Northern Nevada Real Estate A special publication brought to you by the
Vol. 1
COMMERCIAL | INDUSTRIAL | RETAIL | LAND | OFFICE
Monday, April 14, 2014 | www.nnbw.com
Note from the Publisher...
Commercial real estate takes a positive turn Northern Nevada has suffered through Rick lean years Carpenter some for those in the rcarpenter commercial real estate @nnbw.biz industry. Brokers and developers have been hit the hardest. But finally, the commercial real estate ship is slowly turning in the sea of business opportunities in the Truckee Meadows area. The Northern Nevada Business Weekly recognizes the need for the business community to become more aware of the unique business that often rides the waves of drought and floods of growth. As that ship turns, we were searching for a way to bring awareness to the challenges and changes happening in the commercial real estate world. To do so, we are launching this premier edition of the Northern Nevada Real Estate Journal. While numerous publications focus on residential real estate, this section will explore the commercial side of the industry on a quarterly basis. We use the term “commercial” real estate to include retail, office, industrial, land and all other commercial properties. Our goal will be to provide the latest information about different aspects of the industry from what to look for in a broker to where to find funding, title insurance and advantages of different locations in the area. We realize that we are not going to be everything to everyone as we launch this new product so we want you to provide feedback on how we’re doing and what you would like to see more of as we develop content for each edition. What we won’t do is hold breaking news for this quarterly publication. Breaking news will be in the regular edition of the newspaper and even more timely news will be released in our daily update. We will print extra copies of this section and make them available through advertisers who support the publication. As you’ll read in this publication, the area needs more industrial space to accommodate the growing recognition of the strategically located at a national crossroads for delivering products in the West. As Apple Computer and other major companies discover the advantages of doing business in northern Nevada, that need will continue to expand as they become evangelists for the area as many of us already preach to those thinking of moving here. The area has so much to offer from open spaces to spectacular mountain ranges, the beauty of Lake Tahoe and untapped natural resources across the state from Yerington and Virginia City to Winnemucca and Elko. People might have first discovered the area for gold and silver, but they are now also mining the area for our strategic location in the West. We have lots of real estate. Let’s take advantage of that. ● NOTE: If you have ideas or suggestions to improve this publication, please send us feedback for the editorial content to John Seelmeyer at info@ nnbw.biz. If you’d like to learn about advertising opportunities, contact Eli Zeiter at ezeiter@nnbw. biz. Or call me at 775-850-2285.
Industrial rents on the rise By John Seelmeyer jseelmeyer@nnbw.biz
At the depths of the recession, industrial specialist Bryan Gardner of Reno Property Management was negotiating leases in goodquality industrial buildings around town for as little as 24 cents a square foot. Today, it’s not unusual for good-quality space to be leasing for 32 or 33 cents a square foot — with whispers of a few even-higher offers in the market. But trees don’t grow to the sky, and observers are watching closely to see how the tugs of demand-and-supply will work themselves out in the market for industrial space in northern Nevada. There’s a simple reason that rents are going up, says Tom Miller of Miller Industrial Properties in Sparks: The amount of vacant industrial space fell dramatically during 2013 — starting the year at about 13 percent, ending it at under 9 percent. Developers and landlords generally think of a 10 percent vacancy as a balanced market, and anything less means that property owners have the leverage to raise rents. And they did. “The ugly rents? Those days are long past,” says Miller. And the rent increases came fairly quickly. Just last summer, brokers marveled at a lease for a big industrial space that broke through the 30-cent barrier. Also gone, Miller says, are concessions — a month of free rent for every 12 months in a lease, for instance — that owners of Class A buildings were forced to offer during the downturn. But rising rents bring two questions: Will developers undertake speculative industrial projects with the expectation that they can land tenants willing to pay enough to support the new construction? And if new supplies of industrial space arrive, will it be enough to soak up the demand and put a lid on further rent increases? Developers and the lenders who back them still remember the pain of speculative overbuilding in 2007 and 2008 and haven’t been eager to build speculative products until rents rise enough to give them some comfort. That day is arriving, finds an analysis by the industrial team at CBRE. “Tightening supply, rental rate growth and continued demand will bring the next wave of speculative development in northern Nevada,” the CBRE group wrote in a January report. For the developer of a 500,000-squarefoot building, a 1-cent increase in the monthly, square-foot rate will add $60,000 to the landlord’s revenues. At least in theory, a growing supply of industrial space should soak up some of the demand and put a ceiling on rate increases. But speculative projects are likely to target specific sub-sets of the market, and new construction that meets the needs of one type of potential tenant won’t necessarily do anything to meet the demand from other tenants.
