Dec. 12, 2007
ATTRACTING BUSINESSES THAT WANT THEIR OWN BUILDING
Addition by subdivision
Developer finds a niche with 1-tenant structures

DOUG SMITH

Beacon Partners has crafted a marketing name -- "commercial subdivision" -- for a type of development that economic developers say the region needs.

The Charlotte company recently started two such projects with a combined total of nine buildings and 394,500 square feet of commercial space -- one in north Charlotte and one in Concord -- and it has completed or begun work on six others.

Beacon refers to them as subdivisions because they include clusters of single-user buildings, similar to houses in a suburb, rather than giant warehouse-style structures sliced into multiple spaces.

Partner Jon Morris, who is spearheading the initiative with Beacon's Mike Harrell, sees them appealing to manufacturing, showroom, call center and distribution companies seeking speedier construction and individuality. The businesses' names will be on free-standing buildings.

Economic developers say single-tenant buildings are popular with small to medium-sized companies moving into the area and with expanding local businesses.

"Every opportunity we've had with the development community, we've preached the need," said Jeff Edge, senior vice president of economic development at the Charlotte Chamber.

"A majority of international tenants and small companies -- especially those locating from other states -- prefer their own buildings," he said.

For some of those businesses, the issue is more than just getting your name on a building, said Kenny McDonald, senior vice president at the Charlotte Regional Partnership.

Firms involved with medical, food and defense, for example, might need a free-standing structure they can secure to ensure that certifications remain intact, he said.

Edge said business owners are familiar with single-tenant buildings in smaller communities but have difficulty finding them in Charlotte, because multitenant Goliaths have become dominant here over the past 25 years.

Beacon's commercial subdivisions won't displace those buildings, but within its single-tenant niche real estate experts believe it has the potential to become a Next Big Thing in the region.

Other developers compete in the market, but a companywide initiative focusing on leasing and selling single-tenant buildings is unusual in Charlotte-area real estate.

"Beacon has found a formula," Edge said. "It can buy all the land and do all the site work at once on five or six buildings with two or more under construction at a time for economy of scale."

Beacon is investing $28 million to develop both 77 OverLook off Interstate 77 North and International Corporate Center in Concord on speculation, which means it is starting with no signed leases or sales contracts.

Because of the financial risk Beacon probably won't have much competition from larger and more risk-adverse companies that require considerable investor backing.

"Investors go for the lowest risk, which would be the multitenant buildings," Edge said.

Morris said one of Beacon's selling points is that it can produce a single-tenant speculative building faster and less expensively than one contracted for and built to owner specifications.

He said the process is similar to that of a production home builder putting up numerous houses at once in a subdivision instead of doing one at a time like a custom builder.

The two latest projects will bring Beacon's portfolio in the region to eight, totaling nearly 1 million square feet in 34 buildings and representing $95 million in investment.

Three are outside Mecklenburg -- in Cabarrus, Iredell and York counties -- and Beacon partner Harrell said they're seeking more opportunities regionwide.

That's important to McDonald at the Charlotte Regional Partnership. He's seeing more companies looking to tap into a close-to-home work force, allowing employees to reduce long commutes.

By developing on speculation, he said, Beacon can have product on the shelf -- so to speak -- when these companies go shopping for locations in a community.

Morris said Beacon tested the idea in 2004 -- before it came up with the commercial subdivision name -- in a project at Wilkinson Boulevard Business Center on Wilkinson Boulevard in west Charlotte between Steele Creek Road and Morris Field Drive.

"The market response proved positive and immediate," he said. "We sold all four of our buildings in less than 12 months."

Wilkinson tenants include Seacon Corp., a vulcanized rubber products manufacturer; Duo-Fast Carolinas Inc., a distributor of tools and fasteners; and Pavco Inc., a manufacturer and supplier of chemical systems for the metal processing industry.

The key to making the commercial subdivision work, Morris said, is cooperation among public entities, developers and builders.

On the Wilkinson Boulevard project, for example, Beacon worked with the Charlotte-Mecklenburg Development Corp., a public-private partnership.

At 77 OverLook, Morris said, the city is helping Beacon accelerate construction through a time-saving express building review process, and in Concord, the landowner is selling Beacon a prepared site for its International Corporate Center.

The next step, he said, is expanding the concept into the rest of the Charlotte region, where he believes several more commercial subdivisions are possible.

77 OverLook

• Location: Off Interstate 77 on Lakeview Road between Exits 16 and 18.• Size: 20 acres.

• First phase: 40,000-square-foot and 112,683-square-foot buildings for manufacturing, showroom and distribution customers. Remaining 10 acres for built-to-suit or speculative development.

• Completion: April.

• Lease rate: $4 to $6 per square foot annually.

• Sale price: $65 to $75 a square foot.

• Development team: Beacon Partners, developer; Intercon Building Corp., contractor; Wash Hatem Nelson Architects, design services.

• Marketing: Scott Dumler, Beacon Partners.

International Corporate Center

• Location: In International Business Park off Interstate 85 between Poplar Tent Road and N.C. 73 in Concord.

• Size: 11 acres.

• Construction: Five buildings with spaces from 4,800 to 43,550 square feet.

• Completion: May.

• Lease rate: $7.50 to $13.50 annually for office-warehouse flex and call center space.

• Sale price: $85 to $105 a square foot.

• Development team: Beacon Partners, developer; Myers & Chapman Inc., contractor; Wash Hatem Nelson Architects, design services.

• Marketing: Charlie Swanson, Beacon Partners.

Commercial subdivisions

This is a list of earlier projects Beacon Partners considers commercial subdivisions.

• Wilkinson Boulevard, four buildings, approximately 8 acres, 81,000 square feet, completed in June 2005.

• NorthCross Business Center off Interstate 77 North, five buildings, approximately 12 acres, 98,000 square feet, completed in August 2006. One 16,800-square foot-building remaining.

• InnerLoop Park off Old Statesville Road in northern Charlotte, four buildings, approximately 14 acres, 104,000 square feet, completed in March 2007. One 24,000-square-foot building remaining.

• Atando off North Graham Street, three buildings, approximately 7 acres, 60,000 square feet, completed in November 2006.

• SouthCross Business Center in York County, four buildings 124,000 square feet, approximately 40 acres. Under construction. Estimated completion: early 2008

• Lakefield Corporate Center in Iredell County, five buildings, 126,000 square feet, approximately 26 acres. Under construction. Estimated completion: April.

• Information: www.beacondevelopment.com. Doug Smith