Nevada’s explosive population growth, robust economy and attractive business climate, which includes no franchise, corporate income or capital gains taxes, continue to attract industrial users to the state. Unemployment decreased to 4 percent in the first quarter as industrial-related jobs grew by 12.6 percent, adding 19,200 new positions.
Industrial Projects Abound in Southern Nevada
Southern Nevada’s industrial market has maintained a healthy balance between demand and supply, keeping vacancy rates low. The market grew to 85.5 million square feet in 3,386 buildings during the first quarter, with a 7.7 percent vacancy rate, said John Restrepo, principal of Restrepo Consulting Group LLC, a Las Vegas-based real estate research firm. Healthy net absorption pushed lease rates upward to $0.59 per square foot, a gain from historically flat rates of $0.57 per square foot.
“The industrial market is very strong, as evidenced by owner-occupied demand, combined with a declining speculative vacancy rate and a recently rising average lease rate,” said Vic Donovan, managing partner of Colliers International’s Las Vegas office. “While the for-lease industrial market remains healthy, it will be important to monitor the amount of investment in the for-sale industrial market to the extent it impacts our for-lease market.”
CDW Corp., a Vernon Hills, Ill.-based business technology provider, recently signed a long-term lease for a new 513,240-square-foot industrial building in North Las Vegas. The deal is one of Southern Nevada’s largest build-to-suit industrial transactions in recent years. The concrete tilt-up, build-to-suit facility will be situated on 25 acres near the southwest corner of East Alexander Road and Bay Lake Trail, inside DP Partners’ 102-acre LogistiCenter business park.
“It’s a win-win-win project for all concerned,” said Aaron Paris, DP Partners’ executive vice president and chief operating officer. “[We’ve] grown by utilizing a partnership platform. The result of our collaboration will be a quality facility and a new corporate citizen, in addition to construction and permanent jobs.”
Scheduled to open this fall, the single-level, double-height building will service CDW’s western customers, employing up to 180 people. “Our new distribution center will play an important role in enabling us to further improve the speed and accuracy of operations that are a key competitive advantage for us,” said Doug Eckrote, CDW’s senior vice president of purchasing and operations.
United Construction Co., a unit of Reno-based DP Partners, is the general contractor. CDW expects to spend up to $40 million for machinery, equipment and leasehold improvements, with another $6 million for start-up costs. Colliers International’s Suzette LaGrange led the brokerage team that represented both the tenant and landlord.
At the end of the first quarter, there were 2.9 million square feet of industrial space under construction and 5.8 million square feet of planned space, including a 393,000-square-foot addition to the Operating Engineers Trust Fund’s Golden Triangle Industrial Park in North Las Vegas. Located near the northwest corner of Craig Road and Interstate 15, the complex has leased 500,000 square feet worth of space in the last six months alone.
“We’ve seen a pent-up demand for industrial space,” said Donna Alderson, first vice president of CB Richard Ellis’ Las Vegas office, the park’s leasing agent. “The recent activity is due to increased economic confidence, with a lot of businesses looking to expand and grow.”
The two new speculative distribution/manufacturing buildings in the Golden Triangle Park are expected to come online in March 2006. The 276-acre development will eventually contain 16 buildings, totaling 4 million square feet. It’s currently 50 percent complete, with such tenants as OfficeMax, Murray Feiss and Kraft Foods, among others. The park is anticipated to reach build-out by 2010.
Harsch Investment Properties is planning a $45 million, 500,000-square-foot addition to its Speedway Commerce Center, located at Speedway and Hollywood boulevards in North Las Vegas. The 27-building, 1.4 million-square-foot industrial complex is 100 percent leased with 200 tenants varying from 2,500 square feet to 105,000 square feet in size.
“We have an obligation to our existing tenants to help them grow their businesses,” said Harsch President Jordan Schnitzer. “And as they grow, they may need different space configurations. But due to rising land and construction costs, lease rates for the new buildings will be higher.” The firm will construct nine additional buildings on 30 acres next to the existing park, with space divisible from 3,000 square feet to 15,000 square feet. The buildings are expected to begin occupancy by spring 2006.
“Las Vegas is the hottest market I’ve ever seen, with a high amount of leasing market activity by both small- and large-space tenants,” said Dean Willmore, president of IPG Commercial. “Last year, we built 2.2 million square feet of speculative industrial space and absorbed 5.5 million square feet, which was a record.”
