Market
Advisor
NORTHERN NEVADA MARKET UPDATE
First Quarter, 2015
INDUSTRIAL VACANCY: 9.52%
mipnv.com
775.828.4665
Reno, Nevada
We are experiencing increased business confidence
with more requests for longer term leases, acceptance
of rising rents and accommodating shrinking landlord
concessions. As rents rise, landlords are returning to
being focused on securing high quality tenants with
stronger financials and better credit, with more TI costs
being passed into rent recovery rather than landlords
absorbing the costs just to fill long vacant space. Demand
is equally strong for both Class A and Class B space,
suggesting a broad based recovery on the demand side.
Q4 2014:
8.77%
Growing, healthy
market.
Q1 2015:
9.52%
Construction
Market rents
are rising.
Concessions
eroding.
Vacancy
Lease Rates
Quick Trends
The Sparks submarket, which includes Vista Boulevard,
was very active and held its own on submarket vacancy,
about 50% higher than the overall market average
vacancy. Despite returning 16 newly vacated properties to
I-80 East
17.46%
17.92% Vacancy
North Valleys
22.68%
4.72% Vacancy
Sparks - 34.27%
11.18% Vacancy
Overall Market Vacancy: 9.52%
the market, the area absorbed 18 new deals, making it the
most active submarket in the quarter. The highest vacancy rate
remains in the I-80 East Corridor submarket. Fernley leads the
list with over 20% vacancy due to the departure of Amazon
and A.R.E., leaving two large vacancies in a relatively smaller
submarket. That results in a very high vacancy rate, which will
quickly change when those two properties get reoccupied. The
Tahoe Reno Industrial Park’s vacancy also jumped significantly
due only to Zulily expanding to a much larger facility and a new
300,000 SF property coming on line. They are both very positive
area impacts.
We should not forget Tesla, Switch, Apple and the other recent
economic impacts. We hear these names mentioned regularly
by existing firm ownership and new firms alike, always in the
context that the area is on a strong growth mode and they are
glad to be here and committed to staying and thriving here.
New build-tosuit and spec
construction
rises.
Adequate supply
for healthy
demand.
Reno, NV | mipnv.com | 775-828-4665
Outlook
The Reno Sparks industrial real estate market showed
strength in the area’s business recovery. While we cannot
point to another group of mega deals that completed in
Q1, we can report a gross market absorption of almost
900,000 SF. However, since the Reno market is well along
in the new development phase, we are now experiencing
significant new inventory coming on line and the raw
statistics sometimes indicate a market picture that is
inaccurate. In this quarter, vacancy is up from 8.77%
to 9.52%, about an 8% increase. Half of this increase
is from a new 300,000 facility in TRIC and Zulily moving
from a 324,000 SF location into a far larger one. These
are but two tangible signs of continued market growth.
While we experienced a negative net absorption in Q1 of
over 300,000 SF, expect local vacancy and absorption
statistics to jump up and down through several of the
next quarters due to significant new inventory coming
on line through 2015 and as new deals take possession.
Reno Central/West - 1.89%
Airport - 11.89% 3.46% Vacancy Reno South - 12.12%
9.75% Vacancy
3.03% Vacancy
Market Velocity
Market Recovery Continues
Market velocity
normalizes,
slowing rising
prices/stable
vacancy through
2015.
04.01.2015
Q2, 2011 Q3, 2011 Q4, 2011 Q1, 2012 Q2, 2012 Q3, 2012 Q4, 2012 Q1, 2013 Q2, 2013 Q3, 2013 Q4, 2013 Q1, 2014
1905557
851928 1404217
797897 1300616 1050898 1050898
890372 1134861 2401938 1858759
789777
458857
315633
524328 ‐499662
649441
218721
275368
5190
432466 1888843 1456491
0
Gross
Net
3,000,000
3000000
Net
Absorption
-325,871 SF
2,500,000
2500000
2,000,000
2000000
1,500,000
1500000
1,000,000
1000000
Gross
Gross
Net
Net
500,000
500000
0
Net
Absorption
5 yr. avg.
300,563
0
‐500,000
‐500000
‐1,000,000
‐1000000
• Over 350% Lower
than Q4 2015
• 60% Lower
over Q1 2014
• Almost 200%
Lower than 5-year Avg.
Vacancy
9.52%
18.00%
16.00%
Vacancy
5 yr. avg.