Quality industrial space is leasing for 32 or 33 cents a square foot. Rob Sabo, rsabo@nnbw.biz
The mix of companies that are looking for distribution space already plays a factor in increasing the demand for top-quality new space. E-commerce companies, for instance, have been among the key drivers of the distribution sector in recent years, and they’re mostly looking at newer, top-quality buildings. “The Class B buildings don’t work for them,” says Gardner. One key factor, he says, is that e-commerce distribution companies generally require more workers than traditional warehouses in the region. That means they need more parking than they can find at older buildings. Rents have been edging up a bit in those older and smaller buildings as well, although the increases haven’t been as dramatic. Brad Elgin, a vice president of Stark & Associates Commercial Real Estate, says demand has been particularly strong — and supply has been limited — for industrial buildings that include yard space. That’s driven, he says, by the return to life of construction-related companies that need storage for big pieces of equipment. Some space in older buildings also has been occupied by existing firms that are expanding their operations — adding 3,000 square feet here, 10,000 square foot there. But generally, he says, rents haven’t bounced back as strongly in that older, closer-to-town space as they have in new construction. Dampening demand — and the increases of rent — in those older properties are challenges that range from outdated construction to locations in flood plains. “They’re functionally challenged,” says Gardner. While folks looking for new space are likely to be paying particularly close attention to the direction of industrial rents, tenants who grabbed good deals when the market was soft face their day of reckoning when their leases come up for renewal. “Those leases are going to roll over, and people are going to have sticker shock,” says Gardner. ●
2 | Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com
Industrial Real Estate Market | Reno-Sparks, Nevada | Industrial Real Estate Market | Reno-Sparks, Nevada
WAREHOUSE Classifications CLASS
A
CLASS
B
CLASS
C
Rent Rates
Generally highest of the 3 groups, NNN fees tend to be higher.
Generally 10-20% less than Class A in typical market conditions. NNN fees tend to be about the same % lower than Class A.
Generally more than 25% less than Class A in typical market conditions. NNN fees tend to be 50-70% of Class A.
Eave Height
30’ and up allows max. utilization of the ‘cube’ of the facility.
24’ allows decent racking height, but less than Class A.
18-20’ allows only short racking height.
Fire Sprinkler System
ESRF allows max. storage height of product without in rack sprinklers. Might allow cheaper insurance rates.
.33/3000 sf allows lower max. storage height of most product than with ESRF.
Scheduled piping system allows lowest max. storage height of most products. Some products may be precluded.
Column Spacing
50’ x 50’ allows for max. flexibility for racking layouts.
Varies. Largest of 48’, shortest of 40’
Varies from 24’ to 45’.
Offices
Built to the highest market standards. Either BTS or about 3-5% of the overall size.
Varies. May find older finishes and/or mismatched finishes. May find disproportionately sized offices.
Varies. Will likely find older finishes with mismatched finishes. Probably will find disproportionately sized offices
Esthetics
Typically attention is given to modern building esthetics, added treatmentes at the entrances and landscaping.
Typically little attention to building esthetics nor entrance I.D. Older landscaping.
No attention to building esthetics nor entrance I.D. Oldest landscaping.
Dock Count/ Equipment
Generally 4 docks per each 50’ column bay. Allows for max. operational flexibility. 30k# dock levelers on every other dock typical, dock seals and lights typical.
Dock count varies but generally adequate for most warehousing operations. 25k# dock levelers found, dock seals and lights typical, may have deferred maintenance.
Dock count varies and may be inadequate for warehousing operations. Some dock levelers found, dock seals may be torn, dock lights may be missing, expect deferred maintenance.
Roof Structure
Typically open web girders and joists. Allows light and fire sprinkler flow to pass through.
Can vary. Wood or metal.
Typically glue laminated wood beams and wood joists.
Skylights
Typically 2% smoke vent/skylights. Brings lots of natural light to the warehouse.
