With business multiplying like the rabbits and gerbils it feeds, Oxbow Animal Health started the hunt for a bigger place to grow.
Founders of the family-owned global distribution operation had a prerequisite: They wanted to stick close to the Murdock, Nebraska, farm where it all began.
Such local loyalty was lucky for the nearby City of Papillion, area real estate experts said, because not all companies bursting at the seams would hang on three years to get a new place.
“They’re going to move on,” said Kevin Stratman of Investors Realty.
Not only has Oxbow waited — plans call for an August relocation to the headquarters at 150th Street and Schram Road — but the company had to buy way more land than desired because it came as a package.
Owner John Miller had to go from supplier of healthy pet products to real estate developer, and hopes to sell the excess ground, which needs a lot of infrastructure work.
Oxbow’s thorny search helps illustrate a predicament that real estate experts say holds back the local industrial market: There’s a growing appetite for warehouse, distribution center and light manufacturing space, yet not enough shovel-ready land or open structures on hand to satisfy it.
Area commercial brokers who connect buyers with industrial sites see demand only rising. They say e-commerce and the shrinkage of bricks-and-mortar retail stores are fueling the need for places capable of stocking merchandise that can be delivered fast to consumers.
Nationally, too, the online shopping craze and a moderate recovery in manufacturing are driving industrial expansion, said Investors Realty’s latest market analysis.
Check out these signs:
» Of the Omaha area’s leasable industrial space, only about 3 percent is vacant and available, according to Xceligent, which tracks regional trends. (Compare that with office inventory, which is at one of its lowest vacancy rates, 11 percent.)
» It’s been 13 quarters since the local industrial market posted a vacancy rate higher than 5 percent. “That is astounding,” Stratman said, “considering the market has seen over 1.3 million square feet of new construction since 2015.”
» The low vacancy rate is pushing more companies to build. Omaha’s Colliers International reports that 2016 delivered about 20 projects totaling more than 850,000 square feet of new construction to the metro, the most since pre-recession 2008. Colliers said an additional 933,000 square feet currently is under construction.
Alex Epstein of Omne Partners said that while activity is brisk, it could be better, if there were more options. “Finding what companies need is a big problem.”
That could change, if move-in-ready warehouse and distribution center space proposed for the Omaha area materializes.
West Des Moines-based R&R Realty Group told The World-Herald about plans for the Crossroads Commerce Park, a project offering up to 1.1 million square feet of to-be-leased industrial development on a 76-acre site south of Highway 370 near 144th Street.
If all goes as hoped, said Tom Rupprecht, president of development, construction could start yet this year on the first of four buildings — even before any tenants are secured.
He is not concerned about filling it up.
“We’ve seen higher and higher demand for this product type,” Rupprecht said of high-cube structures whose ceilings reach 32 feet. “This product really isn’t in Omaha.”
Such height and high-tech sprinkler systems allow for storing goods in stacks of pallets. Steven Gaer, R&R chief operating officer, said tenants can range from the more typical distribution center to churches and indoor youth sports centers.
Even the millennial crowd is attracted to warehouse clusters, he said, because interior space can be tailored to their liking. Each building of about 250,000 square feet can be divided for multiple tenants, with separate entrances. The company is finalizing plans with Papillion officials.
Yet another industrial park is planned on a chunk of the 350 acres that Dowd Properties and Noddle Cos. are developing in Sarpy County.
A 60,000-square-foot building with 24-foot ceilings would kick off the project and could be available in the second half of 2018, Jay Noddle said. Three other buildings would follow, depending on demand, for a possible total of 240,000 square feet on the northeast corner of Highway 370 and Interstate 80.
“This is a little different for us,” said Noddle, whose notable projects include Aksarben Village’s retail, office and housing campus. His company’s planned transformation of Boys Town’s West Farm area has been likened to a downtown for west Omaha.
But Noddle said the market is demanding more of the less extravagant and affordable structures (relative to office and mixed-use hubs) where businesses can put both office and warehouse under the same roof, and in a visible location.
He envisions tenants such as a mobile phone company that needs both storage and a retail bay, and a window and door manufacturer that wants a connected office and showroom.
South of Highway 370, additional parts of the Dowd-Noddle development could be available for new and expanding industrial businesses — as another up to 2.1 million square feet could be dedicated over time for commercial use.
The overall development is called 370 Commerce and is to include several auto dealerships as well as areas for retailers, hotels and other mixed uses.
