Commercial real estate trend shifts in Jefferson City
Missouri Boulevard’s dominance in the growth of Jefferson City’s commercial real estate market may end — in the next decade or sooner.
When commercial property broker Greg Bowman looks for future growth in Jefferson City, he turns east, toward the side of town long overlooked for both residential and business development.
“The East Side is going to develop tremendously in the next 10 years,” Bowman said. “You can’t go west anymore” and remain in Jefferson City’s corporate limits.
Among the signs of growth that Bowman and other business and civic leaders see:
• The development of the new Wal-Mart Supercenter at U.S. 50 and Cityview Drive, which commercial builders such as Darrell Gordon agree will attract tremendous traffic and new business. Speculators already are buying nearby properties or surveying land for purchase while they look for developers, Bowman said.
• The old state penitentiary redevelopment that will spur both home building and retail to serve offices, such as the new federal courthouse and state agencies that will open there. For example, Bowman said, a new microbrewery/restaurant soon will move into a rehabbed building on Ash Street, an old business district that declined. The offices locating to the prison site lack cafeterias and will boost business for the scattered, existing eateries and prompt others to open.
Development of that area may proceed slowly for another five years until state, county and city governments finish an entrance to the site off U.S. 50, likely through the Lafayette corridor.
• More intense business activity in the area around U.S. 50 and Eastland Drive, where Gerbes Superstore and other businesses have located. Bowman said lots ranging from 2 to 20 acres are developing there now.
• Continued expansion of the Jefferson City Area Chamber of Commerce industrial park off Militia Drive.
“I see growth from Lafayette all the way out to Militia Drive,” said Bowman, who owns Bowman Commercial Realty and is regarded as a principal local authority on that market sector. “You can buy cheap now for development later. Later is two years to 10 years.”
Bill Gratz, who heads Gratz Real Estate and Auctioneers and represented the East Side in the legislature for years, also sees the development focus shifting.
“The west side … is reaching its usable limits,” Gratz said. “With Wal-Mart coming in, everything on the east end will grow. Business likes to be around business, and the east end is an untapped market all the way to Osage County.”
Missy Bonnot, the Jefferson City Area Chamber of Commerce’s vice president for economic development, said: “The east end has amazing potential that has been underutilized for many years. There’s a lot going on behind the scenes that you don’t see yet. People are buying property, getting ready to ramp up” for the full development of the state prison redevelopment, Wal-Mart and other opportunities.
In the residential market, Jefferson City proper already has faded as an option because of limited selection and cost, real estate agents say. Unincorporated Cole County has emerged as the site of choice with 148 of 246 single-family permits this year located outside the city.
But businesses prefer to stay inside the city limits with its superior public safety and other advantages — and their choices for development have been “absolutely” limited in Jefferson City, Bonnot said, because the city largely has been unable to expand due to annexation defeats.
The Militia Drive location of the chamber’s industrial park — on the city’s fast-growing east side — is expected to remain the hub of manufacturing and other activity there with Scholastic, Command Web, Alpla and other businesses in the area. Coming months should bring three major changes:
• The chamber has begun pouring the foundation for a 50,000-square-foot building on 11 acres that it hopes to sell to a relocating company. The facility should be complete by March, Bonnot said, and she expects the building eventually will house a business with 50 to 100 jobs.
• The chamber is continuing to assist Alpla, the European bottle manufacturing company, in the second expansion of its plant since it opened in June 2005. The new $7 million addition is expected to add another 50 jobs to the local economy.
• The chamber hopes to close, by year’s end, on the purchase of 100 acres of the Vanderfeltz family dairy farm for further industrial expansion.
And local governments are preparing for improvements to McCarty Street that would provide a more suitable back entrance to the industrial site with capital improvements sales-tax funding.
The developments appear to be changing the attitudes of east-end landowners, often farm families who have tended their land for generations, Bonnot said.
“The west-end property owners seem to be more progressive about selling their land,” she said. “The east-end farmers don’t want to sell or haven’t.” But the Vanderfeltzes “have been very much for the community” and its broader needs.
They contrast with farmers who own land adjacent to the Wal-Mart site and have resisted that development.
With almost 3,000 workers at the industrial park and nearby prison, the far East Side desperately needs more ancillary retail and eating establishments, Bonnot said: “There’s absolutely nothing now. I tell people all the time that they should just put up a convenience store,” which would have a ready clientele.
Workers there now must drive to the Eastland-U.S. 50 interchange to eat, and many don’t have enough time off to make that trek. Bonnot anticipates that the development of Wal-Mart will spur the opening of numerous smaller businesses to meet that need.
Leasable space totals a half-million square feet in capital
The eastward shift of office, retail and other commercial development would occur despite what Bowman considers a current oversupply of commercial rental properties in the city.
He recently inventoried leasable commercial properties in Jefferson City and found a half-million square feet of space available. Even parts of downtown are vacant again.
“That’s 15 percent more than normal,” Bowman said, attributing the figure to recent construction. “But it’s not that bad.”
Of the total leasable property, one-fifth rests in one 100,000 square-foot warehouse off Jaycee Drive. The largest commercial space — a vacant strip mall on West Truman Boulevard owned by Gordon — contains 25,000 square feet while the most spacious office has 15,000.
Despite Bowman’s predictions for the East Side, he said retailers remain focused —for now — on locations along Missouri Boulevard that have been the staple of retailing for decades here. To that, Gordon, president of Coldwell Banker Gordon Co., added areas along West Edgewood and near the Capital Mall that have become extensions of Missouri Boulevard’s retail expanse.
The chamber has additional land available on West Edgewood, and a three-phase, 15-year plan has been developed for property behind the existing Wal-Mart between Missouri Boulevard and Edgewood that has been annexed into the city.
The southwest should benefit long term from development of the 179 corridor when a new St. Mary’s Hospital opens and a large shopping complex owned by Jerry Green and Rich Sampson begins operations.
But Gordon and Gratz said access problems on U.S. 54 South and the difficulties of building into solid rock along the Moreau River bluffs will steer development away from the southwest entrance to the city.
Multiple Listing Service data indicates that this year’s commercial and rental property transactions have fallen off substantially in number and value from 2005, although Jefferson City only has a few dozen transactions, even in peak years.
Bowman said commercial buildings, particularly offices, “seem to be moving, and the banks are working well with buyers.”
Nancy Gratz, a Premier Bank senior vice president and president of its Wildwood Crossings location, said she worries that interest rate shocks are dampening business activity, particularly among potential new businesses.
The Federal Reserve Board raised rates by more than 2 percent over two years, and many commercial loans are tied to the prime. Those business loan rates have doubled from about 4 to 8 percent.
But Bowman said “lack of choices” rather than interest rates were depressing activity in the commercial market. He particularly cited individuals who have cash to invest —through so-called 1031 arrangements that defer capital-gains taxes — but can’t find suitable properties in Jefferson City.
“These are guys with $100,000 to $1 million in cash that want to buy investment properties,” Bowman said. “They’re looking for an 8 to 12 percent return, and they want it leased or mostly leased. We’re talking about 10 to 15 to 20 guys from California and locally. They’re having a hard time fulfilling” their needs.