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January 8, 2024 Deal Watch

Amid tight industrial space market, Windsor Locks logistics company eyes new 80,000-sq.-ft. warehouse

HBJ PHOTO | MICHAEL PUFFER Multi-Mode Logistics Owner John J. Kumpa at 499 North St., in Windsor Locks, one of two neighboring properties he recently purchased in order to build a new warehouse.
Multi-Mode Logistics
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In an effort to say “yes” to more clients, the owners of Windsor Locks-based Multi-Mode Logistics recently paid $4 million for a former car dealership and neighboring property next to Bradley International Airport, where they plan to build a roughly 80,000-square-foot warehouse.

The 23-year-old company provides warehousing, repackaging and shipping services to businesses that need to store and move components and finished goods.

Multi-Mode Owner John J. Kumpa said the expansion will help his company deal with surging demand at a time when it’s increasingly difficult to secure leased industrial space to accommodate short-term bursts in client needs.

Kumpa said he’s had to turn away business due to lack of space, which could lead clients to find other solutions.

“We have to keep growing,” Kumpa said in a recent interview. “If we say ‘no,’ that (client) still needs to get the job done. (They) still need to find the space to get (their) job done. As long as you say ‘yes,’ the job is easy. But if you say no, people start shopping around.”

Kumpa, 58, bought the side-by-side properties at 499 North St. and 321 Ella T. Grasso Turnpike in August. The combined properties offer 13.1 acres, about evenly divided between the vacant field and a former CARite dealership.

The dealership property includes a 4,960-square-foot office building and a string of linked garages and sheds. Multi-Mode has begun using the car lot and its buildings for storage.

Kumpa said he hopes to submit plans for his warehouse to local officials in February. He would build a roughly 40,000-square-foot building to start, and then add on to it later.

The cost of the first phase will be roughly $5 million, making it the company’s biggest investment by far, Kumpa said.

Trucking roots

Kumpa got his start in logistics while attending UConn in the 1980s. He worked on an East Windsor loading dock for trucking giant Roadway.

After graduating with a finance degree in 1988, Kumpa helped his father, John P. Kumpa, launch Middletown-based JTS Logistics.

At its height, JTS operated four tractors and eight trailers, but eventually abandoned its own fleet to become a freight broker, essentially serving as an intermediary between shippers and freight service providers.

The business model grew out of federal deregulation of the trucking industry.

JTS was sold to a Minnesota company in 1999; a year later the younger Kumpa launched Multi-Mode with his wife, Leigh Kumpa, as his partner, accountant and data manager.

Multi-Mode’s first office was in the mudroom of Kumpa’s West Hartford home. The company also leased 10,000 square feet of warehouse space in Suffield. John J. Kumpa said he reached out to a long list of friends in various industries to create an initial client base.

Today, Multi-Mode Logistics predominantly serves business-to-business logistics, with very few deliveries direct to consumers.

For example, it stores and ships products from Longmeadow, Massachusetts-based Dave’s Pet Food to retailers. Other clients have included Maine-based retailer L.L. Bean and Plainville-based industrial sensors and controls manufacturer Gem Sensors & Controls.

Customers are generally “bigger companies that we do really small things for,” Kumpa said.

That might mean moving components from suppliers to manufacturers, or from one manufacturer to another.

“We handle a lot of bits and pieces,” Kumpa said. “We don’t have a lot of the final stuff. We have all the stuff that goes into the final piece that’s then made at our clients.”

Multi-Mode subcontracts shipping services through FedEx, UPS and a list of more than 1,000 independent trucking companies.

“It’s an old-fashioned warehousing company with a non-asset way of moving freight,” Kumpa said.

Growing needs, shrinking availability

The pandemic led to an explosion of demand for warehouse space, fueled by increased online purchasing by consumers and businesses, Kumpa said.

That demand has tempered in recent months, but remains strong. Multi-Mode handled 40% more warehouse volume in 2023 than it did in 2019, he said.

Before its recent property purchase, Kumpa’s 15-person company operated out of four Windsor Locks locations — three that it owns, one that it leases — totaling 264,122 square feet.

Kumpa would also lease additional space as needed from an array of industrial property owners in the area north of Hartford. He knew most of the landlords, and for a long time they were able to offer space on flexible terms.

In recent years, however, demand for industrial space north of Hartford has spiked, and many of these properties have turned over to new owners and investors at premium prices.

Today, available space is harder to find, he said.

For example, Kumpa leases 100,000 square feet in a 450,000-square-foot warehouse at 296 Ella Grasso Turnpike, in Windsor Locks. Kumpa has rented space at this location for two decades.

In September, the property was sold to New York and Los Angeles investors for $17.75 million; it previously traded hands in 2018 for less than half that price.

When he needs to renew his lease in two years, Kumpa said he anticipates a significant rent hike.

Kumpa said the increasingly short supply of available industrial space over the past five years has forced him to turn away business.

“That kind of inventory for commercial, high-bay warehouse space has just gone away,” he said. “The flexibility has just gone away.”

Christopher Metcalfe, a senior vice president with commercial real estate and brokerage firm CBRE, said Multi-Mode is making a “smart move” by building and owning space, given the rise in demand for third-party logistics and a growing scarcity of available industrial properties.

Only 4.4% of the 31.7 million square feet of industrial space north of Hartford — including Windsor Locks and other surrounding towns — was vacant at the end of the third quarter of 2023, according to CBRE. Historically, vacancies in the area averaged about 6% to 8%, or higher, Metcalfe said.

“We are in a much tighter market than we have been historically,” Metcalfe said.

Space that is available is more costly to lease, with industrial rents rising 10% or more in each of the past three years, Metcalfe said.

Local incentives

Kumpa’s newly purchased properties fall within foreign trade and airport development zones around Bradley International Airport, which offer significant relief on stored goods’ duties and taxes, as well as property tax abatements of up to 80% over five years for new construction and property improvements.

These savings will ultimately mean lower rates for customers, Kumpa said.

His planned warehouse will give him additional space and predictable long-term costs, making it easier to forecast future pricing for clients, he added.

“Is it a control thing? Yeah, 100%,” Kumpa said. “It’s the ability to tell your customer what the future looks like.”

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