Regions

Regional revival

Tech sectors helping to rebuild Roanoke area’s economy

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Ignacio Saez is an assistant professor at Virginia Tech Carilion Research Institute. Photo courtesy Virginia Tech

As the national economy continues to rebuild from the Great Recession, the Roanoke and New River valleys have seen a manufacturing resurgence.

Once thought a casualty of globalism, industries that make stuff have made a comeback in the region. Whether it’s the Luxembourg-based food packaging company Ardagh Group announcing it would invest in a site in Roanoke County, or Virginia Tech-grown TECHLAB expanding biotech production to the Radford Industrial Park, manufacturing is helping to drive  Virginia’s economic recovery.

Health care remains the region’s biggest employment sector, with Carilion Clinic as the Roanoke region’s largest employer. But “manufacturing led us out of the recession,” says Beth Doughty, executive director at the Roanoke Regional Partnership.

While job growth in the Roanoke and Blacksburg areas — home to a combined population of nearly half a million people — lags the national average, the region’s manufacturing sector has outpaced both the commonwealth and the nation.

There’s potential for more, too. The 4-year-old Virginia Tech Carilion School of Medicine and Research Institute reached its first full student capacity this fall.
Economic development boosters hope the research institute will do for Roanoke what Virginia Tech’s Corporate Research Center (CRC) has done for Blacksburg: Provide a supportive environment for small companies to grow and hopefully remain in the region.

An ‘exploding’ tech sector
The 230-acre CRC has 155 tenants and is at nearly 99 percent of its capacity,   according to its president, Joe Meredith. The center is adding two new buildings — one for a $5.5 million expansion by Rackspace’s IT hosting operation and the other for a $3.5 million propulsion laboratory operated by Virginia Tech’s engineering department — as well as athletic fields and amenities.

Two tenants have expanded beyond the CRC. One of them, TECHLAB, a biotech firm that started at Virginia Tech before locating in the CRC, bought a 54,000-square-foot building in nearby Radford to house its manufacturing facilities.

Also, Aeroprobe Corp., which makes instruments and software used in cars, jets, wind turbines and other applications, will invest $3 million over five years into a new site in Christiansburg’s Falling Branch Corporate Park.

Derick Maggard, executive director of the Roanoke-Blacksburg Technology Council, says  Virginia’s tech sector “is exploding right now.”

“This focus on entrepreneurship and innovation is only going to lead to greater growth,” Maggard says. “It’s not a bubble at all but the wave of the future.”

Manufacturing moves
Traditional manufacturing plants have expanded as well. Celanese Acetate, which employs more than 1,000 people at its Giles County facility, launched a $150 million capital project to convert its power plant from coal to natural gas.

BAE Systems announced it will invest $240 million to upgrade its facility at the Radford Army Ammunition Plant.

A Polish company, Korona Candles, will spend $18.3 million to establish a facility in Pulaski County, creating about 170 jobs.

James Hardie Building Products expanded its Pulaski facility to nearly 1 million square feet.

In the largest single manufacturing investment in Roanoke County history, the Ardagh Group announced it would spend $93.5 million to renovate the former Hanover Direct building into a facility that can produce nearly 4.5 million food cans per day.

Not all manufacturing news has been good, though: The Grede Holdings LLC said it would close the historic Radford Foundry, which had passed through the hands of several owners and employed 250 people when the closure was announced.

“There are always ups and downs,” says Aric Bopp, executive director of the New River Valley Economic Development Alliance. “It’s sad to see companies that do face struggles and challenges. But for the most part, the economy in the region is really firing up.”

The companies that have manufacturing facilities in the region sell to a global market, and, if the economy continues to improve, Bopp and Doughty expect to see continued investment and job growth.

No silver bullets
Manufacturing isn’t the region’s only strong point, however. Everyone wants a “silver bullet” for economic development, Doughty says. “Everyone wants the one thing that will change things and make it better. That’s an antiquated view of the economy. It’s more like spinning plates:

You have to have a lot going on to grow your economy in different ways.”

In 2012, Moody’s Analytics ranked the Roanoke region 46th out of 384 metropolitan statistical areas (MSAs) for industrial diversity. It fell slightly this year, from 73 percent as diverse as the nation to 71 percent, but it still ranks high. In Virginia it ranks just below Richmond (72 percent) but is well ahead of the two localities tied for third in Virginia (Lynchburg and Winchester, at 58 percent each).

“We’re not putting all of our jelly beans in one bucket,” says Wayne Strickland, executive director of Roanoke Valley-Alleghany Regional Commission.

The localities that comprise the Roanoke Valley worked together in 2013 to collectively raise their lodging tax rates — a move that required General Assembly approval for Roanoke County — and provide a larger marketing budget for the Roanoke Valley Convention and Visitors Bureau to attract tourists.

The Roanoke Regional Airport invested in a makeover for its terminal, and Gov. Bob McDonnell announced in August that Amtrak would extend passenger rail service to Roanoke by 2016.

Roanoke Valley governments also teamed up with the private sector to create a regional broadband authority to help encourage the expansion of affordable high-speed Internet service. In September, gigabit Internet service arrived in Blacksburg after a successful Crowdtilt crowd-sourcing campaign by TechPad, a co-working space near Virginia Tech. (See page 15.)

Breweries bubble up
Then there’s the region’s growing food economy. The biggest news in that sector was the announcement that Mexico-based Red Sun Farms would invest $30 million to build greenhouses on 45 acres in Pulaski’s NRV Commerce Park, creating 205 jobs within five years.

Beneath the banner of that high-profile economic development victory, the local food movement has grown by leaps and bounds over the past decade.