Trammell Crow Company is expanding its 30-acre Cheyenne Distribution Center, located at the northwest corner of Cheyenne Avenue and Lamb Boulevard in North Las Vegas. The firm will break ground on a 200,000-square-foot addition in the fourth quarter of 2005, with expected occupancy by mid-2006, said Michael Newman, Trammell Crow’s senior vice president. The cross-dock speculative building will have space divisible down to 15,000 square feet for mid-box users.
“The industrial market is very tight, principally caused by a lack of available land for industrial purposes at pricing levels that make financial sense for developers,” said Kevin Higgins, senior vice president of Voit Commercial Brokerage. “In order for certain developers to afford these new pricing levels, profit-sharing with land owners is the vehicle to continue developing real estate.”
Northern Nevada Market Expanding
Meanwhile, Reno/Sparks continues to be a favorite industrial locale for many firms due to its overnight access to 80 percent of the West Coast. The market, as a result, recorded a low 7.6 percent vacancy rate during the first quarter, according to Don Walsh, vice president of office and industrial leasing for Trammel Crow’s Reno office.
Absorption outpaced new completions by a 9-to-1 ratio, signaling the market’s sustained vitality. There were 770,000 square feet of absorption and 85,000 square feet of new completions during the first quarter, resulting in tightened vacancies that pushed lease rates up to between $0.30 and $0.34 per square foot, on average.
However, rising industrial land prices have now reached $8 to $10 per square foot in the Reno/Sparks area. This price increase has forced many big-box users to find more affordable property in outlying areas such as Stead, where several large firms, including General Motors, JC Penny, Michelin and Uniroyal Goodrich, have opened new facilities.
“The industrial market remains pretty robust due to the population influx from California,” said Doug Roberts, a partner in Panattoni Development Co. “Industrial land in the Reno area is getting harder to find. And if you do find it, the projects don’t pencil out unless it’s smaller space.”
Panattoni is currently building a 100-acre speculative industrial park on the northern edge of Stead, next to the airport. The first phase of the Lear Industrial Center consists of a 405,000-square-foot manufacturing/distribution building with space divisible to 50,000 square feet. The 21.24-acre project is scheduled to open in September 2005, with K-2 Inc., a ski manufacturer, occupying 157,500 square feet. The firm will break ground on an 11-acre, 200,100-square-foot second phase, with divisible space to 25,000 square feet, in summer 2006. A third phase will offer parcels between 8 and 15 acres for build-to-suit facilities. The $65 million development is anticipated to be completed by 2009.
Wade Development Co. is building a 3,000-acre mixed-use project called Sonterra in Fernley, 30 miles east if Reno. The master-planned development calls for a 2,000-acre, 6,000-home residential community, with remaining acreage going to retail, office and industrial space. Wade has partnered with Lakemont Homes for the residential portion, but will develop Crossroads Commerce Center, the commercial park, itself with improved industrial land selling for $2.25 to $2.50 per square foot. The project is currently in the planning stages.
“The Reno/Sparks area has been pretty well developed. The average home price is now over $300,000,” said Stan Thomas, Wade’s vice president of sales and marketing. “Jobs are being created with all the new industries locating in Fernley, including UPS, Honeywell, Trex Company and Sherwin-Williams. The town, as a result, grew to 15,000 residents in 2004, a 17.8 percent gain over the previous year.”
Wade is also developing a 2,900-acre master-planned community in Dayton, 40 miles southeast of Reno. Among other things, the project calls for 12 light-manufacturing/warehouse buildings totaling 982,000 square feet on the south side of the airstrip. The concrete tilt-up buildings will range in size from 15,000 square feet to 187,000 square feet.
Hawco Properties has also identified land outside the Reno/Sparks area for its 411-acre Spanish Springs Business Center at Pyramid Lake Highway and West Calle De Plata Drive in Spanish Springs. The master-planned project consists of distribution, warehouse and manufacturing space with available parcels from 1 acre to 200 acres in size. Leviton and Valley Building Supply are among the center’s first tenants. Sale prices are $2.75 per square foot, which is about than one-third less than land inside the Reno/Sparks corridor.
“Strong leasing activity of varying sizes has continued into the second quarter as older obsolete products are readily absorbed,” said Dan Buhrmann, an industrial advisor with Grubb & Ellis’ Reno office. “Roughly 1.6 million square feet of bulk industrial space is expected to come online later this year, which will likely push vacancy rates up in early 2006.”
