Construction in the I-39 Corridor holding up strong with smooth roads ahead for incoming activity

Courtesy of REjournals.com
Activity in the I-39 Corridor isn’t shifting gears anytime soon. It’s safe to say that it remains a strong hub for intermodal and transportation infrastructure.

The corridor is also known for exporting large volumes of agricultural, unprocessed and processed food products, much of which gets shipped through the nearby Union Pacific Global III Intermodal Facility, according to a recent I-39 fourth quarter 2015 report by JLL.

Extending from southeast Wisconsin down to southern Illinois, the corridor has seen a positive amount of activity in the last quarter, particularly Rockford, DeKalb and its surrounding counties.

DeKalb’s asking rents—driven by 3M’s upcoming 304,000-square-foot availability at 12101 Barber Green—increased by $.86 to $3.83 in 2015, according to JLL research. This marks the highest average recorded since 2009.

And with a small size for industrial inventory in the submarket, JLL anticipates to see further rate inflation in the short term as the new 3M building hits the market.

DeKalb has been seeing major development these days. The Target distribution center in Park 88 is converting a 1.5 million-square-foot facility from regional to upstream distribution center, according to Paul Borek, executive director and enterprise zone administrator at the DeKalb County Economic Development Corporation. The center will open up 450 new jobs in addition to its previous 350.

Additionally, Tate & Lyle Custom Ingredients is getting a $1.5 million, 14,100-square-foot expansion of a 90,000-square-foot building in Sycamore Prairie Business Park in Sycamore, Illinois; and DeKalb Forge, a manufacturer of high strength parts with elasticity for several industries, is getting an expansion of its closed die forge operations on Pleasant Street in the City of DeKalb.

Meanwhile, construction on the 987,000-square-foot 3M facility in Park 88 in the City of DeKalb continues strong. The facility, developed by Venture One Real Estate and Clayco, received a $40 million capital investment. Borek said that as of March, the wall panels are completed, structured steel is in place and the roof is currently being installed. The project is progressing toward August, he said, and when complete in 2016, 3M’s footprint in DeKalb will be 2.5 million square feet and about 20 percent of all 3M products worldwide are distributed through DeKalb, Illinois.

Sycamore will also be getting new construction. IDEAL Industries is replacing two of its older facilities with a new 220,000 manufacturing facility at 1631 W Prairie Dr. The new facility, with completion scheduled for first quarter 2016, will consolidate and modernize some existing operations, and provide new space for production of IDEAL’s innovative new products—Audacy Wireless Lighting Control System is the most recent new product, which Borek said was selected to be the lighting control backbone of the Chicago Cubs’ historic renovation and expansion of Wrigley Field.

A notable trend in the area lately has been the growing interest of the food industry. Mick Gronewold, principal and manager of the engineering division at Fehr Graham, explained that the food industry has recognized that distribution out in Rochelle and DeKalb is coming out on rail and they are seeking possible opportunities to transload and dock food there.

“They can get the project a few days early to get it here and truck it to Chicago,” he said. “There’s lots of interest in the food industry looking at logistics, and the City of Rochelle is expanding and using I-88 to market.”

The roads are also getting a fair share of attention with several changes and new plans in the works. The tollway is currently looking to upgrade, I-88 got its stretch to DeKalb, and Rochelle to Aurora is scheduled for 2017, according to Gronewold.

The facilitation of easier transit routes isn’t the only reason why the area has remained favorable. He explained that land prices and the workforce are reasonable, too. And with the six new lanes on I-90 and its nice industrial parks and I-39’s great exposure and available land, Gronewold anticipates to see more activity out in the Rockford and Rochelle areas.

“We are seeing spec buildings come back in the size of 55,000 square feet and it’s a great indicator because for many years we didn’t see it,” he explained.

The Rockford Area Economic Development Council reports that investment activity in Rockford is sizzling, with more than $1.5 billion in current investments within the aerospace and health care sectors.

The county, known for its reputable aerospace hub, is currently undergoing a $40 million Maintenance Repair and Overhaul (MRO) from AAR at the Chicago Rockford International Airport, scheduled to open fall 2016. Rock 39 is also seeing a $300 million investment in a new 450,000-square-foot facility from aerospace giant, Woodward, Inc.

And you can’t forget Rockford’s health care operations. The sector is seeing $812 million currently being invested in the area, including a new $410 million medical campus at I-90, and OSF Healthcare’s $32 million investment in a new School of Nursing at the Rock Valley College campus.

A new 185,000-square-foot facility for FedEx, which is nearing completion, is also contributing to the region’s exceptional growth.

Shan Van Sickle, broker at LandMark Real Estate Group LLC, said there’s been a fair amount of movement amongst small business owners making significant upgrades in investments for company growth.

He said that as far as market activity, velocity is slow but there’s a steady trend upward. Van Sickle added that the area could open itself up for more spec going into 2017.

What’s different about the area, he explained, is that the I-39 Corridor has a unique benefit of providing solutions that are more cost-effective with operating business compared to markets like Chicago or Milwaukee.

“We have low overhaul costs, functional product, good tax environment, and a start of a labor force that’s improving and that’s what we need to continue,” Van Sickle said. “We have wonderful proximity to those business centers. Just this past year, they finished expanding I-90 beyond the state line to the north so it’s six lanes to Beloit, all the way to Chicago.”

But is retaining tenants and attracting investors inside the state challenging with nearby southern Wisconsin’s appealing taxes and its desirable close-range to Chicago?

For Van Sickle, it’s a matter of being informed and aware of what’s going on nearby. He said he has seen a fair amount of activity in southwestern Wisconsin and is aware of the challenges in the State of Illinois and are working on addressing those on a state level.

“Municipalities have gotten educated and assertive when it comes to putting packages together for future investors so we can put ourselves on a community level and playing field with our neighbors,” he said.


Venture One Real Estate

Venture One is a real estate private equity fund manager, developer and operating company specializing in the industrial property sector. Headquartered in Chicago, Venture One manages a series of discretionary value-add investment funds that target opportunities throughout the Chicago MSA and Northeast Industrial Region. Principals of Venture One have over $7 billion of transactional experience. For further information go to www.VentureOneRE.com.