Innovation could help industrial sector embrace green design

by Sara Freund

Warehouses, factories and distribution hubs don’t conjure up images of green design. At least not yet.

Green building has advanced way past grass on a rooftop. New technology, lighter soil and innovative ways to utilize rooftop space could help the industrial sector adopt sustainable design.

Office buildings, retail and luxury apartment towers haven’t had a problem going green—city hall, the Rock n’ Roll McDonald’s and the Aqua Tower are all examples of this. But industrial buildings are different. Dirt can get heavy, and the roof on top of a 500,000-square-foot facility might not be built to support the weight of a garden, which can reach up to 50 pounds a square foot. Other hurdles include affordability, extra planning effort and older structures being unable to accommodate extra weight.

As technology advances, some of those problems get solved. OMNI Ecosystems, a company that creates living infrastructure, has developed an extremely light and biodiverse growing medium, called Infinity Media. If you’re wondering how you make dense dirt lighter, OMNI Founder and chief executive officer Molly Meyer simplifies the explanation by likening the process to a popcorn maker. All the same material is there; it’s just popped with air so that per-square-foot it weighs as little as 15 pounds.

The lighter soil can grow everything from lawns, flower fields, veggies and even small apple trees. The plant index from The Roof Crop, which farms and maintains roofs from OMNI Ecosystems, lists five varieties of broccoli, two kinds of kale, six types of tomatoes and more obscure greens like Pak Choi and Mizuna. OMNI Ecosystems just harvested its own rooftop this spring that grows specialty greens for James Beard-nominated Momotaro on Randolph Street.

The company also learned wheat does well on rooftops, too. When OMNI was hired to install a wildflower meadow on top of Studio Gang’s Chicago office, it was too late in the season for the flowers. So they planted a winter wheat as a place holder and were surprised to come back in the spring to find an abundance of the crop. The Roof Crop had students in its after-school program harvest the wheat, Baker Miller then made flour out of the grain and the students made cookies.

The changes in green design could make it a more attractive and feasible option for industrial buildings, too. That’s what the US Green Building Council is hoping will happen. The industrial sector faces a unique set of challenges and can be more complicated than projects within other sectors. That’s why USGBC, which oversees the LEED certification process, created an initiative to help industrial facilities obtain LEED certification.

One of the green industrial projects that the USGBC highlights in its industrial report last year was Method’s South Side Soapbox. The 22-acre site has a 230-foot wind turbine generating half the building’s electrical consumption, a rooftop greenhouse farmed by Gotham Greens and solar-tracking trees in the parking lot.

Roger Schickedantz, director at William McDonough + Partners, worked on the team that designed Method’s facility. “Method is fairly unique,” he said. “We’ve had a couple clients like this but it’s not very common, yet.”

Gotham Greens, a company similar to The Roof Crop, farms Method’s 75,000-square-foot green house and grows up to 10 million heads of leafy greens and herbs year-round for grocery stores and restaurants. Businesses like this give buildings a way to monetize an otherwise unused space.

If one city can push for green industrial buildings, it’s Chicago.

“Green building is really dependent on policy,” said Meyer. It began with Mayor Daley and his initiative for green roofs, she said. Mayor Emanuel has continued the effort by recently committing to power all city-owned buildings exclusively with renewable energy by 2025.

Setting requirements and providing incentives have been a driving force in making Chicago a global leader in the green roof movement and number of LEED certified projects, according to the mayor’s office. The most recent statistic from 2013 says that more than 500 buildings have green roofs, totaling about 5.5-million-square-feet.

“I think the greatest thing would be if industrial buildings started using green roofs,” said Meyer. “You look at some of these massive spaces with totally unused space. There’s storm water flowing off and the urban heat island effect intensifying, natural habitats have been replaced, energy not being optimized. Green roofs help with that and on top of everything you’ve got just the feel good aspect of people wanting to go to work in a place that is uplifting.”

Rooftop farming might take some time to catch on in the industrial sector but changes in technology might make the shift easier. Looking to the future, Schickedantz goal is for factory design to use a little to leave a big impact. “Finding new ways to use what we already have, that’s where we are headed,” he said.

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Midwest states dominate list of best destinations for Millennials

Omaha ranked third on MoneyRate.com’s list of best states for Millennials.

by Dan Rafter

What states offer the most to Millennials looking for a new home? You probably think of New York or California, right?

