Community, cost important when attracting companies to Region’s spaces
Anne Taylor smiled broadly, like a proud mama with bragging rights at a family reunion, as she ticked off Hammond’s commercial real estate development wins.
There were big catches, like landing Meats by Linz, which supplies meats to upscale restaurants, casinos, golf clubs and more. The company eventually bought 10 acres and brought 400 new jobs to Hammond, said Taylor, who is executive director of the city’s planning department.
United Hospital Services and Huhtamaki, a global food packaging supplier, also have been huge for the city.
And, there were small ones, like local mom-and-pop shops that bring something special to the community.
“We focus on developments that have a lot of jobs,” she said. “We love bringing jobs to Hammond, but we also continue to support local businesses.”
Ixxa Coffee, a stylish coffee shop and roaster that also sells plants and pastries, is one example. It opened its doors in a 1,000-square-foot shop in north Hammond in 2021.
From light industrial to office space, from warehousing to major and light manufacturing, down to small businesses and the local doctor’s office, defining commercial real estate, or CRE, is almost like nailing jelly to a wall — you’re not likely to catch it all at once.
Generally, area experts broke CRE into three main categories: office space, industrial and retail — with each having multiple subcategories.
From Hammond to South Bend, regional experts agree Indiana’s strengths are a business-friendly climate, infrastructure like good highways and freight and passenger rail lines, and access to Lake Michigan. This combination makes it attractive to do business in the Region.
“We’re often the first call when companies are looking to relocate or expand,” Taylor said, a sentiment shared by her colleagues across the Lake Michigan’s southern shore.
Growing CRE
Experts repeatedly described the state of Indiana as pro-business and a not-so-conducive environment in neighboring states, particularly Illinois.
Indiana’s lower taxes, good highway and rail infrastructure, lower workers compensation and more affordable workforce are big draws to the Region, according to area experts.
Affordable land prices and a business-friendly government mean more businesses come to the Region, but population increases also are a huge factor, said David Lasser, managing broker for Merrillville-based Commercial In-Sites.
When new people come in, they want restaurants, shops, doctors’ offices and more, and that creates higher demand for commercial development in the area.
“The main driving force that’s been good for Northwest Indiana for many years is a considerable amount of vacant land for development,” said Lasser, who’s been a broker for 37 years. “There’s an ever-growing wave, over at least the last 15 years, of people moving from Illinois to Indiana. Every time somebody builds a home or occupies an apartment unit, it’s that many more heads and bodies to go into restaurants and shops and fill office buildings.”
Antony Miocic, director of Latitude Commercial’s office group, described Northwest Indiana as a suburb of Chicago, but the similarities between the two areas stop there.
“We’re a suburban market,” he said. “We definitely feed off Chicago, for better or worse, so that helps us definitely versus other markets, being close to a large population center like that.”
Office spaces are doing well in Northwest Indiana, with occupancy rates hovering around 90 percent, Lasser said. That average covers Lake, Porter, La Porte, Jasper and Newton counties.
“This means buildings are full,” he said.
Costs count, and a report from Commercial In-Sites published last January indicated the asking price for full-service rental costs for office space in the company’s Lake County portfolio averaged $26.18 per square foot and $24.73 per square foot in Porter County.
By contrast, business renters in the Chicago area, which had a vacancy rate of about 17 percent, could expect an average asking price of $42.85 per square foot, according to the online Savills Research and Data Services.
Office space remains a draw in the Region, in large part because it’s significantly cheaper than in the big city, and the pandemic prompted some trends that affect Indiana today, Miocic said.
For example, when more employees began working from home, a professional services firm paying for office space in Chicago could move across the state line and pay a fraction of the rental costs, Miocic said.
“It’s going to be much cheaper here, so there was definitely that trend in 2020,” he said.
Site location
A big part of encouraging commercial real estate development is knowing what works and what is welcomed in the many communities that make up the Region.
“So, we work with the communities to help them identify where they want to grow and how, and we help them make it happen,” said Bailey Tombers, vice president of business development for the Lake County Economic Alliance.
Typically, businesses already located within the county will contact the LCEA if they want to relocate or expand in the area, but there are plenty of calls from other states, Tombers said. The alliance discusses the site location with individual communities to see if there’s a match in Lake County.
Tombers named community after community in Lake County, noting the kinds of CRE development they usually want.
In Gary, for example, with the Hard Rock Casino Northern Indiana and the upcoming convention center, “they’re going to see rapid growth all around that area in a relatively short amount of time, which is going to be very positive for them, but the question is how do we help support that.”
Farther south, Crown Point officials have encouraged preparing land for development, and they’re looking at different businesses that could use easy access to Interstate 65 and other infrastructure.
“The developers are working really well with the city to make sure that land is shovel ready,” Tombers said. “They’re putting up buildings and people are coming to look at them.”
One common refrain among communities in the state’s northwest corner, historically home to pollution belching mills, railroads and other heavy manufacturing, is a move toward something cleaner, she said.
“The communities are really trying to transition away from things that are going to have air emissions,” according to Tombers. “They’re tired of having the reputation of being the place where dirty things go. They like what they have, but they’re trying to diversify their economic clusters.”
About 45 minutes to the east, CRE brokers and experts also consider communities’ needs and interests when helping companies expand or relocate to the area, said Shawn Todd, a longtime broker with Cressy Commercial Real Estate.
Different communities have different personalities, and it’s important to recognize that and guide appropriate businesses toward the communities that fit them, he said.
Elkhart, long known as the recreational vehicle capital of the world and a spot for automotive industry businesses, continues to be heavier in manufacturing, while the South Bend area leans toward office and professional spaces.
