Plans are in place for a 400-acre mixed-use development off Interstate 70 just west of Plainfield–an area quickly becoming the next big thing in industrial real estate.
Chicago's The Alter Group and Whitestown-based The Sanders Cos. are planning a massive project at the northwest corner of the Exit 59 interchange, across State Road 39 from a 550-acre industrial park Lauth Property Group already has in the works.
The virtually undeveloped area is drawing attention thanks to the interstate and its proximity to the Indianapolis International Airport and Interstate 465. And the relatively low land prices don't hurt.
Though some say it will be a while before Exit 59's time comes, Alter Group is optimistic about even the short-term potential.
Plans circulating among brokers show a 353-acre industrial park that also includes 35 acres of retail outlots and 11 acres of office space. Company officials said Alter wants to stake a claim here because central Indiana fits into its plans to have a presence in all major distribution hubs nationwide.
Alter Group already has dipped its toe into the Hendricks County market, developing Airwest Indianapolis, a 441,000-square-foot, $18.5 million building on 26 acres in Airwest Business Park in Plainfield.
But the move at Exit 59, just six miles west of Plainfield, is a much larger leap of faith. Once developed, the industrial park likely will be among the area's five largest.
"Indianapolis is within a day's driving distance … from about 60 percent of the U.S. population," said Alter Senior Vice President Patrick Gallagher. "That makes Indianapolis a winner in the logistics business, particularly for bulk distributors … bringing consumer goods" into the country.
The same can be said for Plainfield, which has lured industrial developers and tenants alike with its convenient location and aggressive tax abatements. But most of the available land there already has been purchased.
That's leading some developers to look elsewhere. And they're finding Exit 59.
Land at I-70 and S.R. 39 already has been zoned for the development, Alter's Gallagher said, but the companies have just begun discussions with local officials on potential infrastructure improvements and economic incentives.
Neither he nor county officials would comment about what options might be on the table. The land is owned by HCS LLC, a corporation registered to Sanders Cos. President Mark E. Sanders. Gallagher declined to spell out the financial details of the partnership or the development's total price tag.
If all goes well, construction could begin in the second quarter of 2007.
But the project is a lengthy one; plans call for taking 10 years to fully build out the property. Potential office space would be directly at the intersection, with retail lots stretching north along S.R. 39. Gallagher said the retail portion might be developed last, once nearby housing growth fuels demand.
"It's pretty much a given that the rooftops are going to follow [the industrial development]," he said, adding that major residential tracts already are set aside or under development within a five-mile radius. "[The retail space] probably will become a community shopping center."
Hendricks County Commissioner Ed Schrier said he hopes the projects planned for Exit 59 reverse the development pattern typical for other suburban cities and towns.
"The single-family housing always came first," Schrier said, but without commercial development, the tax burden for growth landed almost squarely on homeowners.
The county has the potential to switch that around at Exit 59, with industrial popping up before most of the housing.
"They're going to be on the positive side of tax revenue faster than anywhere else," he said. "If we're very careful and we've learned anything, then we're going to build a decent mix of [commercial and residential] from the start."
Alter isn't the only developer betting on the future of the intersection, to be sure. As IBJ reported in August, Indianapolis-based Lauth has pitched a 550-acre industrial complex, dubbed Westpoint Business Park, for the northeast corner. It's still hammering out the details, but construction is slated to start next year. Lauth's project will be on the land once slated for a massive amusement park, but that deal fell through in the late 1990s.
"Having additional developers working there validates the area," said Tag Birge, vice president and market officer for Lauth.
Even so, one broker said he's cautious about the exit's near-term potential, especially with industrial space still available in Plainfield. Duke Realty Corp. and Browning Investment Inc., for example, are working on their 922-acre AllPoints Midwest project, where the first building should come online next fall.
"I think the [Exit 59] land is a good long-term investment because it's certainly in the path of progress," said Steve Schwegman, a vice president in the industrial advisory team of locally based Meridian Real Estate. "But in the near term, I don't think they're going to have speculative success out there."
He cited a lack of amenities such as restaurants and day care centers as a possible deterrent.
"My gut tells me that those [Plainfield] buildings are going to get the deal" before Exit 59, at least for the time being, he said. "The common complaint is that there's nothing around here."
Lauth's Birge thinks the cheaper land at Exit 59 means the parks will be able to compete by undercutting Plainfield prices.
"In Plainfield, people are buying dirt for in excess of $80,000 an acre," he said. "We have acquired our land at a significant discount to that price."
Birge declined to say what Lauth paid for its land at Exit 59.
Price will be a selling point, Schwegman admitted, but he's not convinced it will be enough of a difference to close the gap.
Another broker, though, said the price difference will have plenty of wooing power.
"It's the only property available where the prospects … [are] going to get better deals," said Mike Lubbers, a principal and industrial specialist with NAI Olympia Partners. Since many companies are hesitant to be the first tenants of a park, developers often cut them good deals to sign on the dotted line.
That's likely to happen at Exit 59, too.
"Then it will have the momentum," Lubbers said. "Then it's going to be just like Plainfield."