Brokers: Interest in Janesville's industrial vacancies strong
JANESVILLE While the interest is certainly there for vacant commercial property in Janesville, signed leases are not.
Brokers and economic development officials said that could change in the coming months as business owners become more comfortable in a market that’s been dogged by economic and government uncertainty.
“The interest is strong—certainly stronger than it was a year ago at this time—but what’s not so strong is decision-making,” said James Otterstein, Rock County’s economic development manager.
The interest, Otterstein said, is coming from a variety of industrial sectors.
There’s been plenty of tire kicking, and Otterstein and others are confident deals will come to fruition before the end of the year.
“On the industrial side, I’m encouraged,” said Mike Venable, a principal with Commercial Property Group in Janesville. “Deals are closer to getting done, and there definitely is stuff in the works.”
In normal times, Janesville has a vacancy rate of about 7 percent in its commercial buildings, said Bill Mears of Coldwell Banker Commercial McGuire Mears and Associates.
He estimates the current industrial vacancy rate at about 15 percent. That doesn’t take into account more than 4 million square feet of vacant industrial space previously used by General Motors.
“Do we want vacancies? Yes, but our biggest problem right now is we have a lot of vacancies on big buildings,” Mears said. “What’s hard to find are those properties in the 30,000- to 40,000-square-foot range.”
In fact, Janesville has several buildings available that are 100,000 square feet and larger.
The granddaddy of them all is the Helgesen Industrial Center, a 700,000-square-foot building on the city’s south side. It’s the former home of a GM supplier, and owner Jeff Helgesen has completely refurbished and upgraded the facility.
Helgesen said he’s had “enormous” interest in both that building and the 110,00-square-foot vacant building he owns on Wuthering Hills Drive.
In fact, he said, two deals that would have brought hundreds of jobs to the community have fallen through at the last minute, one when a union made concessions to keep an employer in Milwaukee and the other when a federal grant was delayed indefinitely.
Helgesen believes that on Venture Drive he has the perfect building for large-scale manufacturing, but he’s now in a position where he must consider leasing the building piecemeal.
On his desk sits a lease that he has yet to sign for about one-third of the facility.
“I want to use that building to its fullest capacity, but at some point I have to start seeing some revenue,” he said. “I’m paying $510,000 a year in property taxes on an empty building.”
While landing a large-scale lessee is more difficult to do, Venable said that the smaller facilities are more in demand right now. But, he said, the city doesn’t have an adequate inventory.
“I get emails all the time from people looking for a 20,000- to 40,000-square-foot building,” he said.
There just aren’t any.
“We’ve got wide open buildings at 100,000, 200,000 and up to 700,000 square feet, but not the smaller ones,” Venable said.
That raises the question: Should somebody be building facilities that size to meet the demand?
“I’ve had that conversation with several people, and it’s pretty tough right now for people to dig into their pocket for $500,000 or $1 million to build a building and hope it’s going to work,” Venable said.
Otterstein said Janesville vacancies are competing with facilities in Milwaukee and Chicago, where base rent has been cut to the bone.
Venable said all communities are competing with one another, but he likes his geography.
“This market has it all,” he said. “Rail, air, the interstate, it has a great logistical presence in the middle of Milwaukee, Chicago and Minneapolis.”
The local market will rebound, he said, but it’s a matter of time.
“From Madison to Beloit, we’re seeing a steady stream of interest,” he said. “I’m encouraged.”
Mears and Venable said the caution that’s been hampering the industrial market might be even more pronounced on the office and retail market in Janesville.
Both men said that vacancy rate is higher than normal.
“The smaller companies are still nervous and are not taking the next step,” Venable said.