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The Hampton Roads Association for Commercial Real Estate (HRACRE) recently announced that two buildings in Suffolk were recipients of Excellence in Development Design Awards for 2008.

HRACRE’s Excellence in Development Design Awards program recognizes outstanding projects throughout Hampton Roads. This year, HRACRE awarded Virginia Commerce Center Building 100, located on Kenyon Road near Downtown with an Award of Merit. Also awarded was the Virginia Modeling, Analysis & Simulation Center, located in northern Suffolk, which received an Award of Excellence.

Virginia Commerce Center Building 100 was entered in  the Best R&D/Flex/Industrial Building category. The state-of- the-art distribution facility will accommodate a multitude of industrial users and maximize flexibility in layout options. The building, made of architectural tilt-up concrete panels, can be used by a single tenant or can be divided into multiple tenant spaces. The 385,320 square-foot building was constructed by McDonald Development Company.

The Virginia Modeling, Analysis & Simulation Center (VMASC) was entered in the Best Institutional/Public Building category. This building along with the Tri-Cities Building, located in Portsmouth, is the first phase of the Hampton Roads Crossing mixed-use master plan which  currently  includes  academic and research buildings, a Class A office building as well as a residential future phase including hospitality and retail. Both buildings have classrooms, labs and offices, but VMASC is  more of a research and development facility, while the Tri- Cities building houses more general classroom space. The architecture is expressive of the the modeling and simulation concept that is indicative of the Harbour View corridor.

“Suffolk continues to endorse good design standards for commercial and industrial development” states Suffolk Mayor Linda T. Johnson. “We congratulate both McDonald Development Company and HL Development on their wins and we look forward to seeing what next year will hold.”

Trammell Crow Co.’s Wit Truitt assisted PetsMart Inc. last year in leasing a 1 million-square-foot distribution facility in Illinois. This time, the transaction is heading a little closer to Truitt’s home base of Atlanta, as the pet products retailer is looking for a site for another 1 million-square-foot warehouse along the Interstate 85 South corridor.

Last year, he worked with Staples Inc., which is building a distribution center along the I-20 West corridor (see Big Deal, 2C). The ofce supply company expects to be in the building by the frst of next year.

These are just two examples of the type of massive warehouses consumer companies are building in metro Atlanta. Brokers and economists say the trend shows the growing strength of the Atlanta market as a distribution hub connected to different modes of transportation — railways, roadways, ports and airports. The trend also points to the vibrancy of the Southeast’s economy and Atlanta’s consumer base of more than 4 million people.

Truitt said the distribution facility deals he’s worked on are primarily regional consolidations. And they signify that operations are growing, he said. PetsMart, for example, is trying to open 90 to 100 stores a year.

“It’s defnitely what’s spurring this growth,” he said.

Although these decisions are too long term to consider consumer confdence numbers, it does signal that the companies are relatively confdent about their prospects for expanding their operations, said Roger Tutterow, director of the Econometric Center at the Michael J. Coles College of Business at Kennesaw State University.

“If they’re investing that type of resources in a warehouse … they expect to be growing their product line over time,” he said.

Last September, BrandsMart USA moved into a 226,200-square-foot facility expandable to 900,000 square feet in McDonald Development Co.’s SouthPark development on Interstate 675 in Clayton County. McDonald did a 657,000-square-foot building for Whirlpool Corp. several years ago and a 272,000-square-foot warehouse for H.H. Gregg.

Companies are moving into bigger and bigger warehouses, said John McDonald. In the 1990s, the consolidations were into centers that were 200,000 to 400,000 square feet, but now, buildings are 500,000 to 1 million square feet, he said.

Although consumers have driven the economy out of the recession by their purchasing power, McDonald said most of the large buildings are cost-savings decisions.

“The larger the building, the less they cost, the lower the rent,” he said.

The demand for big-box warehouses is best connected to a movement within the distribution and logistics industry to make businesses more efcient and to reduce costs, said Trent Germano, executive vice president of Carter, whose 94-acre New Manchester Distribution Center is home to JVC Americas and Medline Industries Inc., a medical equipment supplier.

“The trend seems to be toward having fewer distribution facilities with a somewhat longer haul,” he said.

One of the largest warehouse deals is Home Depot’s more than 1 million-square-foot facility in Greenwood Industrial Park in McDonough. Also in Henry County, Atlanta-based Cousins Properties Inc. is developing a 416,000-square-foot facility in partnership with Weeks Properties of Atlanta. The facility, which is expandable to more than 790,000 square feet, is one of fve buildings planned for King Mill Industrial Park, which is expected to total 2.9 million square feet of industrial space.

The decisions are driven by location, a compatible labor force, the value of the property and the cost of developing the facility, Germano said.

Jeff Humphreys, director of The University of Georgia’s Selig Center for Economic Growth, said the trend shows longterm business strategy.

“Atlanta just makes sense for a distribution center regardless of strength of consumer confdence,” he said.

