MIDDLE MARKET HIGHLIGHT, SEPTEMBER 2007

Lansing
Dan Marcec

The words growth and expansion understate the amount of activity underway in Michigan’s capital city of Lansing, but perhaps the most significant factor in economic development is the job creation in recent years. Lansing was the only metropolitan city in the state to show net employment growth in 2006, creating 2,031 jobs, compared to 522 from the previous year. This incredible growth was most certainly aided by a 324 percent increase ($228 million) in private investment from 2005 to 2006.

A major catalyst for this expansion has come from three auto industry suppliers that added 1,000 jobs to the market in the past year. On top of that, a new General Motors plant is under development and will create an additional 3,500 jobs when complete. GM also has plans to add 500 more jobs in the coming months, which should lead to 300 more from local suppliers.

“With all the doom and gloom regarding the auto industry in the state of Michigan right now, growth like this is completely unheard of, but Mayor Virg Bernero has been aggressive in attracting economic development by giving incentives to businesses,” says Robert Trezise, president and CEO of the Lansing Economic Development Corporation. “He’s also been working hard to open channels with Michigan State University through the ‘Linking Lansing and U’ program, which coordinates entrepreneurship, properties and students to city growth.”

Area business growth has not been limited to the auto industry, as Demmer Corporation has transformed its production operations from automotive to military manufacturing, developing 1,000 jobs through the conversion. Beyond that, information technology and biotech firms are moving into the city, and though the individual companies are modest in size, a large cluster of them has created a significant market sector. For example, TechSmith announced the construction of both its national and software development headquarters in the city, and Spartan Internet is buying an abandoned school and doubling its employee base from 40 to 80.

With respect to commercial development, downtown Lansing is seeing a wave of revitalization. Occupancy rates for Class A space are very robust, though Class B and C projects are struggling. In the past, building owners relied on state department leases to occupy the B and C properties, but as the downtown continues to be redeveloped, those facilities are being sold to entrepreneurs or rehabbed into retail/condominium projects. With all the construction happening in the city proper, engineering and construction firms are swarming to relocate into downtown, and private investors from western Michigan are looking for opportunities to invest in Lansing.

“There’s no doubt that downtown Lansing is carrying the surge of growth in the area, and probably the economic weight of the region,” Trezise says. “A new generation of entrepreneurs are buying buildings left and right, but they are respecting the history of the city and working together in their efforts to redevelop.”

A $40 million state office building has been approved in the downtown market, which will likely add 550 jobs to market. One developer is planning a 20-story, high-end condominium project with ground-floor retail. Additional ventures are on the horizon, but will not be announced until later this fall.

Although retail development in strip centers on the outskirts of Lansing has dipped, high-tech development has been pushing outward, and the industrial sector is booming.

“Development in Lansing is better than it’s been in the last 50 years, and we’re in a big, big time of change,” Trezise says. “Especially in the context of the current state economy, the growth here has been phenomenal. With [the development] that is coming online, the growth will continue and we should become one of the great midwestern capital cities.”

The Arbaugh Building before the redevelopment. DOWNTOWN REDEVELOPMENT ILLUSTRATES LANSING REVIVAL There are numerous redevelopment projects underway throughout Lansing’s downtown, and one of the most significant is taking a historic, 108,000-square-foot building on the south end of the Washington Square retail corridor and converting it into a 48-unit loft-style residential building, featuring approximately 17,000 square feet of commercial space on the ground floor and 2,900 square feet of mezzanine office space. The renovated and restored building, featuring 48 loft-style residences. The five-story Arbaugh Building was built in 1905 as a department store that anchored the city’s retail scene. Shuttered in 2002, the building remained vacant for over a year before local developer Karp & Associates acquired it and began the redevelopment. Working closely with the municipality and utilizing historic and new market tax credits, the developer removed the building’s glass facade to reveal the original brick front, and added a new cornice to replace the original work that was no longer there. The result of the $8.2 million undertaking is vibrant, well-located mixed-use project in a reinvigorated downtown market. — Kevin Jeselnik

©2007 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.