Northern Nevada’s industrial market remains strong with more than 3.2 million square feet of new speculative space under construction and slated for delivery in 2020. These new projects will push the market well above the 90-million-square-footmark. The vacancy rate is a low 5.56 percent and continues to trend slightly upward.
There have been some significant lease transactions in the market. Prologis is building a 598,901-square-foot facility for Makita Tools; Scannell just finished a 200,200-square-foot built-to-suit facility for OnTrac; and 1A Auto recently leased 149,196 square feet at 9175 Moya Blvd. All of these transactions occurred in the North Valleys submarket. The new 270,975-square-foot Longley Commerce Center by Panattoni leased up a majority of its space in the third quarter. This project is a mix of flex and bulk spaces, and is the last viable industrial development in the South Meadows submarket. Polaris completed its 514,555-square-foot BTS in Fernley in the second quarter, while a confidential user just leased 266,000 square feet in the I-80 East submarket.
Michael Hoeck, Kidder Mathews
There have also been some significant portfolio sales to institutional buyers. The 1.4-million-square-foot Lear Industrial Center is slated to trade hands in the fourth quarter. Northwestern Mutual sold its 1,776,805-square-foot portfolio to Link Industrial for $157.8 million, or $88.81 per square foot, in the second quarter of this year. Dermody Properties also sold buildings A and C of its LogistiCenter 395. All four buildings in its other project, LogistiCenter I-80 West, went to Denver-based Black Creek Group. The price for LogistiCenter 395 was $86 per square foot at a sub 5 percent cap rate, while the price for I-80 West Logisticenter was $90 per square foot, equaling a 5.6 percent cap rate. Stockbridge bought the Westcore portfolio, which contained 1.2 million square feet of Class B space, for $74.31 per square foot at a 6 percent cap rate. In total, there have been eight investment sales in 2019 throughout all submarkets.
The North Valleys continues to be the favored submarket for new development, with Panattoni constructing the final six buildings of the North Valleys Commerce Center all at one time. These buildings total more than 1.6 million square feet. Becknell is also building a 286,000-square-foot spec building in the North Valleys. TDC, in conjunction with the Carpenters Union, is building a 610,400-square-foot spec facility in the TRI Center on I-80 East.
Lease rates continue to increase to new all-time highs. The average asking lease rate for spaces less than 20,000 square feet increased from $0.67 to $0.74 per square foot. Mid-bay spaces between 20,000 square feet and 50,000 square feet average $0.55 per square foot. The average bulk rates are now more than $0.40 per square foot, up from $0.39 in the second quarter of 2019.
Northern Nevada is also home to several data centers operated by Apple, Google and Switch, with expansions continually ongoing. These properties are not included in the general industrial market statistics. The forecast for the Northern Nevada industrial market is bullish with new buildings coming online, continued rent growth and consistent new tenant inquiries.
— By Michael Hoeck, executive vice president and managing director, Kidder Mathews. This article first appeared in the November 2019 issue of Western Real Estate Business magazine.