Retooling industrial space

May 7, 2010
| By Pete Daly |
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America’s economic future concealed a rude surprise in February 2007 when Ashley Capital acquired 4.6 million square feet of industrial/commercial space in 18 former Steelcase Inc. facilities at the shuttered factory complex off Eastern Avenue between 36th and 44th streets.

Eventually, commercial/industrial real estate values began declining like home values had before it, making commercial/industrial a buyers/renters market. Throughout Michigan, in particular, it was too much industrial property with too few takers, exacerbated by tight credit as the banking industry continues to work its way out of the thicket the Great Recession produced.

Now, however, “I think the free fall of values has stopped,” said Susan M. Harvey, senior vice president at Ashley Capital in its Belleville office in southeast Michigan.

Until the credit market begins to return to normal activity, she said, the industrial real estate market will continue to see examples of what she calls “really exceptional pricing,” probably over the next two years.

Ashley Capital, a New York firm with a major base of operations in southeast Michigan, is the largest industrial property owner in the state of Michigan, according to Harvey. The company has tried a variety of strategies to market the 200-plus acres of former Steelcase property, which it now calls the Grand Rapids Commerce Center.

One of the more intriguing strategies was the conversion of part of the former Desk Plant to what Ashley now calls the 40th Street flex building. The building has about 800,000 square feet of space on two floors.

Harvey said it is “not likely” any potential client will show up, looking for anywhere near that much industrial space.

The 40th Street building incorporates high cyclone fencing inside a major ground-floor part of the vacant factory to set off secure spaces of 1,600 to 43,000 square feet which can be leased on a month-to-month basis. Additional spaces can be quickly created to meet the precise needs of clients. The tenants share centrally located restrooms, a break area, shipping/receiving docks and a large door for vehicle access into the building.

“It’s cheap,” said Harvey, and offers ideal space for overflow storage of products, equipment and manufacturing materials.

“We have people who call us on Tuesday and move in on Wednesday,” said Tom Bennett, an Ashley Capital project manager based at the commerce center.

Companies that have rented some of the space include Comfort Research, which is storing bales of foam scraps is uses to stuff its innovative line of bag chairs popular with college students, and Compass Group USA, which has rows of vending machines securely locked up behind the cyclone fencing. Other tenants have included Specialized Powder Coating, Gemini Development and Taylor Companies.

Architectural Glass, which supplies windows for some of the construction projects on the Medical Mile in downtown Grand Rapids, will begin leasing space in June, according to Kevin Hegg of Ashley Capital.

All utilities are included in the rent, and one problem that Ashley Capital realized it would have would be lights left on inside the building by tenants coming and going. The solution was an investment in high-efficiency fluorescent lights that are activated by motion sensors. The people leave for the day, and the lights soon go out.

Harvey said Ashley Capital has sold about two million square feet of the Grand Rapids Commerce Center. Some of the 18 Steelcase facilities it acquired have been demolished and removed, including the coal-fired power plant that was in the middle of the complex.

Bennett estimates there are now about 11 buildings remaining. He works out of the former Steelcase Protection Services building in the middle of the complex. In addition to numerous office cubicles, it also has private offices, conference rooms and a control room with extensive communications cabling that might match that found in a major police/fire dispatch center.

Perhaps the most curious objects in the Protection Services building are several Personal Harbor office modules, a somewhat short-lived product line which Steelcase made in the 1990s. A 1997 article in the New York Times describes Personal Harbor as “a 6-by-8-foot self-contained bubble that seems more like a state-of-the-art photographer's darkroom than an office. It has its own piped-in music, temperature controls and cylindrical darkroom door.”

The former Steelcase medical clinic in the middle of the complex has been leased by an organization that works to keep seniors in their homes, who might otherwise be forced to live in nursing homes.

One of the first companies to locate at the Grand Rapids Commerce Center was Bata Plastics Inc., which recycles industrial and consumer scrap plastic. Bata bought the former Steelcase carton warehouse plus additional acreage, for a total of 44 acres. Bata renovated the existing 121,000-square-foot facility, and also built a 2,200-square-foot addition for office space. The completed addition and the renovation were built to LEED specifications for conservation of energy and sustainable building practices.

The former Steelcase truck garage is now owned by Dean Transportation, which parks scores of school buses there in secured areas.

The former Steelcase Systems I building, a 950,000-square-foot factory where panels for office cubicles were made, was acquired in 2008 by Diversified Distribution Systems of Minneapolis. DDS had warehousing in Chicago and Detroit but consolidated that at its Grand Rapids Commerce Center facility.

Amstore, which produces store fixtures, is now occupying the former Chair Plant.

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