A spec building is an industrial or warehouse space that is built by a local government, economic development agency, or private development firm for the purpose of attracting a tenant who will bring jobs and investment to the community. Some relate spec buildings to model homes, and there are definitely similarities, but the purpose of a model home is to give potential buyers an idea of the type of home they can build in that neighborhood, not necessarily to sell that particular dwelling. While it can occasionally work like that with spec buildings, far more commonly the end goal is to sell the building itself.
While spec buildings are sometimes designed to target a specific industry sector, they are generally built to attract as wide a market as possible, with the understanding that the buyer will likely need to customize it to their specific purpose. As an example, some spec buildings do not have floors, so that the tenant can pour one to their exact specifications. These floorless examples are often referred to as "shell" buildings, although shell and spec can also be used interchangeably. There is much debate in professional economic development circles about floors, with very good economic developers insisting spec buildings should not have floors and equally capable developers maintaining they should. The two spec buildings I was involved with in Statesville both had floors. Our development partner, The Keith Corporation, was adamant they would not put up a building without a floor, noting that a 6-inch reinforced concrete floor was acceptable for 90% of industrial applications, and in those cases where a more substantial pad is required, it is relatively easy to cut out and repour that section of flooring.
Spec buildings range in size from 10,000 square feet to a million square feet or more, depending on the market and the type of industry the community is targeting. Most general manufacturing buildings tend to be in the 35,000 to 100,000 square foot range, with ceiling heights of at least 28 feet. The building we have planned for Wadesboro Industrial Park will be approximately 50,000 square feet, which will typically support 40-60 jobs and a $3-$5 million investment. The second planned spec building, at Atlantic Gateway, will be a larger building designed for warehouse and distribution operations.
In some high-growth urban and suburban areas, private developers literally line up for the opportunity to build spec buildings, while in moderate growth areas (like Statesville when I was there) private developers seek to partner with local governments or agencies to share the costs. Typically, these developers will receive free or highly discounted land, fee waivers, or other incentives to build, but the primary construction costs are still carried by the private firm.
Private industrial development companies, however, generally have minimal interest in investing in rural areas like Anson County. They see these projects as riskier and offering lower returns. And at a construction cost of $3 to $4 million per building, local economic development agencies are usually hard-pressed to come up with the funds to finance one independently. As a result, the vast majority of industrial spec buildings are located in fast-growing metro areas. While there are certainly businesses that for one reason or another need to be located in large metros, many companies locate there simply because that's where the available buildings are. Without an inventory of available industrial buildings, places like Anson County are at an impossible disadvantage.
Twenty or thirty years ago, companies looking to open a new facility usually had a 2-3 year development horizon, which afforded time to select a piece of land, work through the various zoning, permitting, and regulatory issues and put up a new building. Most businesses now have 12-18 month windows, and it is not uncommon for a business to suggest they want to be up and running in as little as six months. Obviously, that does not allow time for construction, let alone the development of raw land, so 75% of the companies we engage in relocation discussions are looking for a building that is more or less ready to go. If you cannot show them an existing building that day, it is the end of the conversation. The last two viable industrial buildings of more than 50,000 square feet here in Anson County each sold in about a year, and each received multiple offers. It is not difficult to extrapolate from those experiences that a 50,000 square foot spec building would sell in a similar timeframe. Anson County has NOT had difficulty recruiting industry into available buildings at market prices, we simply do not have enough buildings.
So, where do we go from here? We anticipate the loan find will be available for us to tap sometime in the first quarter of 2022. We are currently engaging local design/build firms in Anson County and the Charlotte Region and hope to select a construction partner by the end of January. The Town of Wadesboro is securing one last easement for utility construction at the Wadesboro Industrial Park and hopes to begin work on that phase of the project by March or April. If everything goes to plan, we expect to break ground on the building in early summer 2022 and complete construction in early to mid-2023. From that point, we are likely 10-12 months from great new jobs and an expanding tax base here in Anson County!
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