Perhaps the most recent speculative warehouse to be built in the area is a 185,000-square-foot structure in Krambeck Industrial Park, southeast of 156th and Cooper Street in Sarpy County. It filled in a year, said Jon Meyers of Nebraska Warehouse Co. and DAMMM LLC. Meyers plans to build a twin warehouse of the same size in the same area.
Epstein, the Omne commercial broker, said an inventory infusion should help keep industrial deals in the metro area that otherwise might skip town.
When potential newcomers look at regional cities including Des Moines, Kansas City and Indianapolis, he said, winning often depends on what is readily available. “These companies, when they need space, they need it now. If you don’t have one ready, they’re likely going elsewhere.”
However, in some cases — including Oxbow and Thrasher Inc., both of which have international reach — the Omaha area had the hometown advantage.
Thrasher, which focuses on basement waterproofing, is building its 220,000-square-foot headquarters near 120th Street and Valley Ridge Drive. Sister contracting company Foundation Supportworks will be housed at the same Sarpy County site.
Like Oxbow, Thrasher had to buy farmland (55 acres) much larger than the 20 to 30 acres it sought. Indeed, the company preference was to find an existing industrial structure or, secondarily, a lot upon which building could start right away.
“We learned the hard way there isn’t much out there, especially of any (large) size,” said President Dan Thrasher.
The family business was forced to become a real estate developer of sorts, he said. That meant talking to farmers about buying their ground, talking to government folks about zoning, hiring engineers, lawyers, brokers.
“We never wanted to be developers, investing in land and developing it,” Thrasher said. “Ultimately that was what we had to do in order to stay in the Omaha area.”
Though the company by nature is more industrial — with a warehouse and trucks coming and going — Papillion city officials wanted the site zoned mixed-use, which required a “higher standard of building quality,” Thrasher said.
That didn’t affect the design, as Thrasher already wanted a building more stylish than the average industrial warehouse. But, Thrasher said, the zoning might limit the buyer pool for excess lots it hopes to sell.
When Thrasher and Foundation Supportworks (whose president is Dan’s brother, Dave) relocate their 350 employees in about a year, it will have been four years from the time their new headquarters search started.
The sister companies will own more than twice the amount of space as before, Thrasher said, and investment in the new site will reach about $40 million. Within a few years they plan to add about 100 more workers: software developers, marketers, installers and sales and office staff members.
“We’ll end up with a view of a lake, which will be beautiful,” he said. “We’re just excited to have all of our employees back under one roof where we can build relationships.”
With Oxbow, sanitary sewer problems were among several hurdles that clogged its relocation process, dubbed “Beyond the Barn.”
First, said Chief Operating Officer Deb Buhro, the company searched “far and wide,” from Lincoln to Omaha, for an existing facility it could refurbish.
Founders wanted to stay close to their roots and the homes of 145 employees, yet be in a more urban area from which it could recruit and fulfill a three-year goal to grow the workforce to 200.
“We didn’t think we wanted to go to the point of farmland, and taking out a massive grading project and all of the preparation that went into that,” said Buhro.
But the land had a familiar country feel, she said, along with good highway access and proximity to Omaha.
Intergovernmental agreements and swaps had to be approved to allow connection into Omaha’s sewer system, said Denny Sciscoe, a Cushman & Wakefield/Lund Co. broker who worked with Oxbow.
In the end, Oxbow sold and will lease back the 30-acre campus from Lincoln Road LLC. Omaha-based Midwest DCM is general contractor.
Oxbow hopes to sell the tract’s remaining 40 acres.
The future home — 240,000 square feet of offices, production building, warehouse and hay-storage structure — offers more than twice the building space of the Murdock barns and off-site Omaha warehouse.
While the family farm no longer will be part of the business, Miller said, he’ll bring part of the farm to the new business.
A library will showcase company nostalgia. A windmill will greet visitors. Native grasses will be planted to evoke the prairie.
The company’s coveted oxbow will relocate, too. (The company takes its name from the Oxbow Trail, a passageway for settlers that passed directly through the Miller farm. An oxbow harnesses an ox to a yoke.)
Miller looks forward to a boost in sales at the company he said averaged 20 percent annual growth in the past five years.
While not thrilled about the lengthy relocation, Miller said, the timing turned out rather fortuitous.
“The whole corridor is exploding,” he said. “It’s fun to be there.”