Ray Fogg Corporate Properties tried something new at its third building in Euclid’s Bluestone Business Center. It didn’t work out as planned, as a structure designed to accommodate multiple small tenants recently was gobbled up by one big tenant that leased the entire place.
“Shows what we know,” said Ray Fogg Jr., CEO of the Brooklyn Heights-based real estate owner-operator and its sister industrial constructing contracting concern. So Fogg this year plans to clone the 78,000-square-foot Bluestone III next door on Bluestone Boulevard with Bluestone IV.
Construction will begin as soon as winter weather begins to break in late February, with a target of being finished by fall.
Like the other four industrial buildings at Bluestone Business Center, Fogg will start the building on a speculative basis, a riskier approach than showing plans to prospects until one or more commit to the property.
“That model has served us well at this park,” said Fogg, whose company has industrial and office properties throughout Northeast Ohio. “We’ve managed to lease each of the buildings in the park relatively soon.”
With the smaller, 75,000-square-foot design, space in the building can be parceled out among tenants in the 20,000-square-foot range and smaller without creating long bowling alley-style units. The first two buildings were more than 120,000 square feet in size.
The rapid launch of the next building is due to both the appetite of the Northeast Ohio industrial market for space and Fogg’s experience in Euclid.
Last fall, the third building was leased by Euclid-based Lincoln Electric Co. Fogg said his company had another prospect vying for the building as well, and other prospects. He would not say how much it will cost to build the encore building.
Such success was not certain when Fogg launched the 130-acre park in 2009 on a site where a massive World War II-era manufacturing plant had been demolished.
“Initially, it was a real roll of the dice,” recalled Don Bain Jr., an executive vice president in the Cleveland industrial unit of the JLL brokerage. “The site is so near Lake Erie. That might have put off some tenants, but that hasn’t been the case.”
Even though Northeast Ohio is a well-established industrial market with good highway access, the scarcity of building-ready land meant the area had little track record for recent industrial development, Bain said. The outlook also changed with an Amazon fulfillment center nearing completion on the other side of East 220th Street. That 600,000-square-foot building went in on the site formerly occupied by long-ailing Euclid Square Mall.
Even with multiple large warehouse projects rising and recently completed in the region — JLL estimates Northeast Ohio industrial construction is at its highest level in the last 20 years — Bain sees little risk of overbuilding in the near term. Other, more popular distribution markets, such as Indianapolis and Columbus, have much busier industrial building activity, with national developers rushing to build 400,000-square-foot properties.
That’s not the case in the Cleveland area, where few out-of-town developers are at work and local developers don’t have to gamble the way national players do, Bain said.
“There’s no one industry driving demand here,” he added. “There’s competition for space and (rent) rates are gradually going up. Near-term, additional space won’t be a problem.”
For Fogg’s part, he said he’s been surprised manufacturers have not been customers for production plants at Bluestone. The site is in a federally designated Opportunity Zone, which means that investments in businesses or real estate there can provide shelter from capital gains under the most recent federal tax law.
“That is an additional incentive for companies to locate there, ” Fogg said. “It may help us get more manufacturing in the park.”
Fogg said Bluestone IV may not be his firm’s only new project this year.
At Seasons Industrial Park in Stow, a joint venture with the Brennan family of Akron, the parties are looking at constructing another industrial building. A decision will be made later this year, Fogg said.
Article Source: Crains Cleveland