The 607,000-sf building, scheduled to break ground this month, is the second phase of a 1.1-million-sf development known as Rivergate Corporate Center that Trammell Crow is developing for MEPT. MEPT inked a $4-million, 55-year ground lease for the 23-acre, 488,000-sf first phase in December 2001. In October 2002, MEPT signed a $5.4-million, 55-year lease for another 27 acres where Georgia-Pacific's building will be constructed. Trammell Crow SVP Dirk Otis will oversee the development.

Local real estate sources at that time told GlobeSt.com that MEPT wouldn't have OK'd the extra land acquisition--given the fact no tenants had yet signed for the first phase--unless it had a user ready to take the space. In December, when the first phase secured its first tenant, TCC's Dave Ellis acknowledged that a 400,000-sf user was close to signing on for the second phase.

The only first-phase tenant announced to date is Schneider Resources Inc., which leased 50,000 sf of a 150,000 sf building for storing and distributing automobile parts and related components. The rest of the first-phase is housed in a single building totaling 338,000-sf. Both shells, with a 35-foot clear height, were recently completed by general contractor Perlo McCormack Pacific. Monthly triple-net asking rates are $0.34 per sf for warehouse and $0.65 per sf for the office space surcharge. No other tenants have been announced.

Local industry experts tell GlobeSt.com that Rreef fought hard to retain Georgia-Pacific by offering to lower their lease rate, but that Trammell Crow gave Georgia-Pacific a deal it couldn't refuse. The standard rate for newer industrial space in the Columbia Corridor is $0.32-$0.33 per sf per month. Local industry experts believe G-P executed a long-term lease with Trammell Crow at substantially below that rate.

Without revealing the actual lease rate, Trammell Crow SVP Dave Ellis, who handled the lease negotiations, acknowledged aggressive pricing, saying it was possible because of the efficiency of a large building and an aggressive contracting climate. "That's what we are taking advantage of," he tells GlobeSt.com. Cushman & Wakefield brokers Gary Randles (Portland) and Ray Stache (Atlanta) represented Fort James Corp. in the transactions.

If there's a downside to the transaction, it's that it could result in 300,000 sf of negative absorption, as G-P will be moving out of 500,000 sf and into 400,000 sf of a new 600,000-sf building. That plus the speculative 488,000 sf TCC delivered in the fourth quarter has helped push warehouse/distribution and manufacturing vacancy up to the 10% range.

As Grubb & Ellis stated in its fourth quarter report, however, it's a trend we may have to get used to as big industrial users look for ways to make themselves more efficient by consolidating their operations into new modern structures built to suit their changing wants and needs, such as higher clear heights.

"While lack of demand is an undeniable challenge, the reality is that market vacancies, particularly in the long run, may appear higher than they actually are as a function of product inefficiency rather than oversupply," states the report. "It is this phenomenon that remains and will continue to remain a problem for the industrial market. Such building owners may eventually have to bite the bullet and get creative when dealing with this issue, possibly through redevelopment or partial demolition."

Fort James Corp., acquired by Georgia-Pacific in 2000, is an international consumer products company that manufactures bathroom and facial tissue, paper towels, napkins, cotton pads, cups, plates, cutlery and food wrap products. The company's North American brands include Quilted Northern, Soft ´N Gentle, Brawny, Mardi Gras, So-Dri, Vanity Fair and Dixie.

Instant Insights /

Fort James Corp. Pre-Leases 402,450 SF at Rivergate Corporate Center

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