What area is your expertise?
Industrial leasing and sales in the Northern Nevada area, including Reno, Sparks, Fernley, and Carson City.
What trends do you see presently in industrial development in your area?
Abatement of planned buildings while developers wait for speculative big-box construction to absorb.
What type of industrial product is doing well in your area?
Industrial condos have seen an increase in sales due to some aggressive owners acknowledge current market conditions and dropping prices. Concerning leasing, the 20,000 to 40,000-square-foot sector has been relatively active in big-box industrial spaces.
Who are the active industrial developers in your area?
Prologis, Panattoni, DP Partners, McShane, Tarragon, UPC, and Development Arts.
Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
The addition of several new developers building speculative big-box construction has created a new dynamic in the Northern Nevada industrial market. The short-term impact has created a significant increase in overall vacancy. The long-term outcome remains to be seen, but optimistically may create healthy competition among developers luring new prospects to Northern Nevada.
The disposition of the Panattoni Industrial Portfolio, a 2.02 million-square-foot portfolio consisting of seven buildings in Fernley, Reno, and Las Vegas. Also, 1.42 million square feet of the portfolio is the Lear Industrial Center, which is considered the premier industrial space in the Stead submarket. Another one of the buildings is a 337,500-square-foot building occupied by TREX in Fernley. The impact of this portion of Panattoni’s holdings in Nevada should act as a barometer on the health of the North Nevada industrial market, specifically the Lear Industrial Portfolio.
Where is the majority of development taking place? Why is this area doing well?
Most development is taking place in the outlying submarkets, including TRIC, Stead, and Spanish Springs. Although it is hard to classify any project as “doing well” these markets still have phased development plans because the fundamentals for industrial assets in Northern Nevada have not changed. There is a demand for industrial facilities in Northern Nevada and the land basis in the Reno/Sparks valley is prohibitively expensive for most industrial projects.
What area do you expect to be the next big industrial development market? Why?
Although there are three outlying submarkets including TRIC, Stead, and Spanish Springs that command attention for development each of these submarkets have their own unique challenges to overcome. As each outlying submarket matures and space in the Reno/Sparks valley becomes more obsolescent the basis for second and third generation space in the Reno/Sparks valley will begin to hit a price point that makes redevelopment a reasonable venture.
Please describe the industrial leasing activity in your area.
Industrial leasing activity for the 2008 year is down compared to historical data. The transaction volume for the past 4 years are as follows:
Number of transactions >100,000 square feet Number of transactions >5,000 square feet
2005 8 204
2006 14 145
2007 15 118
2008 5* 71*
*It must be noted that for the 2008 year that the data only reflects through the middle of third quarter.
Please describe the industrial sales activity in your area.
There have been 19 industrial sale transactions year to date: eleven of which are condo sales, two are rehabilitation projects, two are user sales of stand alone buildings, and four are investments sales. Eight of the user/condo sales are concentrated in a single project in the Sparks submarket with price incentives. The two market trends behind sales seem to be condo purchases by well timed small business buyers and user purchases of well located rehab buildings.
Please give a measure of industrial vacancy rates and a measure of available sublease space.
The Northern Nevada industrial market stands at 70,586,514 square feet, exclusive of Carson City. With 7,618,976 square feet available for lease the vacancy rate stands at 10.79 percent at second quarter 2008. Currently, 800,000 square feet of this space is for sublease and represents approximately 1 percent of that vacancy.
What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year?
Available credit is the issue more than interest rates. The lack of available credit is not specifically interest rate driven rather it is a reflection of the overall economy, an adjustment to deregulation and the residential housing bubble. With inflation rising, the Federal Reserve is certainly going to increase rates as the economy recovers. The increase in interest rates will bog down progress as other market/political elements such as housing, credit, and the presidential races stabilize. Although interest rates are not substantially impacting real estate now, it will more than likely become a contributing factor over the coming year.
What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?
We expect to see an expansion of users that need to efficiently service the West Coast, specifically California. Although companies are attempting to decrease their carbon footprint and navigate high ene