When Lefika Ragontse sought to open its second squash club in the U.S., and the first one in New Jersey, it worked alongside Transwestern’s managing director, Jeffrey Furey, who has grown to specialize in placing recreational tenants in industrial spaces.
“As New Jersey’s industrial market continues to evolve, we’re seeing a marked uptick in the number of recreation users attracted to the large, open spaces and high ceilings that a warehouse and flex building can provide,” Furey said. “With space that can be divided into virtually any configuration, Princeton South at Lawrenceville is an ideal location for this type of tenant.”
The company leased 5,000 square feet at the light-industrial property at 11 Princess Road, at Princeton South at Lawrenceville, from TMC Properties.
The 20-foot clear ceiling at the property will allow Lefika to have four regulation-size squash courts at the facility.
According to Furey, this type of transaction, a recreational tenant in an industrial property, required a zoning overlay for the campus, but is part of a trend Transwestern and he are becoming more aware of, particularly in towns with vacant industrial space.
“Everything is about ratables to the town,” he said. “They are trying to beef up ratables to lower their taxes, and you’re seeing that through smarter towns. Certain towns are recognizing this is a way to get higher ratables and, if they have a vacancy factor, they are even more willing.
“I have been the leasing agent for the park since about 2010. We’ve had numerous recreational uses that have expressed interest in our park.”
Furey is also the leasing agent at a property in Bridgewater, Middlebrook Crossroads, where he has been involved in transactions for Hoop Heaven, Hardcore Paintball Arena, Shraim's Academy boxing, CrossFit Chimney Rock and VertiQuest ninja training to lease space in industrial properties.
According to Furey, in the last five years, as recreational tenants have continued to show interest at Middlebrook Crossroads, the 580,000-square-foot campus has gone from 50 percent vacancy to 98 percent occupancy.
“The owners don’t mind having recreational uses,” he said “If they have a vacancy, they want to fill it, and that’s the big thing. It’s filling up and having a stable income stream. They see this as a trend in the market and the key is finding tenants that have the financial capabilities.
“That was the big thing with Lafika. He has run a very successful operation in Baltimore. (A) squash club is a business and all the intricacies of running something like that is not simple. You have to know what appeals to the clients, all the different aspects of a squash club. You have to be able to pay the rent, you have to be able to pay people and make sure there’s enough clientele in the area.”
Although recreational tenants have shown interest in industrial spaces, Furey said it takes a collective effort from towns, businesses and landlords to make it a reality. And Lawrenceville was a particularly good town to obtain a zoning overlay because it was able to understand the value of recreational users and process the request for the zone within six months.
“Rec tenants were always turned off because you needed a use variant,” he said “Between the ownership and myself, we talked with the town numerous times. The zoning officer, we spoke with him and said, ‘You know, this is a pattern here. It’s a great club and because of the changing economy and what we have done, this is a great way to repurpose the building and gives it a broader use, having a recreational use in there.’”
And while an income stream is always positive news for landlords, rec users present additional concerns for industrial landlords, Furey said.
“The key is the operator; you want to make sure you have a good operator and that they have experience and they know how to run a business,” he said. “The big question is on the type of user. You have specialty users that need specialty setup. Who can use that setup if they go out of business is the landlord’s biggest concern.
“For the tenant, everything is going to be at his cost. Any specialty setup, the landlord is not going to pick it up. You need the tenant to pick it up so the landlord doesn’t see any type of risk. You have to think 20 or 25 years out.”
And while having industrial tenants next to recreational may present safety concerns for the landlord, both Furey and Transwestern believe it is a risk landlords and towns are more and more eager to address in order to reduce vacancies.
“Lefika Ragontse is one of numerous Transwestern deals completed recently for recreation tenants, which are leasing space at industrial and flex buildings in New Jersey at a growing rate,” the firm said in a news release. “According to Transwestern research, from 2014 to 2016, twice as many recreational users moved into flex and warehouse space than in the previous three years, with total deal volume increasing threefold.”