More than just peanut
- January 29, 2009
Pork and peanuts are still staples in Suffolk and Isle of Wight County, but these western Tidewater locales are rapidly becoming known for industries other than agriculture. With a close-in location to the Port of Hampton Roads, they’re carving out a new identity as a strategic site for warehouse and distribution centers.
In fact, with low tax rates and an abundance of land, the area is attracting some of the biggest names in logistics. Denver-based ProLogis, the world’s largest owner and developer of distribution facilities, plans a location in Northgate Commerce Park in Suffolk. CenterPoint Properties, the country’s leading inland port developer, is moving ahead with plans for a massive intermodal center off U.S. 58 in Suffolk. And Isle of Wight is gearing up for its own intermodal park.
The growth in distribution centers is good news. They help create new jobs and diversify the area’s economy. “Areas closer to the port don’t have the luxury of all the land that we do,” says Cindy Cave, Suffolk’s director of economic development. “We’re still primarily known for peanuts, but we have so many diverse activities within the city.”
Plenty of space was a consideration for CenterPoint when the Chicago-based company decided to build its first project in Virginia. That, and the chance to ship goods through a prime East Coast port. “We spent about a year researching what markets we would like to be in and which ones would hold the key to future success,” says Neil Doyle, CenterPoint’s executive vice president for infrastructure and transportation. “Hampton Roads really rose to the top tier of that list.”
The Virginia Port Authority, adds Doyle, enjoys a good reputation for port management. Throw in the region’s demographics for labor and population growth, and “We think the park is right sized for the market.”
CenterPoint plans to begin construction this spring on a $350 million logistics center and rail yard on 900 acres along the U.S. 58-Holland Road corridor. The center is expected to create 2,152 jobs once it is fully built out over 10 years. Wage estimates range from $8.99 an hour for packers and handlers to $22.46 per hour for first-line supervisors/managers.
Addressing traffic issues
The center would add more than 5 million square feet of new distribution and warehouse space. Located across from Target’s existing distribution center, it presents opportunities as well as challenges for Suffolk. “We have some traffic issues,” says Cave, such as growing congestion along U.S. 58. “The road needs to be widened.”
Still, the city’s Planning Commission approved CenterPoint’s rezoning request, asserting that the project will help pay for improvements to the highway. The rezoning now goes for a vote before the Suffolk City Council.
To bolster its case, CenterPoint plans to assist the state and city with $54.9 million in road improvements, including widening a three-mile stretch of Holland Road to six lanes. “The city’s traffic concern is a very common and reasonable concern,” says Doyle. “We are offering more than our share of costs to mitigate traffic concerns.”
Such large-scale investments, say port officials, can ultimately benefit both localities and the port, especially when an intermodal park is included. “It allows us to market around those intermodal parks,” observes Joe Harris, media relations manager of the Virginia Port Authority. “It will be a draw for cargo and brings an opportunity for other businesses to come in and talk to CenterPoint.”
As CenterPoint winds its way through city government, ProLogis is proceeding with plans for modern, multi-distribution centers in Northgate Commerce Park. The 83-acre site off Interstate 664 could contain more than 2 million square feet of warehouse space. The city is currently reviewing ProLogis’ site plan for the development.
Suffolk first began attracting distribution centers back in 1989 when home-shopping giant QVC opened a center in Wilroy Industrial Park. Today, QVC’s Suffolk facility consists of five warehouses that employ 1,100 people. Following QVC’s lead, Target built a $65 million, 1.5 million-square-foot import distribution center off Route 58 in 2002. That came a year after Sysco Corp. constructed a $33 million, 650-employee operations and distribution center in northern Suffolk.
The cluster of warehouse centers saw dramatic growth in 2008. Joining the list with a Suffolk location were Rock Bottom Golf, the Dixie Group, Ferguson Enterprises and Dana Corp.
Isle of Wight playing catch-up
Not wanting to miss out on the trend, neighboring Isle of Wight County is quickly playing catch-up. During the last decade, it acquired the land to build the Shirley T. Holland Industrial Park in Windsor. International retailer Cost Plus World Market became the park’s first tenant in 2002. Starting with a 500,000-square-foot facility, Cost Plus doubled the space within a few years and now operates a 1.1 million-square-foot center. For the park’s second phase of development, major tenant LDI/SAFCO recently signed on. The office products supplier is expected to create about 40 jobs at the $17 million center.
If all this seems like overkill in terms of sheer space, consider projections for the Port of Virginia. Lisa T. Perry, Isle of Wight’s economic development director, cites studies showing the state will need 20 to 60 million additional square feet of distribution center space by 2030 in order to accommodate the cargo moving through the state’s ports. The bulk of the cargo passes through the terminals at Hampton Roads.
As part of an aggressive plan to pursue the logistics market, Isle of Wight is developing an intermodal park within 30 minutes of the marine terminals in Norfolk, Portsmouth and Newport News. Along with the Shirley T. Holland parcel, the park would include a 1,740-acre parcel owned by Norfolk Southern and 590 acres owned by International Paper. Totaling more than 2,700 acres, the park could accommodate more than 20 million square feet of distribution space and would have access to Norfolk Southern rail lines. “We hope Norfolk Southern will partner with the county and develop a rail yard at the park,” says Perry.
