Commercial Market Report WELCOME TO OUR 2015 MARKET REPORT 2015 was a year with heavy investment demand that spilled over from apartments and industrial to office, retail, and more commercial land. We saw more land sites trade hands this year and more development is on the horizon. Our workforce is continuing to diversify through the economic efforts of companies like EDAWN helping land new jobs in the area, and we should continue to see the paradigm shift in our perception as a region and as a place for many different industries to call home. We expect a new wave of population growth and job growth in the coming years. • • • •
2015 YEAR-END
TOTAL 2015 SALES per segment
INDUSTRIAL
71
OFFICE
84
MULTI-FAMILY
61 79
RETAIL
Slight decrease in overall number of sales units. Increase in Industrial and Office sectors number of sales. Slight Decrease in Apartments in Retail number of sales. Commercial land demand and prices rising.
• Investment demand strong and Cap rates shrinking. • Employment levels at all time recent lows.
COMPANIES MOVING TO THE AREA:
FRED MILLER
775.850.3115 | fmiller@dicksoncg.com DicksonCG.com
SHEILA COLFER
775.850.3143 | scolfer@dicksoncg.com DicksonCG.com
INDUSTRIAL Our industrial market has been one of the consistently better performing asset classes throughout the years, and 2015 was no exception. Because of high demand, lower vacancy rates, and an influx of new companies to the market, we are seeing strong rental growth, which has led to the development of new industrial parks and current construction of approximately 1.5 million square feet scheduled to be completed in the first part of 2016.
SALES
OWNER/USER ACQUISITIONS
On the sales side, the year was relatively normal for acquisitions in the market. One of the more notable sales was in May of 2015 when Dermody Properties sold the newly completed 624,000 square foot Amazon fulfilment center in Lemmon Valley for $45,250,000 or $73 p/sf. The locally based developer was able to land Amazon as a tenant after they vacated the Fernley market, and shortly after completing the building sold the asset as an investment sale. Another big market change was the partial disposition of the Indcor Portfolio. At the end of February, the largest industrial owner in N. Nevada, Indcor, sold a majority share of their portfolio to Singapore’s Sovereign wealth fund Global Logistics Properties (GLP) and retaining the Indcor management team that was in place. Another larger acquisition was the 184,878 square foot building at 550 Spice Islands that sold to HC Companies out of Dallas, Texas for $5,500,000 or $30 p/sf.
There were also a couple of notable acquisitions of larger, owner user facilities this past year. One of those sales was the owner/user purchase by Cascade Designs in the Stead Submarket. The manufacturer of outdoor adventure gear bought an 86,800 sf. building located at 11500 Production Drive for $5,678,000, or $65 p/sf. The facility was situated on 9.49 acres and featured an additional 13.28 acres of excess land for future expansion. Another larger sale was the 158,040 square foot warehouse at 240 Stanford Way that was purchased by the tenant at the building for $4,100,000 ($26 p/ sf). While 2014 had a trend of numerous sales in the $5m-10m range, 2015 had a lot more mid-sized sales to small or midsized companies, buying buildings in the $1m - $3m range in 2015. This is a good sign in that it shows both growth of smaller, existing companies or smaller, new companies enter the market. Many of these buildings were older age buildings in the Sparks Submarket. Although many of the buildings are older age and in the flood plain, the prices are starting to rise into the $65-75 per square foot range for these facilities due to demand and low borrowing costs.
NOTABLE SALES
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The 624,000 Amazon building in Lemmon Valley. Sold for $45,250,000 ($73 p/sq. ft.)
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The 86,800 sq. ft. building at 11500 Production Drive. Sold for $5,678,000 ($65 p/sq. ft.)
•
The 158,040 sq. ft. building at 240 Standford Way. Sold for $4,100,000 ($26 p/sq. ft.)
•
The 184,878 sq. ft. building at 550 Spice Islands Way. Sold for $5,500,000 ($30 p/sq. ft.)
