News Article | 3/7/2008

Large warehouse planned on Westside

JACKSONVILLE — A Dallas developer has bought 69 acres on the Westside to build a 601,500-square-foot speculative warehouse.

Hillwood hopes to tap into the expected growth in cargo moving through Jacksonville after a 158-acre container terminal opens at Dames Point.

West Point Trade Center will fill a need for speculative warehousing space, said T. Preston Herold, vice president for Hillwood Investment Properties, a Hillwood business unit.

“Companies that have wanted to locate in Jacksonville were forced to wait for a build-to-suit,” said Herold, who would not disclose the price for the land or the estimated cost to build the warehouse.

Hillwood bought the property from Pickettville Partners Ltd. and Westside Investment Trust, with Allen Land Group representing the sellers and CB Richard Ellis representing Hillwood, a commercial and residential developer whose chairman is former presidential candidate Ross Perot.

“In the next six months to a year, the majority of ware-house space being delivered is being done on a build-to-suit basis,” said Colliers Dickinson broker Jeff Evans, who was not involved with the West Point Trade Center.

He cited four projects of 800,000 square feet or more being built for specific users, with only one other sizable speculative project that he’s aware of. “The market will have a huge appetite for larger structures built on spec.”

Hillwood is targeting tenants seeking space for regional distribution. It expects to have from one tenant using the entire building to as many as three tenants sharing it, Herold said.

Hillwood will start immediately on the project. It is expected to be ready early in the fourth quarter, just before TraPac Inc., the terminal operating subsidiary of Tokyo-based ocean carrier Mitsui O.S.K. Lines Ltd., opens its terminal in January 2009.

The timing of Hillwood’s project should help it, said Jerry Mallot, executive director of Cornerstone Regional Development Partnership. Many companies have been and will be interested in Jacksonville during the next couple of years, and opportunities can be missed for lack of space built on spec.

“To be able to move forward and get a project going creates more opportunity,” Mallot said.

Located on Pickettville Road about a mile north of the intersection with Commonwealth Avenue, the West Point Trade Center is within two miles of the CSX Intermodal rail facility and the Interstate 295-Interstate 10 interchange.

The warehouse will be 1,200 feet wide and 500 feet deep with a 32-foot clear-height and cross-dock loading capability, including 135 dock-high doors. It will have 313 parking spaces for cars, 118 parking spots for trailers and plenty of space next to the building to maneuver trucks — 180 feet on the west side and 140 feet on the east side.

Although Hillwood is building on spec, the company has been talking with a couple of prospects interested in leasing space, Herold said.

Lease rates rising

He declined, however, to comment on how much the building might lease for, either for the entire space or on a per-square-foot basis.

In general, warehousing landlords can get $4.25 to $4.50 per square foot in annual rent, Evans said, not including charges for property insurance, taxes and upkeep.

“We hit the low fours in industrial warehouse space about two years ago,” Evans said. “As the cost of land rises, even as construction costs have leveled off a bit, that will drive lease rates up higher.”

West Point Trade Center is in line with typical Hillwood warehousing projects. Although the company built a 1.2 million-square-foot building in Memphis, Tenn., it mostly builds 300,000 square feet to 800,000 square feet.

West Point Trade Center will be the third industrial building in Jacksonville that Hillwood has been involved with in the past two years. The company developed a 400,000-square-foot build-to-suit distribution center for Laney & Duke on Presidents Court in 2007, and it bought a 360,998-square-foot building on Faye Road in 2006.

Hillwood’s role in those buildings enabled the company to see and understand Jacksonville’s potential as a distribution hub for the Southeast, Herold said.

“We like the fundamentals of the market,” he said, touting Jacksonville’s geographic position in the Southeast, its highway and rail infrastructure and its expanding port.

“You’re going to see us coming into Jacksonville in a big way.

“This is the start. We obviously hope there will be more.”

At the same time, Herold said suitable land for warehousing is getting harder to find for attractive prices.

“Land costs have tripled since our deal with Laney-Duke,” Herold said. Also, few, if any, sites are available that don’t have issues related to wetlands. Many sites require “significant mitigation costs” associated with filling them in to achieve a workable footprint for distribution operations.

Mallot said Jacksonville has enough industrial land for warehousing to keep projects going for a few years, especially at Cecil Commerce Center, where “there is still a substantial amount available.”

But it won’t be long before “we’ll see future projects have to go to neighboring counties” such as Clay and Baker, he said. “The good thing is that the region will share in the benefits of the expansion of the port.”

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