Typically 1% smoke vent/skylights.
Typically 1% smoke vent/skylights.
Roof Membrane
Typically a single ply membrane. Generally considered the best roof for this application.
Typically older Built Up Roof system. Roof integrity depends on maintenance history.
Typically older Built Up Roof system. Roof integrity depends on maintenance history.
Electrical Services
480V, 3PH Large Amperages
208V or 480V, 3PH. Modest amperages.
208V, 3PH. Low amperages.
Lighting
T-5. Most energy efficient lighting system available today.
Metal Halide second generation lighting system. Many properties upgrdraded to T-5.
Metal Halide second generation lighting system or fluorescent tubes.
Warehouse Heating
Cambridge type system. Very energy efficient and can be used in summer months to introduce cool night air.
Gas fired unit heaters. Older system heats space well, but not highly energy efficient. No ability to introduce cool night air.
Gas fired unit heaters. Older system heats space based on number of units, not energy efficient. Prone to needing replacement. No ability to introduce cool night air.
Truck Court
125’ deep. Gives best flow of truck traffic and assures all docks can be used.
Varies from 100’ to 75’, truck power units may be parked in street. Maneuvering can be a challenge.
Varies. Generally truck power units will be parked in street. Maneuvering can be a challenge.
Trailer Parking
Considerable extra trailer storage generally provided.
Generally scarce trailer storage.
None.
Comments
These top line facilities tend to be the most efficient to operate from a flexibility standpoint as well as least fixed cost for utility consumption. Best employee morale location.
These facilities can distribute most products just fine and are a value to those who can work from them. Some are in the area more prone to flooding.
These older facilities are best suited for low volume distribution operations or for manufacturers who do not need the taller eave heights. 208V power could be problematic for some.
Source: Miller Industrial Properties
Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com | 3
Buyers set sights on northern Nevada apartments By Rob Sabo rsabo@nnbw.biz
Last year saw some of the largest apartment transactions in the past few years in the Reno-Sparks multifamily market, and as vacancies continue to decline apartment brokers expect 2014 to be another strong year for sales. The largest apartment transactions in 2013 included: •
185-unit Caviata Apartments for $24.4 million
•
176-unit Parkway Manor for $18.6 million
•
276-unit The Boulders apartments for $$25 million
This year started just as strong, says Ken Blomsterberg, first vice president of investments with Marcus & Millichap’s Reno office. Blomsterberg started the year by recording $20.8 million in apartment sales in January for northern Nevada properties, primarily in Reno and Sparks. Most of the investment capital pouring into Reno and Sparks is from out-of-state investors seeking opportunities outside of major metropolitan markets, Blomsterberg says. The largest sale in 2014 — the 250-unit Woodside Village Apartments on Kietzke Lane for $14.9 million — was to a Bay Area
investment partnership. Blomsterberg says investors looking at Reno seek higher returns than what’s available in their home markets, where the economic recovery began much sooner and opportunities and margins have dried up. “There is a tremendous amount of buyer interest in the northern Nevada apartment market, which began in the summer of 2011 and has become stronger each year,” he says. “2014 is showing signs that it could be very good year — there is a lot of investor money trying to get deployed right now, and we are receiving offers from New York, Florida, Chicago and San Francisco; they are coming from across the country. Bandwidth is pretty broad, and there is a lot of interest.” Much of the investor interest stems from falling vacancy rates that have allowed landlords to push up rents, says Floyd Rowley, senior vice president with Apartment Realty Advisors. Vacancy in top-quality apartments at the end of 2013 was just 2.4 percent, and vacancy in mid-priced and lower-priced properties was below 5 percent, Rowley says. “That is huge. When underwriting a property for a loan or purchase, lenders generally use a 5-percent vacancy factor. Anytime it’s below 5 percent it shows that the market is pretty hot.” Yet Reno remains attractive to investors because improving rents
Vacancy at Class A apartments was just 2.4 percent at the end of 2013. Courtesy Apartment Realty Advisors
continued on page 11
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4 | Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com
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Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com | 5
Sprinkler systems dictate placement of many companies By Rob Sabo rsabo@nnbw.biz
