Entrepreneurs shunning traditional storefronts for industrial space

December 09, 2011

In this economy, an empty warehouse doesn’t do much good -- unless you’re looking for a cheap place to open a business. Entrepreneurs have been shunning traditional retail storefronts in favor of industrial space. As Peter O’Dowd reports from Phoenix, city planners – and even some landlords – aren’t nearly as enthusiastic.

Yoga studio owner Tish Hegel
Tempe yoga studio owner Tish Hegel rented warehouse space instead of a traditional retail spot. (Peter O'Dowd - KJZZ)

YOGA INSTRUCTOR: Exhale. Good. Inhale.

PETER O’DOWD: The folks at Hegel Yoga wanted something big.

TISH HEGEL: So you can let go and breathe and not feel claustrophobic.

PETER O’DOWD: And Tish Hegel found it here, in this warehouse in Tempe, just east Phoenix.

TISH HEGEL: When I moved over here, I doubled my square footage and my rent went down by a third. So it was definitely economical.

PETER O’DOWD: Hegel is like a lot of other non-industrial business owners in the Phoenix area getting a deal on empty warehouses. After the financial meltdown, all sorts of industrial buildings emptied out, and rents are now more than 20 percent cheaper. Hegel had no trouble renting the space. But not every business owner is so lucky.

Rob Martenson is a broker with the real estate firm Colliers International. His cautionary tale took me to a 30-thousand square foot warehouse near a suburban airport. The building went up at the height of the real estate boom.

ROB MARTENSON: So it’s been vacant for quite a while. 

PETER O’DOWD: Was there ever a tenant in it? 


PETER O’DOWD:There was plenty of interest – mostly from non-traditional tenants like a skateboard park and a military museum. But these users needed expensive zoning adjustments and permits; more bathrooms, air-conditioning. In this case, the landlord didn’t want to bother.

ROB MARTENSON: You could spend a lot of money making improvements. Then if that tenant goes broke, you lose even more money. A lot of times it’s not worth the risk.

Warehouse space available to rent
This 30,000-square-foot industrial building at the Chandler Air Park has been empty since it was built . (Peter O'Dowd - KJZZ)

PETER O’DOWD: Eventually the warehouse went into foreclosure. Sometimes, it’s cities themselves that keep non-traditional tenants out of industrial buildings. Colliers brokers say churches have moved into many warehouses across the country. There’s a new one coming online in West Phoenix. The Arizona Republic has reported that churches are discouraged in Mesa industrial parks. Gilbert doesn’t allow them at all. Neither does Glendale.

JON FROKE: That can be a challenge. 

PETER O’DOWD: Jon Froke is the planning director. He says its an issue of safety and compatibility.

JON FROKE: If I’m an industrial user and I’ve put a million dollars into my business, I don’t really want to deal with someone next door complaining about noise, dust, heavy trucks.

PETER O’DOWD: But the city doesn’t want to turn away potential tenants. Froke has helped churches looking for warehouses find space more compatible with their use. For KJZZ, I’m Peter O’Dowd.


Read the Q3 2011 Phoenix Industrial Market Report from real estate firm Collier's International.