Lack of empty shell buildings hurting Anderson's growth, mayor says

Anderson’s mayor says he could have filled 10 million square feet of business space in the fourth quarter of last year.

“We are missing business opportunities,” Kevin Smith said. “I really need investment from the private sector now.”

Monday, Smith made a pitch to Anderson business people: if they invest in building new, empty, shell buildings, his economic development team can fill them.

But shell buildings, also called flexible space, can be a risky investment.

Muncie attracted Sallie Mae and its 700 jobs with a shell building specifically built to attract new growth, it was announced Monday.

Unlike Smith’s idea of private investment, Muncie’s building is being paid for by Muncie and Delaware County, with the help of private companies.

“(Sallie Mae) went to available buildings in Muncie we don’t have,” Smith said. In the last quarter of 2005, the city got inquiries from 82 different companies, from food processing to metals fabrication, that needed varying amounts of space.

If the space would have been available, those companies might already be in Anderson, Smith said.

“These are shell buildings, nothing fancy,” he said.

Investors who did put money into shell buildings could snag a laundry list of economic sweeteners, bringing the combined interest rate down to 3.9 percent.

Bill Surbaugh, a real estate agent with Surbaugh and Son, said shell buildings can be a risky investment because an investor has to guess what kind of space companies would want.

“You’re building for a customer without a name,” he said. The Muncie building sat empty for five years.

How big do you build? How high do you build the ceilings? And how do you keep it all affordable to make it look good to a company?

A loan to build a shell building usually requires a large amount of cash up front, or total self-financing.

“You have to ask, how much can I afford to risk?” Surbaugh said. “You have to be a risk taker.”

Others say it’s time for private investors to step up.

“To me (Smith’s pitch) makes a lot of sense,” Jim Ault, chair of the Flagship Enterprise Center, said. “Private investment is a very important part of economic development.”