Driving down Coney Island or Spice Island drives, where large amounts of big industrial buildings sit vacant, it may seem slightly puzzling to hear about the region’s lack of industrial space. But 2013 was a blistering-hot year for the industrial market — CBRE reports that more than 4 million square feet of space was absorbed in northern Nevada for the year, the most in 18 years. Overall vacancy for all industrial property types decreased from nearly 13 percent to 8.8 percent to start the year. And it’s much lower for the newer Class A properties required by many of the new companies locating operations in northern Nevada — down to 2 to 3 percent, CBRE finds. So why are old buildings still dark? One of the primary reasons new tenants hanging their shingles in the region can’t repurpose older warehouse spaces along the Truckee River in Sparks or in Stead is because of outdated fire sprinkler systems, says Greg Shutt, vice president with the industrial properties group at Avison Young in Reno. This is especially true for the many thirdparty logistics providers and Internet retailers who’ve found new homes in the Truckee Meadows. Clear heights, ample tractor-trailer parking and cross-docking all play vital roles in 3PL and e-commerce operations, but a primary requirement is ceiling-mounted early-suppression, fast-response sprinklers. The older Class B and C properties that dot the region’s industrial centers typically have ratio-based fire sprinklers, Shutt says. Ratio-based sprinklers provide a pattern of water over a given square footage of floor space and are intended to keep a fire from getting out of control before the fire
department arrives. ESFR sprinklers, on the other hand, are designed to put out fires long before the big red trucks arrive with wailing sirens. Gary Baker, president of The Baker Company and a specialist in industrial consulting, site searches and property management, says 3PL firms often are required to locate in buildings with ESFR sprinklers because of mandates from their insurers. “ESFR sprinklers have become mandatory from an insurance standpoint for a lot of the fulfillment companies that are handling thirdparties products,” Baker says. “The clients are driving that requirement to protect their products.” So how to absorb space in the region’s many older industrial properties? Go after a much different tenant profile, industrial brokers say. Logistics providers may be making the biggest splash in recent years, but they aren’t the only companies in the market, Baker says. Dozens of companies that have come to town need warehousing or manufacturing space and don’t require a top-level industrial property. Examples of new companies to RenoSparks that have repurposed older buildings include French Gourmet, a pastry manufacturing operation that renovated a large space on Coney Island Drive, and Garlock Printing, which is building out the old New West Distributing warehouse on Woodside Avenue in West Reno to house its film-printing operations. “We are not dependent on any one industry,” Baker says. “Buildings that don’t have contemporary improvement have to be marketed to specific industries that don’t need the height and can live without ESFR and don’t have need for a great number of truck doors.” Many transportation companies in Reno and Sparks are absorbing Class B and C warehouse space, Shutt adds. Much of that space was
Companies such as NOW Foods require top-tier industrial space with large clear heights and newer technologies in fire suppression. Rob Sabo, rsabo@nnbw.biz
included in the sale of 9.5 million square feet of industrial property acquired by Blackstone Real Estate Partners VII of New York in August of last year. Blackstone is operating the properties through its Chicago-based warehouse management company, IndCor Properties. IndCor, like many landlords, will reposition the properties by painting warehouse walls, remodeling office spaces, renovate damaged floors and repair overhead doors. “It’s really an issue of modernizing those existing spaces,” Shutt says. “The only thing that’s different from Class A as far as function are the clear heights and the sprinkler systems; otherwise, they are very usable.” Class B buildings typically have all the attributes regional distributors seek, he adds: office space, clear height and sprinkler systems. And many landlords are modernize buildings by repairing or replace office improvements, dock doors and equipment to create spaces that meet the needs of future tenants. It’s also common to find landlords replacing old metal halide lighting with more modern and efficient T-5 fluorescent systems.
rsabo@nnbw.biz
The dwindling supply of Class A industrial space in northern Nevada prompted Dermody Properties to break ground on the first speculative industrial building since the recession. However, more than 1 million square feet of Class A space is expected to come back online as companies leave existing spaces for larger distribution and warehousing facilities throughout the year. Companies among the shuffling include: • SanMar Corp., which will vacate 622,000-square-feet on Vista Boulevard in Sparks when its new 750,000-square-foot location being developed by Lake Washington Partners is ready later this year. • Toys “R” Us, which is closing its 304,000-square-foot operations at 700 Milan Drive in Tahoe Reno Industrial Center on June 1. • Zulily, which is moving from 700 Milan to a much larger facility under construction at 3600 USA Parkway. • Randa Corp.
