Janesville Innovation Center seeks to solve space crunch

JANESVILLE—After three years of development, John Goepfert says his homegrown personal-care product company, Simply Solutions, is on the cusp of going national.

Goepfert said Simply Solutions has distribution deals unfolding with at least one national grocery store conglomerate. The deals would land the company’s patented line of all-natural LipLoob lip balm and other personal lubricants on the shelves of thousands of chain retail stores across the country.

But at home in Janesville, Goepfert faces a dilemma that could soon come to a boil. With Simply Solutions’ products on pace for major market demand, the company could need to scale up production and distribution in short order.

For that, it needs more space than the 8,000 square feet it now occupies at the Janesville Innovation Center.

More space, but where?

Local economic development experts say there is a slim supply of available small-scale industrial space in Janesville—specifically facilities that are outfitted for growing industries that need 5,000 to 25,000 square feet of production and office space.

Mike Mathews, the Innovation Center’s operations director, said his six tenants have grown to occupy 70 percent of office and manufacturing space at the 22,000-square-foot business incubator at 2949 Innovation Drive.

Meanwhile, Mathews said, the center has commitments from new industries that would sew up another 25 percent of space within a few months.

Mathews said it’s feasible that by the end of the year, the center will be “fully leased” for the first time since it opened in January 2013.

The Innovation Center is intended to operate as a temporary, flexible office and manufacturing space—along with business consulting support—to foster startup companies through the early phases of their businesses.

Amid a tight supply for small industrial properties, the Innovation Center’s board of directors is considering options for industrial space that would help the center’s fledgling companies move out of the center but continue to grow.

Mathews and Gale Price, Janesville’s economic development director and a member of the Innovation Center’s board, confirmed one option the board is discussing: building a new facility that would serve as a post-incubator for growing companies.

It could operate as a brood house of sorts that would provide smaller industrial spaces of 8,000 to 15,000 square feet for companies ready to graduate out of the incubator and expand.

Mathews said the board’s conversations are “preliminary,” but the board could approach the city council as early as October with plans for more space for maturing companies.

“We’re still in an exploration stage. We’re gathering our facts to get a better understanding of what our tenants’ needs look like going forward and the best way to assist in the growth of these companies within Janesville,” Mathews said.

Mathews said not all of the incubator’s current tenants are on the same pace and timetable to graduate out of the center, but it’s clear that some are on trajectories that would outpace the available space.

Price said based on preliminary discussions of demand, the board thinks it might need about 40,000 to 50,000 square feet of extra space to “graduate” maturing businesses out of the Innovation Center. That would open up space for new businesses seeking to enter the center.

Price said it’s too early to say how a development for incubator graduates could be funded or who would own and operate it. But he said the market gap in Janesville for smaller industrial facilities does exist, despite the fact that the Janesville area has seen at least 1 million square feet of industrial space built over the last year.

Much of that space has been built on speculation, but it’s been marketed and leased to large industries that use 50,000 square feet or more.

“Talking to local commercial real estate people, there is that gap in (industrial facilities) that are 5,000 to 25,000 square feet here, but it’s tricky,” Price said. “Most developers prefer not to divide to less than 25,000 square feet, so I don’t know if the (private) market will immediately address this gap.”

Price said a new facility for Innovation Center graduates likely would be presented as a public-private project. He suggested that if the city had a role, it might be through tax incentives to entice a private developer to build a facility that could hold smaller-than-average industrial spaces.

Goepfert, who has leased space for three years at the Innovation Center, said he’s poised to grow from about a dozen employees to as many as 20 to 25. He said that growth could happen overnight if a few sets of national grocery and pharmaceutical retailers he’s working with agree to place his products on their shelves permanently.

Goepfert believes his company’s competitive advantage lies in the products’ all-natural ingredients, as well as the federal Food and Drug Administration approval his products now have. He said many larger competitors do not have that designation even though they offer similar products.

FDA approval cost Simply Solutions $350,000, Goepfert said. In order to keep the FDA designation, the company has to work in approved, clean space and use processes that meet federal guidelines.

That cuts down on already slim options for space to expand locally. And if space were available, Goepfert said, it would come at a premium at a time when his business is financially burdened by early development costs.

“It would take a developer that would want to develop space that fits the needs of local, small companies like ours with brands that are ready to grow—but they’re going to have to carve up the space they have smaller than usual. And what? Charge less rent for it?” Goepfert said.

“Yeah, that’s risk. And even as I say it, it sounds like it’s asking a lot.”

http://www.gazettextra.com/20160821/janesville_innovation_center_seeks_to_solve_space_crunch