Well, a new report from financial Web site MoneyRates.com found that many of the best states for Millennials in which to live are in the Midwest. And the best state of all for these young adults? MoneyRates cited North Dakota, certainly a surprising result.

To determine which states are the best fit for Millennials, MoneyRates.com considered eight different factors. The first, not surprisingly, is the strength of the jobs market for young adults. The site, though, also looked at how expensive college tuitions are, the number of apartments available for rent and how high these rents are, access to high-speed broadband Internet, the concentration of bars in the area and the concentration of physical fitness centers in a state.

North Dakota ranked high in several of these categories. MoneyRates.com also found that the state had the second-highest population of people from the sages of 20 to 24. The jobs market is especially strong here for Millennials, with the unemployment rate for people from the ages of 20 to 24 hovering at just 5.3 percent. That figure is a far higher 8.1 percent on average in the rest of the country.

South Dakota came in second on the MoneyRates study, giving the Dakotas a sweep of the top two spots. South Dakota ranks first in the nation in the affordability of multifamily rental rates, an important factor for Millennials.

Nebraska ranked third in the MoneyRates.com study, thanks mostly to its affordable apartment rents and strong jobs market for young adults.

Other Midwest states on the list include sixth-place Iowa, which also has affordable apartment rent and a surprisingly high number of bars, and seventh-place Kansas, which makes the list because of its availability of high-speed Internet access and the high number of apartment rentals available to young people.

Wisconsin tied with Kansas for seventh on the list, and ranks particularly high in the number of jobs available for young people. Coming in at 10th, is Indiana, which offers plenty of affordable apartment rentals for Millennials. MoneyRates.com ranked Indiana high, too, for access to high-speed broadband Internet service.

Posted in Indiana commercial real estate, Iowa commercial real estate, Kansas City commercial real estate, multi-family, Nebraska real estate, Omaha commercial real estate, Topeka commercial real estate, Wisconsin commercial real estate | Tagged , , , , , , , , | Leave a comment

CBRE: Big-box retailers not dead, just evolving

German grocer Lidl plans to open its first stores in the United States this summer.

by Dan Rafter

It’s easy to think that big-box, big-name retailers are going extinct. Shoppers are flocking to Amazon and other online retailers to buy everything from furniture to computers to suits. And the headlines are filled with big-name retailers such as Macy’s, Sears and J.C. Penney announcing their latest round of closures.

But a new report from CBRE says that the outlook isn’t so glum for all big-box retailers.

CBRE’s report, released yesterday, says that big-box retailers are on schedule to open hundreds of new stores spanning tens of millions of square feet this year. In all, CBRE says, 13 big retailers plen to open nearly 1,700 stores in the United States this year. These new stores will total 40 million square feet of retail space.

“Granted, we will see an increase in vacancy in the big-box sector due to recent bankruptcies and closures,” said Melina Cordero, head of research in the Americas for CBRE, in a written statement. “But the hoopla about those collapses nearly ignores that many retailers in the big-box category continue to open additional stores. Some — perhaps a lot — of the big-box space now being vacated won’t be empty for long.”

Which big-box retailers are opening new locations this yeaer? Not surprisingly, the list is headed by discounters. CBRE reports that Dollar General plans to open 1,000 stores across the country in 2017, with each store covering an average of 9,100 square feet. TJ Maxx is planning a big year, too, on schedule to open 197 stores this year, each new store having an average of 28,200 square feet.

German-based grocer, which specializes in low-cost food, plans to open about 100 stores in the country by the summer of 2018 and up to 600 stors over the longer-term. These stores will range in size from 30,000 to 36,000 square feet. Beauty chain Ulta announced that it will open 100 stores in 2017. But the company’s long-range plans are even more impressive; it expects to open 1,400 to 1,700 new locations in the coming years.

Ross, a discount clothing store, will open 70 of its name-brand stores in 2017 and 20 of its dd’s DISCOUNTS clothing and home stores. Dick’s Sporting Goods, one of the few remaining big-box survivors in the sporting goods sector, plans to open 43 of its namesake stores this year, nine Golf Galaxy stores and eight Field & Stream stores, large boxes that will be an average of 49,300 square feet.

So, it looks like the big-box segment isn’t dead. It’s just evolving, with discounters now dominating this space.

