercial Industrial Space Shortage

WR Photo

If you are one of the many business operators in the local manufacturing or distribution industry that has experienced the business growth over the past couple years and are in need of additional space for your operations, you are not alone.  The struggle now is find additional quality manufacturing or distribution properties for lease or for sale.  With the local St Joseph County industrial vacancy near all time lows of 4.6% and Elkhart County vacancy below 1%, industrial space is nearly non-existent.  The result is many companies are choosing to build new facilities either by adding on to existing or at a new location.

The shortage of industrial buildings has caused some developers to consider constructing speculative buildings in hopes that they will be able to quickly lease 80% of the construction.  While it would seem this would be a natural reaction and happen out of pure supply and demand, the pace at which speculative building has happened has be relatively slow.  The reason likely has to do with investors memories from 7-10 years ago and the great recession.  Around 2010 industrial availabilities were plentiful as buildings sat vacant and on the market for months or even years.  Today the overall national and local economy is still good, but there is much uncertainty in the economy due to a long sustained economic recovery, potential international trade tariffs, new tax structure and potential interest rate hikes.  Another reason for the slow growth of spec building is construction costs.  There has been tremendous construction activity in the past couple of years and costs of construction has increased significantly

If you are one of those business owners looking for expansion, there are still a few opportunities and lease rates for existing space have only crept up slightly while rates on new construction have risen more quickly.

The office of NAI Cressy Commercial Real Estate has the only complete database of all commercial properties in the region.  Find out more by checking out our 2018 Annual Report or using our website to search properties.

Cressy Annual Report

Cressy Property Search

Advertisements

Starbucks Heritage Square

Improvements for a new Starbucks have started within the west endcap suite of the former Doctor’s Express Suite at Heritage Square.  The expectation is for the cafe to open within the next 90 days.  The building faces the highly trafficked Cleveland Rd and the Starbucks suite will feature a drive-thru window.  There is already a Starbucks within the Martin’s Side Door Deli at Heritage Square, and that will remain in place.

One Michiana Square

The One Michiana Square building, located at 100 E Wayne St in downtown South Bend, came under new ownership in 2016.  The building was built in 1985 and had historic vacancy rates of 20-30%.  Now with ownership partners from Newmark Grubb Cressy & Everett and new tenant partners including Ladue Curran and Kuehn, the building is now 95% occupied and a true class A office building.  Renovations to the common areas and tenant spaces have given the interior a much needed updated modern feel.  The finished lobby is gorgeous and the office space within LCK’s space features collaborative working space, glass office walls and an open break area.  If you are in the area, step into the lobby and check out the work that has been done by Newmark Grubb Cressy & Everett.

Downtown South Bend Booming

Anyone that has visited or driven through downtown South Bend this year, has seen changes and witnessed massive commercial developments.  The Smart Streets project, which is converting the one-way streets into two-way streets with round-a-bouts and new sidewalks and landscaping, is impossible not to notice.  The redevelopment of the Chase Tower and JMS building into condos and the LaSalle Hotel and Amerigo renovations into apartments and commercial retail are also obvious improvements.  Recently the parking lot which will become a new Courtyard by Marriot hotel was also tore up.  All these developments are meant to bring much needed residents into the downtown area but in the meantime have made downtown a virtual construction site.

Has all the construction hurt business?  Local owners say no.  Mark McDonnell, owner of the LaSalle Grille, recently commented that despite the road detours business has been great.  James, the owner of Bruno’s Pizza downtown, stated the same experience in his store.  Recently I stopped in for lunch at the Chicory Cafe at the corner of Jefferson and Michigan St.  I arrived at 11:45 and within 30 minutes the line to order food was steadily 12 people deep.  The staff at Chicory handled the rush beautifully, the line moved quickly and food was brought out with little wait.  Outside the cafe, the streets were a bustle of people enjoying music and food on their lunch break.

On the most recent First Friday Event downtown, people of all ages and backgrounds filled the sidewalks and local restaurants and pubs. Musicians played played in cafes and on the plaza, merchants displayed their wares in windows and on sidewalks, and everywhere people enjoyed the sunshine and atmosphere.  In the evening hours, Latin music on the plaza drew party goers to dance on the plaza…yes even me.  While enjoying a craft beer at Brew Werks, I chatted with a young guy from Dowagiac making his first visit to South Bend.  He had been told that there was nothing going on in South Bend, but his first visit proved just the opposite.  As someone that has worked downtown for the past 13 years, I have to admit that I have been completely amazed by the change in the town.  The increased volume of people working, visiting downtown is amazing.  It’s easy not to notice subtle changes, but the life and quality of new businesses downtown and East Bank is truly quite amazing and sure to continue to grow.

If you haven’t visited downtown recently, get out and make the short trip.  If you have, share your experiences.

