Gabe Telles, Gatski Commercial Real Estate Services
Be careful what you wish for, industrial brokers. After years of recession, brokers have been given a second life.
Virtually every broker we talk to can appreciate the boom this time around.
The Las Vegas industrial market has seen positive absorption nearing pre-recession highs. With land selling, occupancy rising and major players vying for any asset, the forecast should remain bright for the next 12 to 24 months.
Nearly 3,000 acres of industrial, commercial and residential land was sold in 2014, accounting for more than $700 million in sales volume. Las Vegas’ industrial vacancy was around 9 percent in the fourth quarter of 2014, a low since 2008. The fourth quarter also marked the eighth consecutive quarter of positive net absorption in Southern Nevada’s industrial market. All good news.
The marketplace is swelling with credibility. Panattoni Development Co. bought a 103,000-square-foot industrial building and is developing another 200,000 square feet in the southwest market. ProLogis is developing several big box developments in North Las Vegas. Dermody Properties is reportedly developing industrial space this year, too .
One key component of these new developments is that Las Vegas’ Class A criteria needle is moving upward, with 30- to 32-foot clear big box buildings – a new high for Las Vegas distribution space.
One of the major drivers in this increased quality in buildings is the influx in new e-commerce fulfillment centers. The increased Class A requirement is the materialization of the e-commerce facility in Las Vegas.
Nationwide, the economy is up, rents are up, deals are flowing and brokers are up late.
In Las Vegas, the same thing is largely due to our economy, tax structure and business climate.
All of this has created a massive land grab over the past 12 months. If you are driving along the I-215 Beltway, both sides of the freeway look like a lot of vacation land. Check the ownership of these parcels, and you will see major world headquarters are planned.
Bally (which was recently purchased by Scientific Games) has a huge Class A building in the southwest with 15 acres of land around it.
Ainsworth Game Technology has also purchase a 25-acre parcel in the southwest, moving dirt for its world headquarters. One of its neighbors will be Zuffa, the UFC parent company, which has also purchased 20 acres for its world headquarters.
Other interesting investment strategies include landlords acquiring and repositioning assets in the valley.
BKM Capital has purchased Cheyenne Technology Center in the heart of the Cheyenne Technology Corridor. It is converting the B office warehouse space into standard smaller office/larger warehouse spaces.
This strategy has been undertaken in other submarkets, and is likely due to rising rents in all submarkets.
The deal buzz is statewide, as everyone knows about Tesla’s $5-billion deal in Reno and its soon-to-be neighbor Switch, which is building a $1-billion data center there as well.
Industrial tenants are drawn to Nevada’s tax structure and the innovative business environment statewide, and we expect this effect to trickle south.
With the amazing market we’re seeing right now, and if key projects on the Las Vegas Strip like Genting Resorts kick off , let’s just say industrial brokers won’t be getting a lot of sleep.
By Gabe Telles, Senior Vice President and Managing Director, Gatski Commercial Real Estate Services. This article originally appeared in the April 2015 issue of Western Real Estate Business magazine.