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The outlook for Milwaukee’s retail sector? Rising rents and dropping vacancies

The Corners of Brookfield is an example of the mixed-use retail developments that are boosting Milwaukee’s retail sector.

by Dan Rafter

Rents will rise and vacancies should drop throughout the rest of the year in Milwaukee’s retail sector, according to the latest research from Marcus & Millichap.

The reason for the strong numbers? Marcus & Millichap points to job growth. The company reports that job growth in the first quarter of 2017 was the strongest that Milwaukee had seen in the current cycle, and that this good news was providing a boost to local retailers.

Marcus & Millichap predicts that retail sales should rise 5.5 percent in the Milwaukee area during 2017, a rate of growth that would outpace the rest of the country’s.

Not surprisingly, mixed-use developments are fueling the area’s retail sector. The Corners of Brookfield, 84South and Drexel Town Square are all developments that include apartments, restaurants and entertainment venues. Tenants are attracted to these projects, Marcus & Millichap said. And that strong demand is resulting in rising asking rents in the retail sector here for the second year in a row.

Marcus & Millichap says that Milwaukee-area retail rents should increase by 3.3 percent this year, with the average asking rent hitting $12.16 a square foot. Last year, the average retail asking rent in this market climbed 1.3 percent.

Vacancy rates in the Milwaukee retail sector should fall this year, too, with Marcus & Millichap predicting a decline of 40 basis points in vacancy. This should cause the area’s retail vacancy rate to dip to 6.6 percent by the end of the year. Last year, the news was quite different, with retail vacancy rates in the Milwaukee area climbing 40 basis points.

There won’t be quite as much new retail construction this year, though, in this market. Marcus & Millichap says that new retail deliveries will dip slightly below the 1.2 million square feet completed last year in the Milwaukee metropolitan area.

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Breaking into Louisville: Ecommerce fuels Browning’s 300-acre Velocity65 warehouse development

by Dan Rafter

Looking for a reason why Browning Investments decided that now was the right time to build its first spec industrial project in the Louisville market?

It comes down to ecommerce, and the continued rise of online shopping.

Construction is nearing its finish at the Browning-owned and -developed Velocity65 Trade Center at 120 Velocity Way in Shepherdsville, Kentucky, in the Louisville market. Browning is investing $175 million to build up to six warehouse buildings on 300 acres here, a development that, when finished, would total more than 4 million square feet.

Dale Pfeifer, director of real estate development at Browning Investments, said that the continued importance of ecommerce influenced Browning’s decision to enter the Louisville market in such a big way. Louisville boasts an excellent location for ecommerce companies, close to most of the country and benefitting from strong highway and rail service.

Louisville also has the UPS Worldport. Located at Louisville International Airport, the Worldport is UPS’ largest air facility, and processes an average of 1.6 million packages each day. Velocity65’s site is just 14 miles from the Worldport, something that will be a definite draw for future tenants, Browning said.

“Anecdotally, it seems like every one of the prospects we look at now has some sort of ecommerce component,” Pfeifer said. “This site and project is a perfect fit for ecommerce.”

A complicated project

Turning Velocity65 into a reality was no easy task. Phil Charmoli, senior director with Cushman & Wakefield/Commercial Kentucky, spent more than two-and-a-half years negotiating with developers, multiple land owners and a host of government officials to pull the deal together.

Today, the first building at the site – 712,050 square feet on 43 acres – is under construction and is scheduled for completion by the end of August.

Features at the site designed to appeal to ecommerce users include a thicker-than-normal 8-inch floor, LED lighting, tilted concrete walls and an energy-efficient roofing system. The building will also include extra stalls to park up to 138 trailers.

No tenants have been signed at the building yet, but Charmoli said that several companies have expressed interest into moving into the space.

“We feel this is going to be a homerun here,” Charmoli said. “It is a great location along the Interstate-65 corridor, a highway you can use to travel from Chicago all the way down to the Bay area. You can hit a lot of people with trucking services along the way.”

The Shepherdsville area is already a preferred location for ecommerce users. Charmoli said that Amazon already operates about 2 million square feet of warehouse and distribution space in the market.

“I like to think that Browning entered this market because our customers want to be here,” Pfeifer said. “They want to be here for three primary reasons: The UPS air hub is here. This is a prime location. And the labor force is excellent.”