LEASING
•
We saw a relatively balanced market this last year with a combination of strong absorption and new product brought to market. Some of the more notable lease deals were:
14525 Industry Circle, Better World Books leased 128,000 square feet
•
10855 Lear Blvd, Tagg Logistics leased 153,000 square feet
TRIC/Fernley •
625 Waltham Way, Bi Nutraceuticals signed a lease for 140,000 square feet at 625 Waltham Way
Airport Submarket •
1381 Capital Court, US Cabinets leased 126,268 square feet.
Sparks submarket •
665 Spice Island Drive, Retailer Patagonia leased 79,200 square feet
•
1750 Purina Way, Allstate Warehousing leased 84,000 square feet
•
1135 Southern Way, 3PL company Fidelitone leased an additional 95,200 square feet
North Reno •
8370 Military Road, Marmot Mountain signed a lease for 271,832 square feet in Dermody Properties new Logisticenter.
We ended the year at roughly a 9.7% vacancy rate which reflects Reno, Sparks, Fernley and TRIC. And also takes into account new construction and the leasing absorption up to year end.
CONSTRUCTION Looking forward, we will see a continuation of market expansion with approximately 1,500,000 square feet currently under construction with delivery dates in the first half of 2016. Developer Avenue 55 has a 410,000 square foot project in the Spanish Springs Business Park with completion date expected in the Q1, 2016. Panattoni is building a 707,000 square foot project at their North Valley’s Commerce Center with roof completion Q1, 2016, and Dermody Properties has 704,000 square feet under construction at their Logisticenter 395 in Lemmon Valley, completion slated for Q2, 2016. In addition to speculative development taking place, there are multiple owner user (non-speculative) buildings in various stages of construction. In TRIC alone, Tesla, Switch, AZZ Galvanizing, and Aqua Metals are underway on major facilities. Also in Fernley, windows manufacturer Deceuninck recently announced plans for its new 150,000-square-foot manufacturing facility.
FRED MILLER
SHEILA COLFER
DIRECT 775.850.3115
DIRECT 775.850.3143
CELL 775.741.2400
CELL 775.690.5579
fmiller@dicksoncg.com
scolfer@dicksoncg.com
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OFFICE Office sales in 2015 continued to show improvement with strong numbers in owner/user sales and investment transactions. The number of office sales increased from 73 in 2014 to 84 in 2015. Nationwide, our office market posted $145 billion in sales in 2015, which is up 13% from 2014 and 3 times higher than 2010.
OFFICE INVESTMENT RECAP
NOTABLE 2015 INVESTMENT SALES
With low interest rates and a lot of capital in the market pursuing deals, there have been some notable investment sales including two Class-A buildings in Mountainview Corporate Center. Local developer McKenzie Properties started off the year by purchasing the 59,590 sq. ft. building at 5470 Kietzke for $9,500,000 ($160 p/sq. ft.). Also included in this sale was the adjacent 5.128 acre site that traded for $2,000,000 or $8.79 p/sq. ft. of land. The other sale in Mountainview was in December when the off-market deal of 5441 Kietzke Lane sold for $16,295,274 or $250 p/sq. ft. to an investor out of Fremont, California. The same group also bought the retail center Southcreek in an off-market transaction. The cap rate for the Kietzke office building was roughly 6.3%, and tenants included Eide Bailly, Holland and Hart, and Ticor Title. Another large sale in December was the 36,171 sq. ft., multi-tenant building at 980 Sandhill which sold for $6,400,000 ($176.94) or roughly a 7% cap rate. Tenant’s included Alston Construction and the FBI.
•
he 45,152 sq. ft. Mitel building at 885 Trademark Sold for T $12,400,000 ($163 p/sq. ft.)
•
he 45,152 sq. ft. building at 10509 Professional Circle. T Sold for $7.2 million ($160 p/sq. ft.). Brokered by DCG
•
he 59,590 sq. ft. building at 5470 Kietzke. Sold for $9.5 T million ($160 p/sq. ft.).
•
he 65,074 sq. ft. building at 5441 Kietzke Lane. Sold for T $16,295,274 ($250 p/sq. ft. or 6.3% cap rate)
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The 20,292 sq. ft. building 6225 Neil Road. Sold for $3 million ($148 p/sq. ft. or 7.2% cap rate)
•
The 31,171 sq. ft. building at 980 Sandhill. Sold for $6.4 million ($177 p/sq. ft. or 7% cap rate). Brokered by DCG
•
The 53,437 sq. ft. building at 887 Trademark. Sold for $6,679,625 ($125 p/sq. ft.)
