Signs of Life in the Industrial Market

There have been days during the last few years that Londonderry Community Development Director Andre Garron has felt a kinship with the iconic Maytag Repairman looking forlornly at a silent telephone. But that's beginning to change, says Garron who is the point man for industrial development in a town where the population has quintupled in the past 40 years and where a strong manufacturing base has developed.

We're getting more inquiries about people looking to build new, says Garron.

One big reason Garron's phone is starting to ring again is that Londonderry is on the cusp of what could be one of the biggest business/industrial development projects in the state's southern tier-an 800-acre parcel along Pettengill Road, adjacent to the recently completed access road that connects the Manchester-Boston Regional Airport with the Everett Turnpike. Garron says that land has the potential to house 4 million square feet of developed business and industrial space, and adding 4,000 to 6,000 jobs.

So what does Londonderry have that makes this site so tantalizing? Well, like so many other NH communities that have experienced economic growth, the answer comes down to three words: Location, Location, Location.

The fact is physical location may determine whether a business will succeed or fail, which is why businesses spend so much time looking for the ideal location and why communities go to great lengths to market themselves as the ideal location.

For industries and high-tech firms, location means easy access to good highways, and airports with frequent flights. It also means availability of utility services that make the businesses hum.

Not surprisingly, most of the business and industrial activity in recent years has been along the I-93 corridor between Manchester and the Massachusetts border, along the Spaulding Turnpike in the Seacoast and along the state's western border, which offers ready access to Interstate 91, according to Mike Bergeron, the business development manager for the NH Division of Economic Development, an arm of the NH Department of Resources and Economic Development.

Other infrastructure factors, like municipal water and sewer, amenable zoning regulations, and state-of-the-art communications are important as well. But in today's economy when companies are far less eager to build from scratch, their decision about where to locate is likely to be dictated by the availability of a facility that fits their requirements like a glove.

It's finding the right match for the client, says Bergeron. I recently dealt with a company that made it perfectly clear that they needed a building with a 39-foot ceiling clearance. There aren't that many buildings that have that.

Low Vacancy/Slow Development

While NH has lost 30,000 manufacturing jobs since 2000, the vacancy rate for industrial space is not all that high, according to Russ Thibeault, owner of Applied Economic Research in Laconia. Steven Weeks Jr., owner of Weeks Commercial,  describes the vacancy rate in the Laconia area as low. And in Manchester, which has 8.8 million square feet of industrial space, the vacancy rate is about 9 percent, according to Jay Minkarah, Manchester's economic development director.

Starting in the 1950s, industrial parks became the locus of industrial development and growth. Industrial parks continue to have their appeal, largely because they typically have the infrastructure that businesses, particularly large operations, need, such as convenient highway access, and high-capacity municipal sewer and water systems. And Minkarah notes some businesses find industrial parks attractive because their operations will rarely conflict with neighbors.

But as the nature of industry in NH has shifted from heavy high-output manufacturing to smaller-scale technology businesses, so has the setting in which these firms operate. Today's venue is more likely to be a business park where small manufacturers are located near research and development companies and medical or other professional offices.

One example is the Lakes Business Park, a 105-acre joint venture by the City of Laconia and Town of Gilford, which includes offices for a medical practice, a precision tube assembly firm that supplies products to the aerospace industry, and a distribution facility and showroom for a heating and plumbing firm.

Real estate activity at the park has been slow during the economic downturn, Weeks says. But a vacant three-acre lot at the Lakes Business Park is about to become the home of a new facility for an existing Laconia-area manufacturer that needs to expand. (At the time Weeks was interviewed for this article in early January, he was unable to divulge the name of the firm.)

Breaking Ground

There are other signs of resurging industrial development as well, most notably in Rochester, where Albany Engineered Composites (AEC) and its partner, Safran USA, are in the process of expanding. The two companies will use a new 275,000-square-foot plant in the Granite State Industrial Park, which will be adjacent to the already-existing AEC site, for joint manufacturing of advanced composite engine parts for fuel-efficient LEAP aircraft engines.

Karen Pollard, Rochester's economic development manager, says that the Albany-Safran venture means 400 new jobs. In addition, Albany International, AEC's parent company, is moving its headquarters from Albany, N.Y. to Rochester, which will mean additional employment opportunities. Pollard says what has made Rochester an attractive choice for companies like Albany and Safran has been the availability of skilled workers, as well as improvements to I-95 and the Spaulding Turnpike, which allow companies to get their products to customers more quickly. Forward-thinking companies are looking at that, she says.

Northern Growth

The activity in commercial and industrial development has not been limited to the southern half of the state. The Littleton Industrial Park is proof that companies are willing to locate in the state's North Country. There are 17 businesses in the park, including manufacturers and warehouses as well as publishing and catalogue sales operations. Together they employ about 1,200 people, according to Greg Eastman, president of the Littleton Industrial Development Commission (LIDC), which oversees the park.

The latest business to locate in the park, off I-93, is Secured Network Services Inc., a Massachusetts-based IT support and consulting firm, which is renovating a former FedEx terminal for a data storage backup site. After Hurricane Irene, a lot of companies wanted backup for their computer data away from Boston, Eastman says of Secured Network Services' decision to choose a location that is two-and-a-half hours north of Boston.

The Littleton park is presently about 80 percent to 90 percent full and, according to Eastman, the LIDC is now exploring the possibility of developing another 125 acres for future expansion.

Looking Ahead

While the low vacancy rate for industrial space throughout the state and recent activity in various parks would seem to bode well for the future of industrial development in places like Londonderry, development of new industrial space has slowed, says Mike Monks, president of MONKS & Co. Inc., a commercial real estate firm in Nashua. You might see one or two companies a year. It takes a lot more to get companies to move these days, he says.

Monks notes that while companies move operations for a host of reasons, relocation is not their first preference. A successful company knows their workforce is a big reason for their success and moving can often be disruptive. There are some companies that don't want to go more than three traffic lights from their present location, says Monks, who has been in the commercial real estate profession for nearly 40 years. Relocating to a different area usually means hiring a new pool of workers.

The lack of available workers with the advanced education and skills to fill the jobs in the precision, technology-based firms is the most daunting challenge facing the state, says economic development directors, real estate brokers, and economic consultants from across the state.

Thibeault of Applied Economic Research worries that NH-and the rest of the country for that matter-could lose its competitive advantage unless we produce more scientific and technological talent to work in industry. He says that despite popular perceptions to the contrary, industrial production in the United States is just about equal to China's. But we produce it with about one-tenth of the manpower, Thibeault says. That's how we compete. Despite the high degree of automation in U.S. factories, manufacturers and tech companies still need skilled workers in order to grow, he says, and that growth is necessary to not only fill the vacancies we have for industrial space, but to create new demand and new jobs.