Ground breaking on Main St Mishawaka

Construction has finally begun at the site along Main St in Mishawaka adjacent to Lake City Bank and Meijer.  Plans for a multi-unit retail center were announced in early 2015, long enough ago that many may have forgot about the project.

The original announcement was for a 4 tenant retail building that would be anchored by Potbelly and Qdoba restaurants.  Both restaurants are new to our market, though the first Qdoba opened a few months ago at the Shoppes on 6 in Elkhart.  The owners of the property were unable to be reached to confirm both tenants or any other potential retailers.

Heavenly Goat-Heritage Square

A peak in the window on the construction of the latest craft brewer in the South Bend/Mishawaka area.  The Heavenly Goat Brewing Company will be opening in the former Gino’s Pizza in Heritage Square.  This will be an excellent location and a highly anticipated opening.  Good luck to Greg and Joel, we can’t wait!

Facebook HeavenlyGoat

Why do so many restaurants fail?

It is a well known idea that restaurant businesses are notorious for starting up and failing within the first few years of business.  Eye-popping statistics are thrown out like, “90% of all restaurant start ups fail within the first three years.”  Researchers from Ohio State University, interested in the validity of this type of statistic, studied 2,500 restaurants in the Columbus area and found that only 25% of restaurants turned over ownership in the first year and 60% turned over after 3 years.  This rate is still high, though not nearly as high as some anecdotes or even lenders would suggest.  Of this 60%, many restaurants have not failed, they have simply been sold by their owners even though they are making money.

So what is the reason for the 60% rate of ownership change?  H.G. Parsa, the professor at Ohio State University that headed up the study, concluded that most restaurants failed because of owners’ willingness to put sufficient attention on the business itself.  Life often gets in the way, i.e. divorce, illness, children, etc.  Those that have worked in the restaurant business know the hours are brutal and sacrifices of personal and family life are necessary to make a restaurant or bar successful.  This can be very draining on an owner and many find that after a couple years they are no longer willing to give up family and personal time for the business.  They may either choose to sell the business or simply devote less time into it and watch the business start to degrade.

This time and attention to the business can be the contributing factor to many of the more obvious restaurant failure reasons:  Poor customer service, inconsistent quality, poor money management, insufficient marketing and lack of investment in quality people.  These are all manageable issues.  Quality restaurant employees are hard to find and while many staff are good people, they simply will not be as dedicated as the owner.  That is a reality that owners need to be aware of.  Owners need to be willing to sacrifice much of their time and energy for the business, create a well thought out business plan and execute the plan and adapt throughout the life of the business.  The restaurant business can be rewarding and profitable but need to have the right kind of owners.

Mishawaka Bar for sale

Elkhart Bar for sale

Hoffman Hotel Apartments

I got a chance to walk through parts of the Hoffman Hotel Apartments in downtown South Bend recently.  The artist apartment building is now open and actively leasing.  Currently the owners have 18 tenants that have already moved in since the building opened on March 18.  The studio apartments are attractive with great views of downtown and Notre Dame!  The project also features common fitness area and artist creative studio space.  Pictured below is the creative space on the top floor.

LaSalle Hotel apartments next door are set to open in just a few months and will feature beautiful 1 and 2 bedroom apartments and commercial retail space.  Two great projects for downtown South Bend.

 

New Tenant in the Former Walgreens

The former Walgreens building which has sat vacant for many years at the prime traffic intersection of Grape Rd and Edison Rd finally has a new long term tenant.  DriveTime, a national used car dealer has started to make improvements to the building.  DriveTime is headquartered in Phoenix, AZ, operates over 129 locations and specializes in providing credit to car buyers.  This new dealership will join other long time local car dealer along Grape Rd including Basney, Gurley Leep and Lexus of Mishawaka.

The former Walgreens has been without a long term tenant since the most recent economic depression.  It has had a couple seasonal Halloween stores in the past, but this new tenant is another sign that we are climbing our way out of the downtown and filling some of our retail vacancy.

Drivetime

Emporium Bldg-Niles Ave South Bend

Pictured here is a portion of the newly restored brick exterior of the Emporium Building in South Bend.  Local developer Dave Matthews purchased the building back in 2013 and recently began removing the paint from the exterior.  Matthews will continue to remove the paint from the Niles Avenue side of the building improving the look and further enhancing the feel of the local neighborhood.  The brick on the river side of the building is too soft to withstand the paint removal process, says Matthews, so that side will remain as is.

The East Bank Village continues to see improvements and developments.  Jefferson Blvd improvements were recently completed which includes sidewalks, bike lanes and curbside landscaping.  New residential units are breaking ground and others planned near the river at the former Transpo site.  I would expect that we will continue to see new developments announced for the area in the near future.

Emporium