With the shortage of top-tier industrial product, other developers soon may follow Dermody’s lead — but market rents currently prohibit widescale speculative development Those moves, along with a small amount of currently vacant Class A space, total 1.2 million square feet of industrial space, says Tom Miller of Miller Industrial Properties. Currently, though, there’s just one property available that’s larger than 300,000 square feet, Miller notes. That space is a 334,000-square-foot building at 14255 Industry Circle in Stead. The several build-to-suit projects under construction and Dermody’s spec project will add nearly 2.7 million square feet of new industrial product to the market, Miller says. With the shortage of top-tier industrial product, other developers soon may follow Dermody’s lead — but market rents currently prohibit widescale speculative development, says Doug Roberts, partner with Panattoni Development.
• Wasting Arrows, an archery range that set up shop in flex space on Double Diamond Parkway. • Flips USA Gymnastics, which set up a gym in 18,000 square feet on Dunn Circle in Sparks • Reno Sportsdome, which operates out of 35,000 square feet on Tampa Street in Reno. ●
“These upgrades are what
Developers waiting on speculative construction By Rob Sabo
is required for landlords to be competitive,” Shutt says. “Landlords that don’t do these types of things will realize a lesser rental rate, but there are tenants out there that are fine with that if it means keeping their operating cost as low as possible.” Additionally, Shutt notes, many companies seeking to locate in northern Nevada don’t require the large amounts of space distribution and logistics providers require for their racking and automated picking machinery. Class B and C buildings ranging in size from 20,000 square feet to several hundred thousand make up the bulk of industrial vacancy in the region, he says. Class B and C spaces also are being repurposed for a wide range of non-industrial users. Examples include:
Dermody Properties is spot-on with coming out of the ground on a large building, Roberts says, since there’s a need in the market for more Class A big box buildings and strong demand from tenants looking to expand with operations in northern Nevada. Having a building big enough to house a large tenant is key factor in attraction — but other developers are waiting to see how long it takes Dermody to lease its building. “Most companies don’t have time to wait for a build-to-suit, and having an existing building makes it so much easier to make a deal,” Roberts says. “But for guys like us to build we need rents to go up. Right now the cost developers would underwrite needs to be 33 to 34 cents a month triple net to make spec development seem feasible. We are getting closer, but we are not quite there.” The large e-commerce site Dermody is erecting also could prove beneficial to the area in other ways, Roberts adds. Having a high count of Internet retailers located in northern Nevada brings the area a certain cachet that can be used to draw even more companies to the region. ●
The Greater Reno-Sparks industrial market comprises more than 74 million square feet under roof. About 6.7 million square feet currently is vacant. A breakdown of the percentage of industrial vacancy by property size: 5,000 to 20,000 square feet: 13 percent, or 871,000 square feet — about 1.2 percent of the total market. 20,000 to 50,000: 19 percent, or 1,273,000 square feet — 1.7 percent of the total market. 50,000 to 100,000: 23 percent, or 1,541,000 square feet — 2.1 percent of the total market. 100,000 to 250,000: 31 percent, or 2,077,000 square feet — 2.8 percent of the total market 250,000 and greater: 14 percent, or 1,500,000 square feet — 2 percent of the total market. Source: Avison Young
6 | Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com
Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com | 7
It all started 40 years ago with one office building. Since then, Basin Street Properties has grown to 3 million square feet of quality office, retail and mixed-use properties by relying customer on our strengths of engaged service and responsive management.
