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Buildings with a past: Incubators nurture new businesses in old buildings

by Corinne Colbert

April 2007

Turning an existing building into a business incubator is no simple thing. Even a free building may wind up being more expensive than a newly built facility once you pay for renovations and all the inevitable surprises that crop up along the way. In fact, many incubation experts say “building-driven projects” – incubators launched solely to use an available building – are a prime cause of incubator failure.

But that hasn’t stopped many incubation programs from using available real estate to their advantage – and some pretty unusual real estate, at that. With patience, sweat equity, a sense of humor and sometimes large outlays of cash, these programs have made silk purses from sows’ ears. Here are just a few of the NBIA member programs that have taken up residence in unique places, along with their stories.

INNOVATION DEPOT

Birmingham, Ala.
Building: Former Sears store in downtown Birmingham
Constructed: Late 1940s
Renovated: 2006
Cost: $17 million
Renovation Funding Sources: City of Birmingham; Jefferson County; University of Alabama at Birmingham; private donations

For 15 years, Susan Matlock – director of the Entrepreneurial Center and OADI, two incubation programs in Birmingham, Ala. – would drive by the massive, empty former Sears store in the city’s downtown with one thought: I want to put an incubator in there.

“I have coveted that building forever,” she says.

This month, her dream comes to fruition. For nearly a year, Matlock has overseen renovation of the 140,000-square-foot store to serve as the new home of the Entrepreneurial Center and OADI, now combined as the Innovation Depot.

At two full city blocks, the building – vacant for two decades – was a hulking eyesore that attracted vandals and homeless squatters. About three years ago, the city identified a seven-block area starting at the former Entrepreneurial Center and running toward the University of Alabama at Birmingham campus as an entrepreneurial corridor. The Sears building, though, sat right in the middle. “We knew that if the Sears building wasn’t redeveloped, there would be no entrepreneurial corridor,” Matlock says.

She formed a coalition of city, county and university officials to raise the $17 million needed to buy and revamp the building. By January 2006, the capital campaign had yielded enough money to convince the city to put up half the $3 million purchase price for the building; Matlock had enough cash on hand to begin interior demolition immediately. By May 2006, reconstruction began, including installation of skylights and tearing out brick walls in favor of windows. The first floor is mixed-use office space, while the second floor houses wet labs.

“We gutted it,” Matlock says. “We’re not using anything other than the floors and the roof.”

The completed facility will be more efficient, both for university entrepreneurs – who previously had to drive 25 minutes to reach the OADI facility – and for Matlock and her staff. “I look forward to not having three offices – one at the Entrepreneurial Center, one at OADI and [one] in my car,” she says.

UPPER COASTAL PLAIN BUSINESS DEVELOPMENT CENTER

Wilson, N.C.
Building: Former Belk department store
Constructed: 1955
Renovated: 2006
Cost: $1.5 million
Renovation Funding Sources: U.S. Economic Development Administration; North Carolina Department of Commerce; Golden LEAF Foundation; North Carolina Rural Economic Development Center

When Wilson County bought the former Belk department store in downtown Wilson, N.C., in March 2006 to use as a mixed-use incubator, the cost of renovation was estimated at $1 million. But as any new homeowner knows, what you think you’ll have to spend to fix up the place is usually far less than what you wind up paying.

“The most challenging aspects of this project have been estimating the construction costs of completely renovating the facility’s mechanical and electrical systems,” says Greg Godard, CEO of the Upper Coastal Plain Business Development Center, which will open in July. “Much has been discovered about renovating an older building since the purchase.”

For example, the county originally thought it could fix the roof for an estimated $15,000; as it turns out, the roof will have to be replaced to the tune of $100,000. The work required to bring the mid-20th-century building up to 21st-century codes will cost an additional $500,000 over the original budget.

The payoff should be worth it, though, Godard says. The incubator’s feasibility study projects a total of 32 clients and the creation of 100 jobs within the program’s first three years of operation alone. “This [project] is a great use of a department store in a downtown area,” Godard says.

BUSINESS DEVELOPMENT INCUBATOR

Jersey City, N.J.
Building: Former commercial laundry
Constructed: Around 1900
Renovated: 2003-2005
Cost: $4 million
Renovation Funding Sources: U.S. Economic Development Administration; Jersey City Economic Development Corp.; Fleet Bank; Public Service Electric and Gas Co.; New Jersey Commission on Science and Technology

The former Consolidated Laundry Co. building had been vacant for 10 years when New Jersey City University bought it to serve as the home of its new incubation program. Century-old laundries, it turns out, are pretty dirty places: The renovations included abatement of an array of hazardous substances: asbestos, lead, PCBs, heavy metals, pigeon droppings…

Pigeon droppings?

