Lennox Industries Inc. is giving Indianapolis a vote of confidence as a logistics hub with plans to move distribution of its commercial heating and cooling products from facilities in Chicago and Columbus, Ohio, to the east side of Indianapolis.
Although the distribution center is relatively small at 60,000 square feet, Lennox is one of a few companies that have abandoned distribution centers in other cities in favor of Indianapolis' low cost of real estate, central location and interstate access.
Last year, California-based kitchenware retailer Sur La Table moved most of its distribution operations from Seattle to a 198,000-square-foot facility in Brownsburg.
"We realized Indianapolis is perfectly located to ship to Illinois, Ohio, Kentucky and Michigan," said Bill Wieser, local commercial territory manager for Dallasbased Lennox. "Right now, the Columbus warehouse is not as convenient for the western part of that area, and coming from Chicago, the [traffic] slows you down."
Lennox's new distribution center, operated by Tokyo, Japan-based NYK Logistics, will employ five people when it opens in early August. Lennox already employs six people at a sales and service center near Interstate 65 and Keystone Avenue on the south side. That office will remain open, Wieser said.
The manufacturer had been considering an Indianapolis distribution center for years, but Wieser said rising fuel costs likely were a deciding factor.
"Our shipping costs have increased almost 20 percent in the last 15 months," he said. "The products we ship are very heavy and, to be competitive, you can't keep raising costs [of the product]."
Lennox signed a three-year lease for its space at 2900 N. Shadeland Ave., with options to renew and take more space at the end of the term, Wieser said. He said he also expects the presence of the local distribution center to boost sales of Lennox products locally, where the company competes with locally made Carrier Corp. furnaces and air-conditioners, and in Kentucky. Dealers are more likely to buy a brand with a short wait for delivery of systems and parts, Wieser said.
The impact of Lennox's local distribution facility won't be huge in terms of jobs or space occupied, but it's another sign Indianapolis is near the top of the list for companies looking to add or relocate logistics hubs, local industrial brokers said. In 2002, the Central Indiana Corporate Partnership, citing a study by the Battelle Institute, recommended Indiana focus on attracting and retaining logistics operations.
Lennox's choice of location, a former Chrysler Corp. plant, is also a sign of the rebirth of industry on the east side. In the past few years, a growing number of landlords have purchased shuttered plants in Warren Township and converted them into distribution centers.
The buildings typically have lower ceiling heights and smaller spaces than the modern bulk behemoths in the suburbs, but landlords willing to put money into older industrial spaces are finding a steady stream of demand from companies like Lennox who need midsize spaces.
In the past 12 months, at least half a dozen new deals have been signed for more than 100,000 square feet of industrial space on the southeast side, said Andrew B. Morris, managing director of the industrial advisory team at locally based Meridian Real Estate, which represented NYK and First Industrial in the Lennox deal.
"There weren't that many 100,000-square-foot deals in the prior three years," he said.
Overall industrial vacancy in the submarket fell from 34 percent at the end of 2003 to 26 percent at the end of 2004, according to Meridian's statistics.
The east side's access to interstates 70, 465 and 74 is becoming less of a secret, said Mark Writt, an industrial broker at the local office of CB Richard Ellis. Writt recently leased 88,000 square feet to Pratt Corp. in an expansion of its facilities on the northeast corner of 30th Street and Shadeland Avenue.
"There's been an amazing amount of
buildings built or redeveloped in the last
few years," Writt said.