Right now, the industrial real estate market in northern Nevada is changing before our very eyes. But to anyone not deeply involved on a day-to-day basis, I fear it may be a bit like the legendary story of the nine blind men touching different parts of the elephant. Each has vastly different impressions of the same animal, all of which are simultaneously both somewhat right and wrong. In this case, here are three observations about the industrial real estate market in northern Nevada that are both true – and false:
- The first observer says, “I see market prices rising.”
Yes, this is certainly true in the large big box size range – a search of available 200,000 sf spaces yields but two today. These prices are driven up sharply due to extreme scarcity. However, pricing in the midsized range remains low and an excellent bargain. Searching for midsized locations from 40,000 to 75,000 sf results in 46 locations. These extreme variations in availability have obvious dramatic impacts on asking prices, concessions and terms.
- The second observer says, “I see ‘For Lease’ signs everywhere, so there is still an oversupply of space in northern Nevada.”
Yes, this is true for midsized spaces and in certain types of smaller spaces. However, in the larger sizes, we are close to being totally sold out. In fact, the big box segment could actually be heading towards a zero availability as we close in on year end 2013, with a number of potential users circling the two remaining locations.
- The third observer says: “With our high vacancy rates, there will be no new construction for years.”
Yes, this is true for many types of warehousing. However, as I write this, plans are in the works for the construction of a massive, new, state-of-the-art speculative warehouse. That location will cater to the e-commerce user drawn to state-of-the-art, multi-story fulfillment systems. This project will be on line about mid-year 2014 and, there are already new users nibbling at this project before it even breaks ground. Many are forecasting that it will be leased before it’s completed.
There are many parts to the elephant and to the local industrial real estate market. Looking at either in bits and pieces can give you a false sense of the whole picture. For a truly accurate market awareness, look to those who can see the big picture.
Read our recent post for a review of northern Nevada’s industrial real estate market in Q3.