CHICAGO—Huge, modern, big-box distribution facilities typically gain a lot of notice, but the smaller and older industrial buildings scattered throughout Chicago's suburbs contain a significant portion of the area's economic power. And many of these properties remain attractive to investors. Value Industrial Partners, for example, specializes in this class of industrial buildings and just closed the purchase of two more with a total of 91,000-square-feet. The firm now owns and manages dozens of similar properties with about 3.7-million-square-feet.
The first, 1101-1133 Ellsworth Avenue in Villa Park, is a fully-leased 51,000-square-foot building currently occupied by four tenants. One of its main attractions was an 18-foot ceiling clearance, a rare find for buildings that provide units of this size in this submarket, according to VIP's Director of Leasing Brian Gedvilas. His research showed that companies seeking between 8,000-square-feet and 12,000-square-feet in the Addison and Villa Park area have many options, but only if they could make do with a low clearance. But if they need at least an 18-foot clearance, these towns have nothing available.
“It's a natural fit for us and a good building our tenant base can grow into if needed,” Gedvilas says. “We would have bought it even if it had some vacancies.”
Their second recent purchase was a distressed asset at 755-777 Edgewood Ave. in Wood Dale. The 40,000-square-foot multi-tenant building was only 40% leased at the time of sale, although VIP just signed another tenant which will put it over 50%. Some potential buyers may have been put off by the high vacancy rate, Gedvilas says they saw a building that provides clean, functional units, each with its own trucking dock. Furthermore, many of the buildings in Wood Dale and surrounding towns like Bensenville and Elk Grove Village that accommodate small industrial users were built in the 1960's, whereas 755-777 Edgewood was built in the 1980's.
“For this building we think we can add some value with capital improvements,” Gedvilas says, such as resurfacing the parking lot, new landscaping and roofing work. The previous owner ran a business in a significant portion of the property and “may not necessarily have had the funding to do the necessary work.”
VIP, however, has the funds. In May, GlobeSt.com reported that the company had refinanced a large group of their holdings, locking in low, long-term rates. The 23 refinanced properties have over 90 tenants and a total of about 900,000-square-feet.
Gedvilas says this suburban industrial market is “improving and stabilizing. In some areas we're back to where we were in 2006 and 2007.” Still, rental rates have not reached the point that would justify new construction of units for smaller users. A lack of supply could start to have an impact, “but for the near future, there will be very limited construction of new buildings that feature units with less than 10,000-square feet.”
NAI Hiffman's Kelly Disser represented VIP in the Wood Dale purchase and will also market the available units for lease. Brian Liston of VIP also worked on both transactions.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