Today we are proudto call Reno our home and we work hard to have an
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GIVE US A CALL TO LEARN MORE ABOUT COMMERCIAL REAL ESTATE IN NORTHERN NEVADA. (775) 954-2900 — BASIN-STREET.COM
8 | Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com
Recovery slow in Carson City industrial market By Roger Diez info@nnbw.biz
Carson City is the manufacturing hub of northern Nevada, and has historically been a strong market for industrial property. Since the bottom dropped out in 2008, recovery has been slow, but is starting to pick up from its low point at the depth of the great recession. However, it has not yet rebounded completely. Brad Bonkowski of NAI Alliance Carson City characterizes the market as “Interesting.” “It’s not bad, but it’s not red hot.” Bonkowski says. “The biggest problem is that most of the inventory is filled, and what remains is not that desirable.“ The market is also unusual because most available properties are 30,000 square feet range or smaller, whereas Reno has available buildings from 50,000 to 100,000 square feet and larger. Bonkowski estimates that the industrial vacancy rate in Carson City is at 7 to 8 percent. “That doesn’t include underutilization,” the broker says. “When you factor that in, some folks put the vacancy rate a bit higher, at around 10 percent.” Another problem is the lack of new construction. “Distressed sales and bankowned properties have kept prices down,” says Bonkowski. New building costs are around $75 per square foot, while existing sales are in the $20- to $30-a-squar-e foot range. Lease rates are running from 25 cents to 40 cents a square foot, so development of speculative projects for either sale or
lease is not economically feasible. Bonkowski thinks that lease rates will begin to rise as the remaining inventory is filled, and he estimates that the market will see some new construction beginning in one to two years. There is certainly enough vacant industrial-zoned land to build on, approximately 600 acres by Bonkowski’s estimate, but little activity. “There has only been one industrial land sale in Carson City in the last seven years,” said Bonkowski. “Click Bond bought a parcel in 2012 for future campus enlargement.” Another trend is the demand for more clear height in industrial buildings. “Companies now want buildings with 35 feet of clear height, versus the 18 feet that has been the norm,” Bonkowski says. This is particularly true for warehousing and distribution facilities, where racking can make use of the extra height and effectively lower the cost per square foot. The Carson City industrial-property market also includes Mound House in Lyon County just east of Carson City on Highway 50. The industrial park there is a warren of mostly smaller properties, occupied by machine shops and small specialty manufacturers, plus a few larger operations. “Companies looking for corporate headquarters usually look at Minden,” says Bonkowski. “Mound House is mostly hard-core manufacturing operations that turn out castings, machined parts, and the like.” But Bonkowski’s overall view is that the market is stabilizing and on the right path for long-term strength. “We have a long way to go before we top out in the current cycle. I see 10 years of growth,” he says. ●
Dayton pinched by lack of industrial inventory By Roger Diez info@nnbw.biz
Dayton is perhaps the smallest industrial real estate market in northern Nevada. The majority of industrial property lies within the Dayton Airpark Business Park, which has been in existence for nearly 25 years. After a number of years of vacancy, two of the larger buildings in the park are now occupied. Carboline, a manufacturer of specialized coatings, occupies the former Amway Distribution Building, and The Webstaurant Store, a Clark Associates Companies subsidiary, is in the old 170,000 square foot Sherwin Williams building. The Webstaurant store is a distributor of restaurant supplies, and expects to employ about 100 when fully staffed. Like many other industrial real estate markets, Dayton is feeling the pinch from a lack of inventory. Bruce Robertson of Sperry Van Ness Gold Dust Properties says that there are currently two large buildings in the park for sale. The former Oakley building at 95 Lakes Boulevard is 63,692 square feet and has been on the market for some time. “The problem was that there was a lot of foundry equipment still in the building, “said Robertson. “ Now that it’s been auctioned off, the property should move pretty quickly.” Also on the market is the former RTP building at 23 Airpark Vista, with 104,250 square feet of space. The building at 10 Airpark Vista is the only
property in the park for lease and is 53,144 square feet. There is also a lot of vacant land in the park, and Robertson thinks that user-owned build to suit buildings will start going up in the near future. At around $50 per square foot, we’ll run out of buildings pretty soon,” said Robertson. Brad Bonkowski, Coldwell Banker Commercial Premier Properties, is also very familiar with the Dayton Market. In fact, he has put together a 2000 plus parcel along Highway 50, with half of it suitable for an industrial park. “The problem with the Airpark is that access is across a single bridge and through residential property,” Bonkowski said. His experience is that some companies are reluctant to locate there because of the possibility that an event like the 1997 New Years flood could cut off access. Like Robertson, he thinks that when the few available buildings are sold, the area is ripe for build to suit and spec construction. Like Fernley, Dayton also benefits from Lyon County’s fast track permitting program, so when the market reaches the point where industrial construction becomes economically feasible, developers will be able to move ahead rapidly. Also like Fernley, Dayton has nearby residential neighborhoods to house the employees. With the highest unemployment rate in the state, Lyon County is anxious to welcome new industries. ●