Important role for rail
Rail will play a huge role in the region’s ability to attract more distribution centers. The $249 million Heartland Corridor project will move double-stacked freight containers along the Norfolk Southern railroad between Norfolk and Columbus, Ohio. Expected to be operational later this year, the upgraded corridor will take 250 miles off the route between Norfolk and Chicago. “That’s really going to give us an edge,” says Perry.
While pork processor Smithfield Foods and International Paper remain as two of the largest employers in Isle of Wight, the push toward capturing more warehouse businesses is helping the county diversify its economy. “We’re sowing the seeds for the future,” notes Perry. “We’re very interested in advanced manufacturing, technology-driven, valued-added manufacturing.”
As the port continues to grow, more businesses in the warehouse and distribution sector are discovering that Suffolk and Isle of Wight offer more than farmland. Although economic development officials believe each locality can have a hearty share of the pie, they still compete for prized companies. By offering to fast track building permits for SAFCO’s $17 million distribution center, Isle of Wight snared the office products supplier last year. The New Hope, Minn.-based company had stipulated that its 302,000-square-foot distribution center in Holland Park had to be up and running by December. “Not many communities can make something like that happen,” Perry says. “We customized the permit process and assisted with review and site planning.”
“We came here because of the port,” says SAFCO marketing manager Amber Johnson. “The Port of Virginia has a dedicated fleet established for high-volume lanes.” The company also has distribution centers in Atlanta and Riverside, Calif., but Johnson says the Isle of Wight facility will be a boon for East Coast sales. “It’s just a strategic location to accommodate our East Coast customers.”
Suffolk’s pro-business attitude also has persuaded industries to settle in the city. Particularly attractive is a low real estate tax rate which decreased from 93 cents to 91 cents per $100 of assessed value in 2008. “Lowering the tax rate certainly helps us becompetitive,” says Cave. The city also offers various federal, state and local incentives to new and expanding businesses, including rehabilitation tax credits and Enterprise Zones and Foreign Trade Zones. Plus the Economic Development Authority provides an economic incentive program based on capital investment and wage rates.
Isle of Wight also boasts one of the region’s lowest tax rates, at 52 cents. Economic development officials in both Suffolk and Isle of Wight say the credit crunch has caused businesses to be more cautious about expansion plans, with some delaying proposed projects. “Lead activities have stayed pretty consistent,” Perry says, adding that Hampton Roads may not take as big a hit as other areas due to the military and port presence.
Not the only growing industry
A warm reception, along with a location about 15 minutes from all pier locations, was enough to sell The Dixie Group Inc. on Suffolk’s Bridgeway Industrial Park off I-664. The Richmond-based company recently opened a 16,000-square-foot warehouse on five acres of land. “The ports of Virginia are poised for growth,” says Michael C. Smith, president of Dixie Growth LLC, the strategic and marketing arm of the company. “Our long-term plans are to grow with the ports of Virginia.”
Warehouse and distribution businesses are not the only large industries fueling Suffolk’s economy. In the last decade, the region has become a high-tech hub for the modeling and simulation industry. Companies such as Lockheed Martin, along with Suffolk’s largest employer, the U.S. Joint Forces Command, have made their homes in business parks along the I-664 corridor. “Modeling and simulation is huge,” notes Cave. “It’s increased our per capita income.”
Yet as the region continues to attract a more diversified roster of businesses, growing pains are evident. The growth has put a strain on roads, as well as the area’s water and sewer systems.
The localities are working together to address those challenges. Partnering on a $450,000 state grant, Suffolk and Isle of Wight are using a computer software program to model transportation and land-use issues. Planners can plug in simulated data such as proposed zoning changes, development projects and traffic volumes to develop “what if” scenarios and determine how the changes would affect infrastructure.
Along with traffic concerns, Isle of Wight faces a shortage of work-force housing and the labor for the anticipated influx of jobs. “We think there will be some population growth,” Perry says. “We’re planning strategically — where we are going to allow and encourage mixed-use, housing and retail developments. It’s a big huge picture.”
Residents also worry that the new industries will change the character of the bucolic county. “People operate from a position of fear,” says Perry. “A lot of people grew up here and don’t want to see anything change.” She understands their concerns but believes large industrial parks can happily co-exist with farmland and smaller businesses. “On the one hand, we’re developing and looking to industry and business growth, but in the same vein, we are looking to maintain some of the things we hold dear. We’re not out there trying to pave paradise.”
City of Suffolk Warehouse
Source: City of Suffolk Department of Economic Development
A. Target Distribution
B. QVC Distribution
C. SYSCO Foods of Hampton Roads
1. Bridgeway Business Center
2. Bridgeway Commerce Center III
3. Pak-Al USA
4. Hampton Roads Logistics
5. Commonwealth Commerce Center
6. Northgate Logistics Center I & II
7. Virginia Regional Commerce Park
8. Virginia Commerce Center
9. Enterchange at Suffolk
10. Commerce Center Hampton Roads
11. Westport Commerce Park