Humphreys said companies also are looking at the distance to the market. To determine the cost of the location, they consider freight rates, air transportation costs and shipping costs.

As an emerging logistics powerhouse, Atlanta and its surrounding counties appear to be flling the bill.

McDonald Development Company specializes in master-planned industrial parks across the Southeast.

Like most real estate developers, John McDonald knows that real estate is a competitive industry. That’s why the founder of McDonald Development Company has chosen to specialize in high quality business parks, including both industrial distribution and single-story office buildings.  Since 1992, the company has developed more than 7 million square feet of new distribution space at an approximate value of $250 million, and currently has more than 1.4 million square feet under construction in Georgia and Florida.

Founded in 1988, McDonald Development Company is developing build-to-suit facilities and multi-tenant industrial business park buildings, for delivery in 2004.

In recent years, McDonald Development Co. has expanded beyond its Atlanta roots, with large-scale projects now under way in Savannah, Waycross and Orlando, Fla.

More geographical diversifcation lies ahead, said owner and president John McDonald.

“We’ll go where the opportunities take us,” said McDonald, adding that markets in other Southeastern states are on the radar but declining to go into specifcs until individual projects are announced.

McDonald described the industrial development company he founded in 1989 as “doing exceptionally well considering market conditions.”

“The market has been in recession for three years, but we not only have 759,200 square feet of build-to-suits going up, but also two spec buildings under construction in Atlanta,” he said.

SETTING THE BAR

Then again, McDonald Development has never been the sluggish sort. Since 1993, the company has developed more than 7.3 million square feet of new distribution space (valued at more than $250 million) and currently has 1.4 million square feet under construction, 750,000 of which is leased. At present, McDonald is developing 10 industrial parks in the Atlanta, Orlando and Savannah markets — a total of more than 1,500 acres.

Through the years, Atlanta projects have included Peachtree North, Horizon Ridge, SouthChase, SouthPark, Windward Chase, Windward Ridge, Westlake and Southmeadow. In Orlando, it is developing Crowne Point Commerce Park, which is suitable for about 1 million square feet of development.

McDonald recently began development of the Georgia Commerce Center, a 41-acre, two-building logistics/ distribution center at the Georgia Ports Authority’s Garden City Terminal near Savannah. More than 3,000 railroad cars a year will be brought into the state-of-the-art facility, where product will be unloaded and put into containers for transport on ships.

Phase One is a 315,500-square-foot, rail-served bulk distribution building that is preleased to Capital Cargo International Airlines Inc., which is adding 100 jobs to the Chatham County economy. Phase II will be a 200,000-squarefoot distribution center.

Capital Cargo owner Kenny Meyer said he started the project on his own seven years ago and “banged my head against the wall” for six years until he brought in McDonald.

“I just didn’t have the expertise to do it,” he said. “John does. He knows exactly what it takes for a project like this to be successful.”

Meyer had been impressed with the design and functionality of McDonald buildings he saw in metro Atlanta.

“They were well-adapted to ft customer needs,” he said. “One thing we did here was to bring the railroad inside the building so that we won’t have to unload cars in inclement weather. That feature alone will gain us a better share of the customer base.”

One soon-to-be-completed McDonald project is a nearly $6 million, 217,500-square-foot factory for Simmons Co. in Waycross. The mattress manufacturer is creating 225 jobs in the southeast Georgia city.

Simmons considered fve companies before choosing McDonald for the project.

“John runs a very precise organization,” said Simmons’ Allen Podratsky, senior vice president of product development and supply-chain management. “It’s a tight ship. They’re very meticulous in their planning and do a bang-up job of managing the details.”

McDonald said his company’s “land position” has enabled it to do well in Atlanta despite the economic downturn, from which the market is only slowly emerging. The company, for instance, owns four parks near Hartsfeld-Jackson Atlanta International Airport, including 358-acre SouthPark, 354-acre Southmeadow and 400-acre Westlake.

McDonald also is building a 354,000-square-foot cross-dock spec facility in Southmeadow and a 121,600-square-foot rear-load spec building in Westlake.

MAKING OF A VETERAN

At age 60, McDonald is a 32-year veteran of Atlanta real estate. His career has included stints as a land/leasing/ investment broker, a partner at Trammell Crow Co. and a partner at Taylor & Mathis Inc.. He ventured out on his own in 1989.

For the past 15 years, McDonald has served as the honorary Norwegian consul in Georgia. Several years ago, King Harold V of Norway knighted McDonald for his contributions to that country.

About venturing out on his own, McDonald said, “I had learned what I needed to know. I wanted to make my own decisions and take my own risks, at whatever level I wanted that to be. And I’ve been very happy with that decision. We now own 4 million square feet of buildings and are adding 700,000 to 1 million square feet a year.”

McDonald expects the latter number to accelerate “through diversifcation in other markets.”

The Buckhead resident said he enjoys vying for business.

“I like the challenge of going to the marketplace every day and competing,” he said. “Development is a matter of being creative and going out and fnding the business. We’ve always been able to fnd it because we know what we’re doing.”