Development group still looking for the right fit to fill big new industrial building on east edge of town
The 153,000 square-foot building on the eastern edge of Lawrence currently stores patience. When you construct a large industrial building without a tenant, you had better be well-stocked in that attribute.
Leaders gathered Wednesday afternoon for an open house at the first building constructed at VenturePark, the city-owned business park near 23rd Street and O’Connell Road on the east edge of town. The building is vacant. It was built on speculation — meaning a tenant wasn’t in place when construction began — by VanTrust Real Estate, a Kansas City-based developer that makes industrial and other real estate investments throughout the region.
There were no announcements about a tenant for the building at Wednesday’s event, but a representative with VanTrust told me the company is still pleased with the investment it has made in Lawrence.
“We would love the velocity of tenant activity to pick up, but we don’t have any deadline we are facing,” said Grant Harrison, a development manager for VanTrust. “We are very patient capital. We still would like to lease this building up to a certain point and then start building a second building.”
As part of an incentives package with the city, VanTrust received ownership options for three building sites in VenturePark, including one that is immediately east of the new building. As part of the construction of the current building, VanTrust had some preliminary grading work done on the second building site, which will speed up construction when that time comes.
If all three buildings are built — the second one would be about 150,000 square feet and the third would be about 250,000 square feet — it would represent about $31 million in investment by VanTrust. Harrison said the founder of the real estate company, Larry Van Tuyl, is a KU graduate who has long had an interest in doing a deal in Lawrence. Van Tuyl is the son of the founder of the Van Tuyl Group, which became the largest privately owned auto dealer in the country before selling to Warren Buffett’s group in 2014.
Before talk turns to future buildings, Job No. 1 is getting the current building filled. Harrison said the building was built to be flexible. Distribution and manufacturing space are both possibilities in the building. It was constructed with extra-high ceilings to accommodate stacks of merchandise in a warehouse setting, plus the backside of the building is lined with overhead garage doors. The front half of the building easily could be converted into office space. The space also could be divided to house two or three tenants.
Harrison said the most likely tenant may be a business that already has a Lawrence connection, but has perhaps outgrown its space. He said economic development officials had told VanTrust they thought it was important to have some available space to accommodate local businesses that want to expand but otherwise would have to move to do so.
Other potential tenants would be companies that are really focused on the Kansas City and Topeka markets. With Lawrence being between the two markets, the VenturePark building could be attractive for such a company.
What’s less likely is a deal with one of the big national or regional companies — think Amazon — that are attracting headlines in the Kansas City market. The large intermodal railroad yard in Edgerton is tough to compete with in that market.
“This isn’t the half-million-square-foot facility at the intermodal that those companies are looking for,” Harrison said. “This is a different type of product.”
What local leaders mainly care about is whether the building can attract new, quality jobs to town. The city provided a significant incentives package to convince VanTrust to construct the building. Those include industrial revenue bonds, property tax abatements ranging from 50 percent to 70 percent, and enough free land to build three buildings ranging in size from 150,000 square feet to 250,000 square feet. Under terms of the agreement with the city, VanTrust has until 2021 to construct the second building and until 2024 to complete the third building or else ownership of the lots would remain with the city.
City officials provided the incentives package because they became convinced it was going to be difficult to attract a tenant to VenturePark without a ready-made building. The city thought it had landed a tenant — a cement block and truss manufacturing facility for Menards — but that deal has gone cold. While Menards hasn’t said it has killed the project, it has given local leaders no indication of when it could happen.
Harrison said VanTrust is finding that a ready-made building is important in attracting companies.
“You have to have product up,” Harrison said. “Everybody is acting so fast. You have to take timing and construction risk out of the equation.”
Harrison also said the incentive package offered by the city was a key factor in VanTrust moving forward on the Lawrence project. In addition to the financial incentives, the city also used what it calls its “catalyst program” to expedite approvals on land use and other city permits for the project.
“The city was really good to work with,” Harrison said. “We always had a direct line to the city.”
The city offered all those incentives against the backdrop of slow activity at the park. VenturePark — which used to be home to the abandoned Farmland Industries fertilizer plant — became available for tenants in late 2014, after the city spent about $8.5 million building roads and other infrastructure to serve the park.
VanTrust began construction on its building in early 2018, and it was completed in December. Harrison said city officials shouldn’t yet be concerned that VenturePark hasn’t attracted a tenant. He again highlighted that patience is a requirement in the industrial development business.
“I think the first step really was getting the building up, and we’ve got that done,” Harrison said. “When you build one of these, you might get it leased up during construction, or it may take a couple of years. We hope it doesn’t take that long, but, unfortunately, we don’t have much control over the timing of deals.”