Flocks of pigeons had taken to roosting in the building, and a decade’s worth of pigeon poop made for some interesting days for Director Gina Boesch. “I worked with the architects and contractors and I learned more about pigeons than I needed to know!” she says.

Then there were the unusual accoutrements that go with a commercial laundry, like underground soap tanks the size of tractor trailers. But the renovations kept the best features of the building, such as wood floors, exposed brick and a high-bay warehouse. The program’s 10 client companies also enjoy a communal kitchen, café and library. But they’re probably more careful than most about their financial audits.

“We get teased about ‘money laundering’ on a regular basis,” Boesch says.

INNOVATION CENTER @ WILKES-BARRE

Wilkes-Barre, Pa.
Building: Former Woolworth store
Constructed: 1950
Renovated: 2003-04
Cost: $6.3 million
Renovation Funding Sources: U.S. Economic Development Administration; Greater Wilkes-Barre Chamber of Commerce; Great Valley Technology Alliance; Great Valley Technology Institute; Pennsylvania Department of Community and Economic Development; Ben Franklin Technology Partners; Luzerne County; City of Wilkes-Barre; Diamond City Partnership; northeast Pennsylvania colleges and universities

Losing a big downtown store is a blow to any city; it’s even worse when the property has ties to the foundations of a legendary retailer. That was the case with the Woolworth store in Wilkes-Barre, Pa. Although the current 60,000-square-foot structure was built in 1950, the store had been opened in 1884 by Fred M. Kirby, a co-founder of the Woolworth chain.

“The Greater Wilkes-Barre Chamber recognized the importance of this particular piece of downtown real estate,” says John Augustine, director of the Innovation Center @ Wilkes-Barre, which occupies two floors of the building with nine clients.

The renovations included the installation of three huge skylights and a four-story clerestory window on the eastern facade to bring natural light to the building’s interior. The skylights project from the top of the building, giving it a unique appearance. “The building’s sawtooth roof profile has become part of the Innovation Center’s iconic architectural image,” Augustine says.

In keeping with the building’s history, the street-level floor houses retail shops, including Barnes & Noble. Passersby can note the building’s roots on an historical plaque. And one incubator hallway is an entrepreneurial hall of fame with portraits and biographies of local entrepreneurs – including Kirby.

THE NEW CENTURY VENTURE CENTER

Roanoke, Va.
Building: Former headquarters of Advance Auto Parts
Constructed: 1950
Renovated: 1996
Cost: $0; painting and carpet cleaning donated

The city of Roanoke, Va., experienced the worst flooding in its history in November 1985, when the remnants of Hurricane Juan sent the Roanoke River over its banks. The headquarters of Advance Auto Parts, the nation’s second-largest aftermarket parts retailer, were flooded more than three feet deep, causing a need for total renovation of the structure.

But it’s an ill wind that doesn’t blow some good. Eleven years later, the post-flood repairs were still good as new for Lisa Ison, whose New Century Venture Center opened in the building in 1996.

“We slapped a little paint on the first space [needed by] tenants and cleaned the carpet,” she says. “We opened the doors 30 days after [buying the building] with two tenants.”

Originally, the building was occupied by a beer distributorship. A railroad spur ran just four feet behind the building; beer was taken from cold storage and loaded onto rail cars for shipment. The railroad no longer runs, but the cold room – “or dungeon, as we refer to it,” Ison says – is still there.

In the last decade, the incubator has graduated more than 30 companies and was named NBIA’s 2004 Randall M. Whaley Incubator of the Year. Those successes haven’t erased the building’s origins in locals’ minds, though. “When people are trying to find us, we say we’re in the old Advance headquarters building and people know where it is,” Ison says.

SOUTH SIDE INNOVATION CENTER

Syracuse, N.Y.
Building: Former theater, bowling alley and carpet warehousebr> Constructed: About 1930br> Renovated: 2005br> Cost: $500,000br> Renovation Funding Sources: Syracuse University, SU alumni, local banks

Few incubator facilities can boast of a history as colorful as the South Side Innovation Center’s. Its building was constructed around 1930 as the Brighton Theater, a movie palace in the then-wealthy South Side neighborhood. In mid-century, the theater became the Brighton Lanes, a bowling alley. By the latter part of the 20th century, though, the South Side had become blighted, with empty storefronts and a high crime rate. Dunk and Bright, central New York’s largest furniture dealer, used the building as a carpet warehouse.

