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Defense Cutbacks Lead to Novel Industrial Parks

From coast to coast, U.S. Navy shipyards have been converted into industrial parks with facilities occupied by small, medium, and large companies employing from fewer than a dozen people up to several hundred.

John K. Borchardt (Winter 2012)
The Navy turned the Long Beach Naval Ship Yard, located on Terminal Island, over to the City and Port of Long Beach in 1997. It is now a container terminal serving the Port of Long Beach, the nation’s busiest port. The Navy turned the Long Beach Naval Ship Yard, located on Terminal Island, over to the City and Port of Long Beach in 1997. It is now a container terminal serving the Port of Long Beach, the nation’s busiest port.
All new ship construction in the Navy shipyards formally ended in 1972, after publication of a report indicating that ships built in Navy shipyards cost about 30 percent more than ships built by private-sector shipbuilders. The report led to nine Navy shipyards being de-activated and converted to other uses.

These shipyards are large sites - often comprised of more than 1,000 acres - and are located on prime waterfront property in urban areas. Many of the buildings remaining on these sites are suitable for use as factories, warehouses, and offices. In addition, there is a growing amount of new construction.

As with any restoration of an industrial brownfield site, government agencies require environmental review, toxics removal, and soil remediation before any new development and re-use.

Conversion to a Modern Shipyard
Philadelphia Industrial Development Corp. (PIDC) is managing the former Philadelphia Navy Yard. A joint venture of the City of Philadelphia and the Greater Philadelphia Chamber of Commerce, the PIDC was founded in 1958 to promote economic development throughout Philadelphia. Its role is to manage properties and implement real estate and financing transactions. PIDC took over the Navy shipyard in 2000 after its closure.

The core of the yard covers 793 acres. Architect Robert A.M. Stern has prepared a master plan for redevelopment. The plan calls for a mixed-use waterfront community including industrial, office, and research and development facilities; retail development; waterfront amenities; and improved mass transit. More than 9,000 civilian workers are presently employed at the yard in various private-sector enterprises.

The largest tenant is a private shipbuilder, Aker Philadelphia Shipyard. The largest manufacturing business in Philadelphia, Aker employs about 1,200 people and adds $230 million annually to the regional economy including $9 million in city tax revenues. About 85 percent of its work force is from the local area. The shipyard is quite modern as a result of construction work completed in 2000.

New Industrial Facilities
In 2009, Tasty Baking Company moved its corporate headquarters to the former Philadelphia Navy Yard. The following year it sold its Philadelphia bakery and distribution center and transferred manufacturing operations to the former Navy Yard.

Tasty Baking President and CEO Charles Pizzi called the move "an important step in the completion of our manufacturing strategy." He explained that the company's old manufacturing plant, a six-story facility built in 1922, had grown inefficient and limited the company's ability to expand production and grow. The new 345,000-square-foot plant is as big as six football fields. It occupies one giant floor, where seven production lines manufacture four million snack and dessert items daily. Tasty Baking calls the plant a "green" bakery because of its efficient water and energy systems and use of recycled building materials.

Liberty Property Trust (Malvern, Pa.) and minority partner Synterra Partners (Philadelphia, Pa.) built the Tasty plant for $50 million. Tasty Baking is leasing the building. To pay for $78 million in equipment, Tasty received $31 million in public financing in the form of loans from PIDC, the city, and the state. A group of four banks, led by Citizens Bank, loaned the rest of the needed funds.

Tasty's new plant occupies 25 acres of a 50-acre parcel on the west end of the yard. That area, also referred to as the back end, was once so off the beaten path - both physically and conceptually - that it was not included in the Stern development plan for the site. However, local, state, and federal infrastructure funds have provided roughly $20 million for new roads and infrastructure on the Navy Yard's west end. This should spark even more development. Already John Grady, executive vice president of the PIDC, has announced that Liberty plans to develop a 200,000-square-foot industrial building near the Tasty Baking facility.

PaceControls LLC President and CEO Thomas A. Mills, Jr. anticipates moving into one of the two, one-story "flex" structures that Liberty Property Trust and Synterra Partners are building just north of the new Tasty Baking facility.

Re-using Old Buildings Too
In 2011, PaceControls LLC moved from York, Pa., to the Navy Yard, beginning operations in a former Marine barracks originally built in 1911. In business since 2005, the firm develops and manufactures energy-saving retrofit kits for commercial, industrial, and residential heating, cooling, and refrigeration systems.

Mills was prompted to relocate to the Navy Yard when the U.S. Department of Energy announced a five-year, $122 million award to a research consortium led by Pennsylvania State University. The purpose of the award is to establish an energy-innovation hub at the Navy Yard. Three other federal agencies, including the Small Business Administration, are kicking in $7 million more. Called the Greater Philadelphia Innovation Cluster (GPIC), the research consortium has the mission to develop and commercialize technologies to make existing buildings more energy-efficient. PaceControls' relocation gives it the opportunity to take advantage of GPIC accomplishments. Urban Outfitters also re-used an old facility at the yard, relocating its headquarters from downtown Philadelphia to a former pipe-fitting complex. The company chose an unusual renovation strategy, preserving much of the old industrial character and history of its five buildings that together contain 280,000 square feet.

The 167-acre historic core of the Navy Yard, with more than 2.5 acres of waterfront, is actually on the National Register of Historic Places. The core offers opportunities for renovation of existing buildings for commercial use, and for the conversion of older loft space to residential use.

Job Creation
Other Navy yards also have been converted to industrial parks. For instance, 260 acres of the Brooklyn Navy Yard were sold to the City of New York in 1967 for $24 million. This property was opened as a city-owned industrial park in 1971. Today, under the management of the nonprofit Brooklyn Navy Yard Development Corp., its 40 buildings are 99 percent occupied by 230 firms employing 5,000 people. About 2,200 of these jobs were created between 2001 and 2010. Firms at the site include construction, medical rehab device manufacturing, theatrical set design, computer and office supplies, contracting, refrigerated distribution facilities, media communications and promotions, motor overhauling, and metal fabrication operations. These include more than two dozen small businesses ranging in size from one person to 465 employees.

Currently the Brooklyn yard is undergoing its largest expansion since World War II, with more than 1.5 million square feet of new building space to be completed by 2014. It is anticipated that the new capacity will house companies employing about 2,000 people.

This construction is being financed by over $200 million in basic infrastructure investments from the City of New York and the federal and state government. This includes $15 million from the state to build facilities for green manufacturers. These funds have helped leverage more than $400 million in private investment for new buildings at the yard.

Logistical Assets
The Navy turned the Long Beach Naval Ship Yard, located on Terminal Island, over to the City and Port of Long Beach in 1997. It is now a container terminal serving the Port of Long Beach, the nation's busiest port. The yard's location, only 23 miles from Los Angeles International Airport, and between San Diego and San Pedro, is a prime asset.

Mare Island
Naval Shipyard near Vallejo, Calif., is now home to more than 85 businesses occupying three million square feet of space and employing nearly 2,000 people. Companies on the site include MuriGenics, Inc., a biotech company specializing in medical research; and California Dry Dock Solutions, which opened in early 2011 and will use the Mare Island dry dock to dismantle and recycle "mothball fleet" ships stored in nearby Suisun Bay.

Buildings comprising more than seven million square feet suitable for warehouses, factories, and offices are still available for lease at the former Mare Island Naval Shipyard. Other former Navy shipyards also offer both empty buildings for re-use and vacant space for the construction of new industrial plants, office buildings, and other facilities. Opportunities abound.
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