That includes the rapid expansion of the region’s craft brewing sector. While larger, traditional domestic beer companies have seen sales of products stagnate, craft beer labels have exploded in variety and revenue. Until 2013, however, Roanoke’s only brewer of note was Roanoke Railhouse, founded in 2009.

The 2012 expansion by Nelson County-based Devil’s Backbone Brewing to a new facility just north of Roanoke in Lexington, however, may have inspired more regional brewers to step up. Devil’s Backbone expanded the Lexington plant at the end of 2012 and again this year, increasing its production capacity to 40,000 barrels per year.

In the Roanoke and Blacksburg region, entrepreneurs launched Parkway Brewing Company in Salem, Sunken City Brewery in Franklin County near Smith Mountain Lake and Flying Mouse Brewery in Botetourt County.

The largest of the three, Parkway Brewing, is producing 3,600 barrels per year, with plans to expand to 6,000. Owner Mike “Keno” Snyder says the brewery saw about 15 percent growth its first year.

Sunken City invested $2.3 million at Westlake, where it produces canned product. The brewery is on track to produce about 3,000 barrels this year and has the capacity to produce up to about 20,000 barrels per year. Owner Jerome Parnell says he hopes to expand distribution eventually into five to seven states.

Local food loyalty
Besides beer, there’s been a surge of farming and food production in western Virginia, too. “Local products have really improved not just in quantity but in quality too,” says John Bryant, spokesman for the Roanoke Natural Foods Cooperative. “There’s been a real step up in the game.”

In 2003, Tenley Weaver’s Good Food – Good People, a Floyd County-based food aggregator, received local produce from five suppliers and maintained about eight accounts. Now, Good Food – Good People channels local products from 40 farmers and nearly 30 other suppliers to numerous restaurants, farmers markets, wholesalers, a retail outlet and roughly 385 people who paid at the beginning of the season for regular deliveries through a Community Supported Agriculture (CSA) program.

“The percentile growth that our company and food system here is experiencing is off the charts,” Weaver says. “Will it hold? Of course not. It has to level at some point.”

This year has been difficult for farmers, with unseasonably cool temperatures, record-breaking amounts of rain and generally unpredictable weather. The markets and demand for locally produced food, however, are better than they’ve been in decades.

Farm-to-table restaurants, such as Local Roots, River to Rail and Bent Mountain Bistro, trumpet their commitment to local foods, while others, such as Alexander’s, regularly purchase regional goods as well.

Nearly a dozen new farmers markets have cropped up. The success of one of them, the Grandin Village Community Market, founded in 2009, inspired the nearby Roanoke Natural Foods Cooperative to grow as well, expanding with not only a second, downtown location but also the establishment of an urban farm.

Downtown boom
The co-op’s new satellite location in the freshly renovated Center in the Square building wouldn’t have been possible without a residential development boom in downtown Roanoke.

Richmond developer Bill Chapman, who previously launched the Lofts at West Station in a redeveloped warehouse, this year opened Parkway 301, which includes 89 apartment units in the former Shenandoah Building. Another developer, Faisal Khan, plans 90 units for the Crystal Tower Building, which he has renamed the Ponce de Leon in honor of its former life as a hotel.

The rapid conversion of old warehouses and office buildings into apartments has resulted in new opportunities for retail stores. One retail area, 16 West Marketplace, was developed as a commercial marketplace aimed at the new downtown population: It includes a grocery, pizzeria, coffee shop and more.

The private sector investment has been boosted by the city government, too, which over the last decade has invested roughly $20 million into the Market Street corridor from the railroad to Elm Avenue. In October, the city reopened Elmwood Park after a $7 million renovation that included construction of a new amphitheater.

“We try with public dollars to leverage what’s happening downtown to get more private investment,” says Roanoke City Manager Chris Morrill.

That’s what happened with the six-  story Market Garage, which was renovated in 2009 at a cost of $6 million. That led to an announcement in 2012 by the Greenville, S.C.-based Windsor/Aughtry Co. that it would build a Hampton Inn on top of the structure. Bids came in several million dollars higher than the company expected, so it is working with city government to find ways to cut costs. The company still hopes to begin construction before year’s end.

While the region’s retail sector still struggles with online competitors, clothier Larry Davidson said the work downtown has boosted his business: “I just sense the activity level is so totally different now. For me, personally, it’s very exciting to see the quality of the things it’s instilled up and down Market Street.”

The city hopes to spin that activity into adjacent neighborhoods. Last year, the Roanoke City Council extended the downtown district south past the Roanoke River to an area that includes the Bridges, a planned $150 million development that broke ground in May. The first phase includes construction of an apartment building and the renovation of an existing structure into a coffeehouse and restaurant.

City officials also designated a district just west of downtown for targeted federal redevelopment funds. Freedom First Credit Union will open a branch in the neighborhood, and the city council voted to sell the former health department building to Ed Walker, a renowned developer who previously redeveloped the Patrick Henry, the Cotton Mill Lofts and the former Hancock Building into apartments.

One of the city’s traditional cornerstone companies, Advance Auto Parts Inc., announced in October it would acquire General Auto Parts International Inc., for $2 billion, meaning the largest automotive aftermarket parts provider in North America will be headquartered in Roanoke.
Additionally, Virginia Western Community College offers courses in mechatronics — a combination of mechanical and electronic systems — that will prepare more workers for the kind of manufacturing companies that are making a home in the region.

“Advanced manufacturing is our sweet spot,” says Doughty. “We’re just starting to see the beginning of a trend. It’s going to continue to go up.”


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