12.62%
14.00%
12.00%
• 8% Higher
than Q4 2014
(8.77%)
10.00%
• Over 9% Higher
than Q1 2014
(8.66%)
8.00%
6.00%
• 32% Lower
than 5-year Avg.
(12.62%)
4.00%
Sub-Market Breakdown - Q1, 2015
Sub-Market
Size
Vacant
Vac. %
Gross Abs.
Net Abs.
Spec
Const.
BTS Const. Total Const.
North Valleys
I-80 East Corridor
Sparks
Airport
Reno Central/West
Reno South
16,988,801
13,025,728
25,568,949
8,872,036
1,410,606
9,043,313
801,263
4.72%
2,334,569 17.92%
2,859,252 11.18%
864,924
9.75%
48,752
3.46%
273,826
7.44%
190,747
0
396,167
202,266
48,064
51,250
-35,761
-343,290
2,023
20,801
-10,059
36,555
0
300,000
0
0
0
0
0
0
0
0
0
0
0
300,000
0
0
0
0
TOTALS
74,909,433
7,129,854
888,764
-325,871 300,000
0
300,000
9.52%
Reno, NV | mipnv.com | 775-828-4665
04.01.2015
Significant Transactions Q4 2014
Sales Transactions
2325 Market Street
400 Western Road
2920 Highway 40 W
3950 Mira Loma Drive
9748 S Virginia Street
690 E Glendale Avenue
Lease Transactions
Binyan, LLC
OCE, LLC
Chilkur, LLC
Swammies, LLC
Ingram Clark Prop.
Berry Ents, Inc.
24,220 sf
61,152 sf
14,264 sf
7,296 sf
10,880 sf
7,200 sf
$2,815,000 $116.23 psf Cascade Designs
$2,350,000 $38.43 psf Almo Distributing
$1,250,000 $87.63 psf Watts Water Tech.
$1,245,000 $170.64 psf ACP
$1,178,000 $108.27 psf Adv. Supply Chain Logistics
$522,000 $72.50 psf Tenant Confidential
87,500 sf
74,800 sf
73,728 sf
66,000 sf
55,515 sf
51,520 sf
Construction
Construction continues to be hopping. Many developers are now into expanding their portfolio with few expressing much
hesitation to add reasonable inventory into the mix, as long as current market velocity continues. The area’s total size
increased by 300,000 SF last quarter with the addition of Conco’s expansion to 2777 USA Parkway in TRIC, bringing the
Reno industrial real estate market to just under 75 million SF. The curtain is ready to rise on several new projects as well.
Panattoni has Petco’s 707,000 SF build to suit in Red Rock well underway, plus a new 200,000 SF spec facility next door.
Dermody, having filled their 624,000 SF with Amazon, is well along with new 402,000 SF and 224,000 SF spec buildings
in Golden Valley. KTR is progressing with their new 566,000 SF spec facility in TRIC as well. This totals to over 2,100,000
SF of new Class A spec space coming on line in Q2 and Q3 2015. While it sounds like a massive amount of new product,
it only takes a few large transactions to gobble that up quickly.
2015 Trending
We expect to see continued new development as developers vie to get positioned with the newest Class A, ready-to-go
product for the next mega sized lease transaction to come courting northern Nevada. Panattoni has a new North Valleys
project ready to start for a 700,000+ SF spec facility. Dermody is preparing for a new 1 million SF project in the North
Valleys. And SJS is prepping the site to start a new 694,000 SF facility in TRIC. All will address a very high eave height and
a high LEED designation. This is another 2.4 million SF waiting in the wings, presenting an “if you build it, they will come”
scenario. International fulfillment models require utilizing the latest business trends to gain competitive advantages, and
northern Nevada has it waiting and ready to go in a business friendly environment area with long standing logistical
advantages.
2015 Summer/Fall Forecast
We are seeing a strong market velocity with transactions ranging across small, medium to large transaction size ranges.
The medium-sized market growth is especially encouraging, since these tend to be the meat and potatoes type of business
that can be highly conservative, commonly run by a small ownership group. To see these types of firms reentering the
market as expansions from elsewhere indicates a highly broad based economic growth trend. This should combine with
more e-commerce, mega-sized deals and continued small business growth. Overall, the northern Nevada market should
experience a very healthy 2015.
Tom Miller, CCIM
[email protected]
Brad Lancaster
[email protected]
Reno, NV | mipnv.com | 775-828-4665
Beki Sisco
[email protected]
04.01.2015