Illinois Business Journal - Tight South County real estate market may drive companies to SW Illinois

Is Kuna Meat Inc.'s recent announcement to move to Dupo, Ill. from its current home in south St. Louis County a portent of things to come?

Kuna Meat has been leasing 50,000 square feet of space in the Bussen Quarry on the Missouri side near the Jefferson Barracks Bridge. Continued and expected future growth led Kuna to the conclusion that it needed to expand to 80,000 square feet.

The company performed a thorough search of South County and Fenton-area real estate but could not fulfill its needs, according to Kuna Meat attorney Mike Kaemmerer with McCarthy, Leonard and Kaemmerer.

Kuna Meat's story is typical of the South County industrial real estate market, according to Jeff Hawley, vice president with Colliers Turley Martin Tucker.

Owners of businesses have been reluctant to consider the Illinois alternative, he said.

"As much as 80 percent of the industrial users in South County own their own buildings and they live in South or West (St. Louis) County," said Hawley. "Their labor force is located in South County or Jefferson County.

"These entrepreneurial people live in Chesterfield or Manchester or Ballwin and they don't want to fight the traffic and drive to Westport or that area," he added.

Meanwhile, companies can't go very far south because of the Ozark Uplift which is characterized by hilly terrain and rocky soil. This geography makes it very expensive to build in that area and limits alternatives, according to Hawley.

Unlike Kuna Meat, most company owners are desperate to stay on the Missouri side, he said.

"People will overpay by 20 or 30 percent (to be) in South County," said Hawley. "To them it's not a function of overpaying; it's a function of being able to own property close to where they live."

And South County options are few, which led to the development of the Green Park Commerce Center on the site of a former quarry near Interstate 55 and South Lindbergh Boulevard.

Lots in that business park are being sold for $3.50 per square foot, according to Hawley.

"Fenton is the next best thing," said Hawley. "People are paying crazy prices for ground out there."

With alternatives shrinking and prices soaring, will Illinois finally get serious consideration by Missouri companies?

"I still believe that if they had their druthers, they would prefer not to go across the river," he said. "You'll have a real tough time getting users - people who want to lease space - to go over there. Illinois tends to be perceived as a secondary marketplace for people who live in St. Louis because of their one-mindedness about St. Louis County being so special and wonderful.

"The idea of going across the river to them is more of a step down," he said.

But John Herzog, economic development coordinator for Madison County, says that archaic perception is changing.

"Some of the reluctance was fear of the unknown, but I think Gateway Commerce Center and Sauget Business Park have opened some eyes," he said. "Illinois is part of the equation now."

According to Herzog, Missouri companies are surprised to learn how many of their employees live in Illinois.

"When they start pulling their employee records, they find that one-third to one-half are Illinois residents," he said, "particularly in manufacturing."

As reported in the August issue, Clayco Construction Co. is planning a large industrial park along Illinois 255 in Dupo with the expectation that South County companies will cross the river.

The Illinois alternative met all of Kuna Meat's needs, according to Kaemmerer:

The ability to own its own building; room for future expansion; proximity to major highways; tax incentives through a tax increment financing district; and affordable land costs. An added plus was the support of the village of Dupo.

"The village of Dupo has been very cooperative and has been a very good partner," Kaemmerer said.