In her own words: Retail specialist Ashley Lawson THE BASICS Name/title: Ashley Lawson, Retail specialist/Avison Young Number of years in this job: Four Years in this profession: Six Education: I have a business degree from Morrison University Last book read: “The Four Agreements” by Don Miguel Ruiz Favorite flick: “Father of the Bride” parts 1 and 2 and “You’ve Got Mail” What’s on your iPod: Mostly pop and country Spouse, kids or pets: I have a dog named Toby Northern Nevada Business Weekly: Tell us about Avison Young and the duties of your position. Ashley Lawson: Avison Young used to be Grubb and Ellis. We were one of the newer offices, but this year they are continually adding offices. I do retail — anything having to do with shopping centers, restaurants or just general retail. We have around 20 landlords that we list property for and represent them in trying to lease their properties. I also do a lot of tenant representation, such as negotiating terms of contracts and tenant allowances. NNBW: How did you get into this profession? Lawson: I started at R&K Homes, a sister company of Reynen & Bardis. I did project management for all the housing tract developments. I knew someone in commercial real estate who explained their position, and it sounded like the dream job. I applied for two years to every firm in town trying to get in. I finally got a call from Lee & Associates, and they needed an assistant, so I started there in industrial properties. But I always wanted to do retail, and John Pinjuv wanted me to be a broker. NNBW: You started your career in commercial real estate during the recession. How did starting your career during that difficult time better position you for success today? Lawson: When I first started I would literally go knock on every door in town. It was a huge challenge to get through to those owners — I wasn’t well known in the market. Now I look back, and it’s been quite a struggle. I am happy I made it this far. I thought when you first start you know a lot and you think you have it down, but now I’m six years in. It was a blessing to switch to retail. It would have been a struggle if I still was in office or industrial. With retail, I feel like I was meant to be here; it’s a cool niche to be in. NNBW: What do you like most about your job? Lawson: When you are helping somebody look for a space. They are uncertain, and then you find a space that’s completely empty. They come in and design it and totally transform the space. The best part is once they are in there and they are successful. NNBW: What was your first job? Lawson: Working at Dairy Queen and at Raley’s as a bagger. NNBW:What’s your dream job, and why aren’t you working it? Lawson: I think it would be really cool to have a big business that’s famous for something. I really like custom homes and design and have always been interested in interior decorating. NNBW: Have any advice for someone who wants to enter your profession? Lawson: Always make sure you have money as backup, because you won’t make any for a long time. And you have to stick with it — it can be a really rocky road. NNBW: How do you spend time away from work? Lawson: I like to jog a lot and like to participate in all the running events. And I like Lake Tahoe. NNBW: What did you dream of becoming when you were a kid? Lawson: I used to always think I would own a little Irish pub. NNBW:If you had enough money to retire right now, would you? Why or why not? Lawson: Probably not. I would love to have enough money to feel so comfortable that I would not have to stress, but I would never retire from real estate. It’s something you can always keep doing. NNBW: What’s the last concert or sporting event you attended? Lawson: I went to an Ohio State hockey game. NNBW: Where’s your perfect vacation spot? Lawson: I would like to go to Fiji and really relax and enjoy all the stuff around. NNBW: Why did you choose a career in northern Nevada? What do you like most about working/living here? Lawson: I have always lived here. You always have to have a home base from which you can travel. It really is a good area. There is a lot of stuff to do, and it’s not too big where you are overwhelmed by people all the time. ●
Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com | 9
Industrial Real Estate - Minden/Gardnerville By Roger Diez info@nnbw.biz
Industrial real estate in Minden/ Gardnerville, concentrated mainly in a few business parks, has rebounded strongly from the depths of the great recession. “The market has been hot, and pretty much everything available for sale has been purchased,” says Dick Silvera of Silvera Commercial Real Estate in Gardnerville. “Bank owned properties and foreclosures made for some really good deals, but those are gone.” Silvera says 75 percent of industrial building purchases have gone to California companies relocating to Douglas County. Chad Coons, president of Gillmor-Coons Real Estate Group, LLC concurs. “California companies are still moving here, but mostly smaller firms of around five to 10 employees,” he says. Coons estimates the vacancy rate in industrial buildings at 8-10 percent, mostly in smaller buildings. Sales prices and lease rates are on the rise. One of the larger buildings that Coons sold recently was a 76,000 square foot facility in the Meridian Business Park that was acquired by an international shipping company named Shipito in March of 2013. The company specializes in shipping items overseas. The property sold for $3,175,000, or $42 per square foot. A 10,750-square-foot building in the same park, went for $530,000, nearly $50 per square foot. And a 22,500-square foot-building was a bargain in December of 2013 for $875,000 or $39 per square foot. “We have seen the existing inventory reduced drastically in the last 12 to 18 months,” Coons said.