Air Hub

The UPS Worldport has long been an important draw for industrial users in the Louisville market. UPS also operates its Centennial Hub near in the Louisville Renaissance South Business Park neaer the Louisville International Airport. UPS is expanding this hub, spending $300 million to triple the size of the packaging facility to 830,000 square feet.

This was another draw bringing Browning to the area, Pfeifer said.

“We can offer closer access to the UPS hubs than our competitors,” he said. “We are about 14 miles away. That might seem far away, but given the scarcity of land sites for these big boxes in Louisville, we are considered close. We have been able to assemble 300 acres of ground where we can put up buildings larger than a million square feet. This is considered beachfront property.”

Velocity65 will draw its labor force from as many as 20 miles away, Pfeifer said. This gives tenants here access to a particularly deep labor pool.

“That is very important for customers here, to have access to the deepest possible labor pool,” Pfeifer said. “And we have it.”

Browning Investments has had plenty of success developing industrial properties in Central Indiana, Pfeifer said. Company officials decided it was time to break into the Kentucky market to replicate some of that success.

“We have been searching for the right site for a major spec industrial project for a number of years,” Pfeifer said. “The timing was all about this site becoming available. This is an excellent location for us to do business in Louisville. We knew we could build this in-house. We love the location, and we have access to the airhubs. We think this is the perfect fit.”

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Colliers report: Traditional restaurant chains face a challenging 2017

PizzaRev locations in the Twin Cities are scheduled to close this year.

by Dan Rafter

Consumers are spending plenty of time and money eating out. But where they are eating when they do dine out continues to change.

Colliers International highlighted this trend in its recently released first-quarter retail report for the Minneapolis-St. Paul area.

Colliers says that in the Twin Cities — as in most Midwest markets — higher-quality fast-casual restaurants are expected to thrive, while many more traditional sit-down restaurant chains are expected to struggle. Colliers pointed to such chains as Applebee’s, Ruby Tueday’s and Buffalo Wild Wings as examples of traditional sit-down eateries that are expected to have a sluggish year in the Twin Cities.

The reason? Colliers says that diners are increasingly choosing faster, more affordable and healthier options when dining out. And the old-school chains don’t necessarily fit in with these desires.

As Colliers says in its report: “The competitive and ever-changing nature of the restaurant retail landscape is forcing the retail giants of the past to reinvent themselves as newcomers in the market.”

As an example of the woes of more traditional restaurant chains, Buffalo Wild Wings is closing two of its PizzaRev restaurants in the Twin Cities area, one in Edina’s Centennial Lakes development and a second at Knollwood Crossing in Hopkins. Both of the locations, part of the Buffalo Wild Wings chain, opened just three years ago.

Of course, the struggles faced by traditional restaurants doesn’t mean that even popular fast-casual chains won’t face challenges in 2017 and beyond. In the Twin Cities market, for instance, fast-casual restaurants are now facing an upcoming minimum wage of $15. This, Colliers reports, could mean a boost in menu prices, which could impact business.

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Population growth, rising incomes push demand for Midwest storage

By Sara Freund

Employment growth in Chicago and a steady increase in household formation pushes up the demand for more self-storage facilities, according to a report from Marcus & Millichap.

Occupancy in self-storage is improving as development ramps up in the Midwest, Marcus & Millichap reported. Consistent demand and moderate development have resulted in stable growth in 2017. In Chicago, an intense population density coupled with a booming apartment market sustained underlying storage demand, encouraging a drop in vacancy.

Buyer interest is high due to solid returns and steady operations, Marcus & Millichap said. Investors favor the Midwest because of the region’s consistency in slow steady growth. Buyer demand remains elevated, but investors are pushing back on pricing amid expectations of rising interest rates. Sellers’ expectations though have yet to adjust creating a gap between bid and ask spreads.

In 2017, employers added 60,000 workers expanding the headcount by 1.3 percent in Chicago. In addition, single-family home builders will complete 10,000 residences this year and multifamily developers will bring 8,400 units onto the Chicago market. The rate of household formation is set to increase .7 percent this year, up about 5 percent from 2007.

Job growth is strengthening and many households favoring apartments, vacancy at self-storage facilities will fall 130 basis points to 12.1 percent–the strongest dip in the Midwest region. This vacancy rate is a seven-year low and reverses the increase of the past two years.

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