Northwest Indiana continues to lag badly behind other regions in building large industrial spaces tenants can move into on short notice.
About 7 million square feet of industrial space was being built on speculation, that is, with no immediate tenant lined up, in the Chicago region in the fourth quarter last year, according to an NAI Hiffman report. About 3 million square feet was built on speculation around Indianapolis last year.
That compares to no large industrial space built on speculation in Northwest Indiana last year.
Northwest Indiana's lack of a "track record" for building and filling large industrial spaces built on speculation continues to make developers wary of placing large financial bets on such projects here, according to Kelly Disser, executive vice president for industrial services at NAI Hiffman.
Buildings built on speculation go one step beyond making a piece of land simply "shovel ready." Instead, with a so-called "spec" building, a site becomes "move-in-ready" with a new tenant able to start operations almost immediately. Such large industrial spaces can host a broad array of manufacturing users as well as shipping and receiving facilities.
"When they need space, they need it now," Disser said of companies looking for new space. "And if the building doesn't exist when they need it, they are forced to go somewhere else."
But developers like Disser, along with local officials, hope the situation in Northwest Indiana may soon turn around.
Becknell Industrial is slated to begin building a 163,000-square-foot speculative building in Hobart's Northwind Crossings this month. That will be the only sizable industrial building going up on speculation in the region.
But other sites across Lake and Porter counties are being prepped to host both spec and build-to-suit buildings, the latter of which are built with a user already lined up.
"We are a subset of the Chicago market, and there are a lot of advantages in being located here," said Rex Richards, CEO of Valparaiso Economic Development Corp. "When you look at the overall cost of doing business, it's cheaper here and that's attractive to companies."
Two weeks ago, Richards met with Disser and developers for an almost 100-acre plot southeast of Vale Park Road and Ind. 49. Among options discussed was the potential for two spec buildings, one as large as 350,000 square feet.
Valparaiso Economic Development Corp. is also pitching several other sites, such as Park 30 East on the city's southeast side with service available from two freight railroads.
Porter County is currently host to the two largest build-to-suit projects in the region, the 350,000-square-foot Urschel Laboratories Inc. building, in Chesterton, and the 300,000-square-foot MonoSol building, at Ameriplex in the Port, in Portage.
Urschel Laboratories is already moving into its new $104 million headquarters and manufacturing plant in Chesterton from Valparaiso. MonoSol plans to start production at its new $95 million facility this year and create 157 new jobs there by 2020.
In Lake County, NAI Hiffman continues to market the 125-acre Park 65, an industrial park at the northeast corner of the Interstate 65/Ind. 2 interchange in Lowell. It also is marketing the 245-acre Hallmark Crossing, which sits just southwest of the same intersection.
Ameriplex at the Port remains the most successful industrial park in the region, with more than half-dozen large industrial buildings put up there since its groundbreaking in 2001. Some of the largest industrial spaces in the region are at the 400-acre park's east end, including the 574,000-square-foot MidPoint building.
It is also home to half a dozen smaller industrial buildings, office buildings, a Bass Pro Shop, a hotel and restaurants.
Much of the industrial space constructed there in the past decade was built on speculation, according to Mike Micka, Holladay vice president of development. But obtaining bank financing for buildings with no immediate tenant lined up has become increasingly difficult, Micka said.
Banks usually want to see a tenant lined up for at least part of the building before granting financing for the project.
In addition, Northwest Indiana has not yet developed the "massing" of big industrial spaces that has been achieved along Ill. 55 and in Southeast Wisconsin, Micka said.
The massing of warehouse and production facilities in close proximity is important, because it allows trucking companies to maintain efficiency by quickly filling up trailers with new loads as soon as one is dropped off.
"That's the missing piece, until we get some of those larger buildings," Micka said.
The Associated Press contributed to this story.