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A rendering of Industrial Partners USA’s 110-acre industrial development in Pavilion Township. A rendering of Industrial Partners USA’s 110-acre industrial development in Pavilion Township. COURTESY PHOTO

Development JV accelerates plans for large- scale spec industrial projects in SW Michigan

BY Sunday, October 09, 2022 07:11pm

When a Southwest Michigan development group received more inquiries in 2021 for industrial spaces 1 million square feet or larger than it had in the last 10 years combined, leaders knew they faced a challenge, as well as had a business opportunity on their hands. 

Michigan’s industrial market has lacked inventory of large-scale industrial spaces, which frequently caused companies to weigh their options out of state, said Greg Dilone Jr., director of development for Portage-based Clark Logic LLC and Great Lakes Capital, a real estate private equity firm based in South Bend, Ind. 

However, the two companies have been partnering to add new industrial inventory in Southwest Michigan by developing speculative projects through Industrial Partners USA LLC, a joint venture the two firms formed in 2019.

Industrial Partners USA recently completed the first phase of the joint venture’s inaugural project in Battle Creek, which has been fully leased out. They expect to break ground in April 2023 on the second phase of the project, located off Watkins Road and Mercury Drive, that is set to add 243,000 square feet of space. As well, Industrial Partners USA currently is working to develop 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 initially considered the possibility of developing new industrial properties, company President Jamie Clark was ambivalent about the idea, but came around when his diversified warehousing, logistics and real estate services firm joined the Battle Creek project.

“After being awarded the opportunity to construct the Battle Creek site, the realization of the opportunity to expand Clark Logic — then only 2.5 million square feet of facilities — became ever clearer, and we hit the gas pedal on gaining a foothold with the strongest sites along the I-94 corridor in Kalamazoo,” Clark Logic President Jamie Clark told MiBiz in an email. “We now have over 4.5 million square feet and are growing more rapidly than ever.”

Industrial Partners USA now has more than 300 acres of land under control in different phases of industrial development, and the partners are working to secure an additional six sites for another 1,000 acres of expansion, Dilone said. 

To date, all of Industrial Partners’ projects have been speculative builds, which is a reflection of strong demand in the industrial market. Spec projects also generally provide the developers with a quicker path to fill some of the demand for industrial spaces, Dilone explained.

“We work with every major manufacturing partner in Southwest Michigan, and day-to-day we understand the demand in the market 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 materials costs has come with its own set of challenges, Dilone added, citing that project costs today are at least 50 percent more than they were three years ago.

“Our focus is on the municipality and aligning ourselves with them and the state to find incentives that can offset our cost of construction and provide us a runway for a successful start to the project,” Dilone said. 

Industrial Partners’ executives visited “no less than 100 sites around Kalamazoo” as part of the process to narrow the joint venture’s focus to the four sites it has today, he said, noting the company chooses to locate in municipalities that “have been the best and quickest to work with.” 

“Four of our sites have rail, which has also been a strong suit,” 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 Fort Custer Industrial Park. The economic development group contributed a new road to the site in a nearly $1.5 million investment. 

One of the biggest needs for industrial development right now is site readiness, Dilone said. 

“Battle Creek Unlimited has been very good and has for decades been buying and zoning land and getting it prepped in some manner to get it fast tracked,” he said. “In other municipalities, land will have a future land use designation for industrial, but it’s not currently zoned industrial.”

The developer expects to break ground this month on its Pavilion Township project, located just east of Portage. The first phase of the project includes a 295,200-square-foot industrial spec space that already has several tenants inquiring about long-term leases, Dilone said. When fully completed, the Pavilion Township project will feature 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 broke ground this 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 out as a spec 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 for its two industrial projects in the village of Mattawan, where it expects to break ground in 2023-2024. 

Housing needs

When Industrial Partners USA goes into a community for an industrial project, the firm realizes its projects also will likely create a need for additional housing, especially given the additional employees the projects could bring into an area, Dilone said.

Dilone, who worked solely with Clark Logic for about nine years, became exposed to the housing needs after the company partnered with Great Lakes Capital, which also builds multifamily and mixed-use properties.

Great Lakes Capital typically scouts for sites to develop into multifamily projects in areas where it is involved in an industrial project, Dilone said. The firm has projects that are “under development in some manner” in Battle Creek and Kalamazoo that could break ground in 2023-2024. As well, it also has a site under contract to build a multifamily project in Mattawan. 

“We look for those types of sites as well,” Dilone said. “We know there could be a demand from a couple thousand employees.” 

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