Now, the building is home to the SSIC, a mixed-use incubator that is the centerpiece of Syracuse University’s initiative to revitalize the South Side.

The only visible clues to the building’s past are the third-floor projection room and the twin staircases that lead to the mezzanine that once served the theater’s balcony. While those are no help to the incubator, the theater’s sloping floor was. A level floor had been installed over the original floor, leaving a gap ranging from one inch to four feet. During the incubator renovation, that gap made it easy to run electrical, telephone and Internet wiring throughout the first floor. “That was a real benefit we were able to capitalize on,” says Manager Joe Dickson.

The 14,000-square-foot incubator opened in April 2006; it’s already full, with 14 clients, Dickson says. He hopes to build out the building’s second floor to gain another 2,800 square feet for clients.

And that’s just the beginning. “We have to create office and storefront space for these companies to move into,” Dickson says. So the university is looking for funding to start renovating the many vacant storefronts and homes nearby to house SSIC graduates.

MIDMICHIGAN INNOVATION CENTER

Midland, Mich.
Building: Former Dow Chemical research facility
Constructed: 1950
Renovated: Began in 2005
Cost: $300,000 to date (space is renovated as clients sign on)
Renovation Funding Sources: Banks and foundations

As part of a consolidation of its headquarters in Midland, Mich., the Dow Chemical Co. had planned to bulldoze the former home of its agricultural insecticide and pesticide development division. Instead, it’s donating the building to a coalition of community leaders to serve as a business incubator.

The MidMichigan Innovation Center opened in the building in July 2005 and will gradually take over the entire property as Dow moves its employees out over a three-year period. That will give the incubator time to fill gradually and not bear the expense of empty space. “By the time the three-year [changeover] is over, we’ll be financially stable,” says Don Schutt, executive director of MMIC.

Staying on budget is important because of the building’s renovation challenges, such as the 55-year-old, single-pass HVAC system that pulls outside air in at one end of the building and discharges it at the other end. “It’s not too efficient,” Schutt says. The incubator is looking for funding to implement an energy savings plan developed by a Chicago consulting firm.

There’s no room in the budget for extras like overhauling the old cafeteria – so MMIC clients banded together to tackle the project themselves. They obtained more than $17,000 in donated materials and price breaks and then sold business and personal items on eBay to raise money for appliances and a 42-inch flat-screen TV. The incubator paid for carpeting, an expense Schutt was glad to contribute. Of all his experiences on the project so far, he says, “the cafeteria renovation is my favorite.”

DSIFE

Springfield, Mo.
Building: Former mortuary
Constructed: Mid-20th century
Renovated: 2004
Cost: $50,000, plus donations of furniture, equipment, landscaping and labor
Renovation Funding Source: City of Springfield, Mo.

When your incubation program is set up in a former mortuary, puns run rampant. News articles about DSIFE, the student-run incubator at Drury University, reliably include lines about “bringing the building back to life” or “breathing new life into businesses.”

It was no joke, however, when the city of Springfield bought the former Springfield Mortuary in the early 2000s as part of a plan to revitalize the city’s downtown. The city gave the building to Drury Students In Free Enterprise (DSIFE), along with $50,000, to launch its incubation program, which opened in 2004.

Students were deeply involved in the renovations, which weren’t without surprises. While cleaning out an attic room, a team of students found what they thought were trash bags. Thinking the bags would be handy for clean-up, they began to toss them down the stairs. That’s when they discovered the bags had something most trash bags don’t: zippers. “Turns out the mortuary company hadn’t taken everything along when they moved to their new location,” says John Taylor, the Drury University faculty member who works with DSIFE.

Now the facility’s days are numbered. The city’s master plan calls for the one-time mortuary to be razed to make way for a downtown park. If and when that happens, the program will move. “We have a few options available if the city eventually decides to remove the building,” Taylor says. “They’ve already postponed [demolition] a few times, so we’re uncertain if it will happen.”

Keywords: budget -- incubator, economic development, facility management, facility renovation/expansion, facility selection/construction/renovation

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