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LEASING RECAP On the leasing side, the spread in comparative rates between freeway-situated office buildings and off freeway office buildings is at a peak for the South Meadows submarket, while Downtown absorption continues to strengthen. While CoStar quotes a 13.3% vacancy in 342 buildings, our records show that the vacancy in the top 40 Downtown buildings is only 10.62%. Only two spaces over 10,000 square feet remain in Class-A buildings Downtown. The market’s 200 buildings over 10,000 square feet stand at a 14.1 % vacancy. Assuming approximately 40,000 square feet of net new occupants to this subset in the 4th quarter, the year-end result should be near 14% overall vacancy, finishing stronger than the start of 2015. CoStar’s Washoe County Office Vacancy stands at 12.3% and we predict a 2016 year over year decrease to 11.9% representing 100,000 square feet of net absorption. These rates are tracking pretty closely with the national office vacancy which ended the year at around 10%.
OWNER/USER SALES Acquisition of owner-user buildings saw continued strength in 2015. There were many office buildings in the Meadowood
and South Meadows submarket selling to owner-users taking advantage of SBA lending. Price per foot ranges have increased over last year into the $160-$200 p/sq. ft. for many of these buildings. There were two large acquisitions by owner users this year. NV Energy purchased its building at 6100 Neil Road. The 293,207 sq. ft. building was purchased by the PUC for $18,000,000 or $61 p/sq. ft.. Another large owner user acquisition was Renown’s purchase of the 63,296 sq. ft., office building at 10315 Professional Circle, near their South Meadows Campus. The availability of quality owner-user buildings is beginning to shrink, and we predict pricing to continue to increase into 2016.
NOTABLE OWNER/USER SALES •
The 6,048 sq. ft. building at 661 Sierra Rose. Sold for $1.3 million ($215 p/sq. ft.). DCG brokered this sale for the seller.
•
The 293,207 sq. ft. building at 6100 Neil Road. Sold for $18 million ($61 p/sq. ft.)
•
The 63,296 sq. ft. building at 10315 Professional Circle. Sold for $11,750,000 ($185 p/sq. ft.). DCG brokered this sale.
FRED MILLER
SHEILA COLFER
DIRECT 775.850.3115
DIRECT 775.850.3143
CELL 775.741.2400
CELL 775.690.5579
fmiller@dicksoncg.com
scolfer@dicksoncg.com
PAGE 5
Institutional Experience. Local Knowledge. The commercial team at Dickson Commercial Group has been working the Northern Nevada market for nearly 35 years. Our seasoned group of real estate professionals offers broad based market knowledge, proven problem solving capabilities and resourcefulness with a complete focus on commercial real estate.
We work as a team in the truest sense of the word. We collaborate to find the best solutions and we exploit the targeted knowledge of each agent. Our multi-faceted brokerage provides local, national and international clients the full array of commercial real estate services. Agents are trained specialists with accreditation through the Society of Industrial and Office Realtors (SIOR) and Certified Commercial Investment Members (CCIM).
SHEILA COLFER
FRED MILLER
775.850.3143 DIRECT 775.690.5579 CELL scolfer@dicksoncg.com
Sheila Colfer was born and raised in Reno and attended the University of Southern California completing a Bachelor of Science in Finance with an emphasis in real estate. Sheila has worked in the commercial real estate field for twenty five years formerly with Commercial Property Services as a broker/partner. Sheila has handled a broad range of property transactions that include investment and land sales as well as leasing, management and development. Sheila holds the CCIM designation and is a member of the Reno/Sparks Association of REALTORS.
775.850.3115 DIRECT 775.741.2400 CELL fmiller@dicksoncg.com
Fred’s clients benefit not only from his great interpersonal skills, but from his broad industry knowledge, as well. He has received accreditation from the Society of Industrial and Office Realtors (SIOR) as well as training through the Urban Land Institute. His ongoing commitment to keeping abreast of the latest real estate issues has made him one of the region’s leading industrial experts specializing in industrial leasing and sales. A life-long Nevada resident, Fred understands Northern Nevada from multiple perspectives – resident, business owner, active alum and real estate specialist. He graduated from the University of Nevada with a Bachelor of Science degree.
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