Reno-Sparks industrial real estate enters stable market
RENO, Nev. — The industrial real estate market in the Reno-Sparks area appears to have settled into a sound stable market to end 2015, according to a fourth quarter report from Miller Industrial Properties.
“Coming out of the recession, it was marked by wild highs and lows,” Tom Miller, president of the company, said in a phone interview. Charts of quarterly numbers looked “like the Alps.”
When looking at 2015 as a whole, the data generally follows the five-year averages.
“We seem to be entering a stable period in balance between demand and supply,” he said.
The region had an annual gross absorption of 5.1 million square feet for the year, on par with the five-year average of 5.4 million square feet, according to the report released Jan. 4.
The annual inventory returned to the market from tenants leaving the area or moving to larger or smaller space was 3.4 million square feet, compared to the five-year average of 3.7 million.
Net absorption for the year was 2.1 million square feet, which is higher than the five-year average of 1.6 million and reflects the declining vacancy rate.
The report for the fourth quarter of 2015 shows the vacancy rate for the area as a whole stood at 9.13 percent for the fourth quarter, 7 percent lower than the third quarter vacancy rate of 9.89 percent, and 28 percent lower than the fourth quarter of 2014, which had a 12.82 percent vacancy rate.
Breaking ground on new construction has again become commonplace as investors and developers are comfortable enough with market conditions to invest in a steady supply of new Class A warehouse buildings, which is the product of choice for many new firms enter the market, according to the Market Advisor report.
Older structures — Class B and C — are lower in height and less able to accommodate large trucks and modern equipment.
The more modern amenities of Class A warehouses provides more flexibility for tenants, Miller said.
“E-retail people come in and want that product,” he said.
Developers do remain caution with major projects being constructed in phases.
Large projects currently under construction include a 707,000-square-foot warehouse in North Valleys by Panattoni, with the roof expected on in the first quarter of 2016.
Dermody Properties is working on the first 704,000-square-foot building of a three building complex in Lemon Valley, with the roof scheduled to be completed in the second quarter. In Spanish Springs, Avenue 55 is completing a new 409,000-square-foot project with roof scheduled on in the first quarter.
Additional Class A warehouse projects could soon follow. Dermody, Prologis and other developers have sites that can accept more than 1 million square-foot projects, the Miller report said. Developers in the Tahoe Reno Industrial Center and Mustang have an additional 1 million square feet ready for construction.
Significant activity in the fourth quarter of 2015 included transactions by Cascade Designs, which purchased 86,800 square feet of space at 11500 Production Drive for $5.67 million; and Linda & Greg, LLC.’s purchase of 41,246 square feet at 350 Greg Street for $2.6f4 million.
Lease transactions included Better World Books moving into 128,000 square feet at 14525 Industry; Landstar with 84,000 square feet at 1750 Purina Way; and UPS Supply with 57,600 square feet at 1150 Trademark.
Investors are also coming back into the market.
Many large investment funds were burned badly in the recession, Miller said, after investing in new buildings that remained empty for years.
“Those days are over,” he said. “It’s like they’ve licked their wounds and are now confident enough to come back into the market.”