“Downtown South Bend is just a different area than Elkhart or even Mishawaka,” Todd said.
Office space
The pandemic upended a lot, including the traditional demand for office space. More people who worked in offices began working from home, but that’s beginning to change too, Todd said.
“This need for private office space is not as much as it was before, and it’s an expense on people’s books they now look at differently,” he said. “Before, they thought they had to have (office space), and now maybe they see they don’t have to have it anymore.”
Still, more businesses are getting tired of having meetings in local coffee shops and restaurants, and they seem to be requiring workers to return to their offices more.
While office rental rates are holding steady, office vacancy is still higher than it should be in the St. Joe area, so that’s unfortunate for the office market, and the rates of office space deals have slowed down recently, Todd said.
“The velocity of deals is not there right now,” he said. “It used to be you could count on a certain number of deals happening each year, but it’s not really happening anymore. It is more challenging. The odd thing is we haven’t seen leasing rates really drop.”
Steel, data distribution
Steel manufacturing, with mills of various sizes dotting the lakeshore and its court of rail and other supporting businesses, still may be the Region’s economic king, but big data and distribution are eyeing the throne.
“We still do steel,” said Lasser, of Commercial In-Sites. “I’m told we make more steel of a higher quality than ever before, however, with less employees due to technology. Steel drives a lot of local vendors.”
Indiana still leads the nation in steel manufacturing, according to the Indiana Economic Digest and the American Iron and Steel Institute. U.S. Steel and Cleveland-Cliffs still run massive integrated steel mills along Lake Michigan’s southern shore, and there are plenty of more specialized mini-mills across the seven-county Region.
But, data and distribution are exploding in the area.
There have been giant distribution projects, recently, that capture the business imagination, like the 1-million-square-foot Amazon distribution center planned near I-65 and U.S. 30, the second such center in the area.
Another big catch is the Panduit distribution center — a $76.5 million, 475,000-square-foot behemoth — that will rise on Mississippi Street in Merrillville.
Proximity to Chicago makes Northwest Indiana more attractive, especially for warehousing and distribution businesses, Miocic said.
“We’re the crossroads of America,” he said. “We’re just a prime location for distribution centers. We have companies building (large structures) on spec, which is crazy, when you think about it, but they’re confident they’re going to find a tenant for them.”
Data centers are driving some economic growth in places to some extent, Todd said.
“We’re seeing it (in St. Joe County) and across NWI,” he said. “Data center activity is big. I don’t think there is a county in Northwest Indiana that doesn’t have a data center project.”
That’s not a bad thing, Lasser said. There’s a huge demand locally, regionally and nationally for data centers, even though they require huge amounts of power, and it means the Region is not putting all of its economic eggs in one basket.
“Diversification really helps the job market” Lasser said.
If you build it
Business parks and “spec buildings” still draw businesses to the area.
Spec properties are often massive structures developers build and subdivide to draw businesses. Sometimes, the developers don’t have to divide them at all.
Amazon opened a 190,000-square-foot distribution center at the AmeriPlex at the Crossroads park, built by Holladay Properties, in Merrillville in 2021, and this January, Amazon gobbled up a 1 million-square-foot building at The Silos at Sanders Farm development at the junction of I-65 and U.S. 30.
“Spec is still working,” said the LCEA’s Tombers. “It’s still very attractive. We see a lot of food production, packaging and those types of things. It’s making more sense in Lake County because of our proximity to Chicago.”
Headquartered in South Bend, Holladay Properties has dozens of development properties across Northwest Indiana, said Mike O’Connor, senior vice president of development and leasing.
Holladay also operates properties across several states, many of them mixed-use developments. Holladay broke ground on the 385-acre AmeriPlex at the Port in Portage in 2020, and they began building AmeriPlex at the Crossroads in Merrillville four years later.
“We try to have a pretty balanced portfolio. It’s somewhat influenced by the regional economy,” he said. “I would say we have more light industrial and medical office than residential in Northwest Indiana.”
Next up for Holladay Properties is another AmeriPlex-like business park in Michigan City. The company began developing the area after years of interacting with leaders in that city.
“It’s about aligning with interests in planning by the community,” O’Connor said. “We kind of stay close to the folks that are doing planning with local governments. There’s a great desire in Michigan City to create more opportunities for business growth, including light industrial flex space.”
Flex space is a versatile form of development that attracts a wide range of businesses, from office to warehousing, light industrial and distribution in a single area.
From business to community
Retail also is a big component of CRE, and it has the capacity to build communities where residents live, work and play.
Tucked into a strip mall, coffee shop Ixxa is within reach of a local plant of an international conglomerate that makes bar soap, a railroad yard, a casino and dozens of small businesses.
Jose Marin, who grew up in neighboring Whiting before moving to California, said he noticed a “missing link” in the community when he moved back to the area with his wife, Stephanie Mora.
“In every city where I’ve lived, whether it’s Los Angeles or London, there was always that part of the community that was important, and it was a coffee shop,” Marin said.
Marin and Mora decided to open their own unique coffee shop in 2021. Soon, they added a neighboring space in the strip mall to house their coffee roasting equipment, expanding the store by about 400 square feet.
Last year, they added an outdoor patio space. They could see the immense possibilities behind a community hangout, Marin said. One cool shop, restaurant or bar opens, and others soon follow.
“I’ve seen it before,” he said. “You see this thing that just happens in front of your eyes. The neighborhood can grow and grow and grow, and it all starts with someone in the neighborhood just starting a little community of their own.”
Taylor emphasized that small businesses are the key to commercial development. Getting people to live and work in Hammond requires services and activities that create a sense of community.
“We really want to see more amenities for people living in and moving to Hammond,” she said. •
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