Reno’s Industrial Market Remains In Demand

S&S Activewear occupies this 802,113-square-foot industrial facility at North Valleys Commerce Center in Reno, Nev.

Chris Fairchild, Vice President, Colliers International

Reno’s industrial real estate market has kept a jaw-dropping pace over the winter months. The fourth quarter of 2019 saw record-setting gross absorption numbers for any quarter at 3.34 million square feet with 10 transactions above 100,000 square feet. This amount of activity so late in 2019 typically suggests a slow start to the new year. However, activity seems to have picked up steam, as many users are considering new growth in Reno/Sparks.

As a whole, 2019 was a fruitful year for industrial real estate. The market continues to draw attention for its West Coast distribution fundamentals and pro-business environment from tenants, developers and investors. Developers constructed 3.5 million square feet of industrial product, split almost equally between speculative and build-to-suit construction. About 17 million square feet of our 90-million-square-foot market changed hands at market-low cap rates to industrial investment groups. This included many groups that were new to the market, as well as several existing groups doubling down in Northern Nevada.

Inventory remains the primary concern for tenants and developers as we come into 2020. With some minor caveats, new construction is getting absorbed as quickly as it is brought to the market. Given the strong start to 2020, we do not anticipate this will change in the coming year or two. Despite 3.5 million square feet of construction, the market is critically underserved for vacant industrial product of less than 100,000 square feet.

Existing industrial product is sought after as rates and values continue to push higher as the only alternative is often new construction. Flex product is also very attractive in the marketplace with only a handful of flex sales occurring this year. Rental rates saw their largest gains over the last part of the year, given the extreme lack of product in the marketplace. With this said, Reno/Sparks still largely trails the West Coast on this metric. Location, construction and features all affect pricing, but this is a general barometer for the beginning of 2020.

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