Another recent arrival to the market is the Public Restroom Company that purchased the former BMC Supply building, which had been vacant for a number of years. The company occupies three buildings totaling 33,000 square feet on a 10acre property that leaves plenty of room for expansion. Lease rates have increased to around 40 to 45 cents per square foot in the Minden/Gardnerville market, and landlords are happy to see the increase. But there is no new industrial building construction going on because current lease and sale rates are lower than the building cost per square foot. Both Silvera and Coons see this situation resolving in the near future. Silvera believes developers will probably start putting up speculative buildings in a year or so. Coons thinks that build-to-suit construction will very likely begin sooner. If a company needs to make extensive renovations to an existing building, then build to suit becomes economically feasible. Industrial zoned vacant land is available near the Meridian Business Park near the Minden-Tahoe Airport, on Johnson Lane, and on Heybourne Road connecting the two. There is also land available to the south of Gardnerville near the Aervoe Business Park. The lack of inventory presdents a problem for larger companies, says Silvera. “The area sells itself with our quality of life and the business-friendly attitude,” says Silvera. “It is ideal for corporate headquarters, but it takes a year to construct a new building and some companies can’t wait. So they are going to Carson, Reno, and the Tahoe-Reno Industrial Center.” ●
Sales prices for industrial buildings are on the rise in Gardnerville and Minden. Courtesy Silvera Commercial Real Estate
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10 | Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com
Commercial office sales red hot in 2013 By Rob Sabo rsabo@nnbw.biz
Last year was a record year for commercial office sales, but dwindling inventory and rising prices are expected to cool sales volume in 2014. There were 79 arms length sales in the Reno-Sparks office market in 2013, Colliers International reports. That’s the highest volume of transactions since 2007. Nineteen sales were for properties in excess of 10,000 square feet compared with 10 in the prior year. The banner year for sales is a bit unfortunate for commercial brokers — they sold much of the vacant properties available. Tim Ruffin, executive vice president with Colliers International, says that as the year went on and inventory began dwindling, square-foot prices began escalating. “Price rose from $100 a square foot to $140 to $150 a square foot as we got tighter on inventory. People realized we had hit bottom and were seeing inventory dwindle and wanted to buy what was available.” During the recession, when vacancies rose to record levels, prices never got much lower than $100 a square foot for newer office buildings. But many of those properties cost developers about $200 a square foot to build, Ruffin says. Prices averaged $133 a square foot in the second half of 2013, but one property, a 3,500-square-foot building at 10425 Double R Boulevard, sold for $177 per square foot in November, Colliers reports. Other notable office sales included: • Northpointe Sierra Investment’s purchase of a 13,000-square-foot building at 1200 Financial Boulevard.
• Boy Scouts of America – Nevada Area Council’s purchase of the former Swift Communications headquarters building of 12,192 square feet at 500 Double Eagle Ct. • Lotus Radio Corp’s purchase of 18,260 square feet at 690 E. Plumb Lane • Community Bible Church’s acquisition of 20,250 square feet at 385 Gentry Way. Another trend in the sale of office properties, Colliers notes, is the decreasing amount of bank-owned properties coming to market. There were 10 sales of bank real estate owned properties in 2013, but only four of them occurred in the second half of the year. Owner-user sales accounted for 52 percent of total transactions for the year. The return of commercial lending, especially to owner-users, helped spur the sales of office properties throughout the year, says Matt Grimes, senior associate with the office properties group at CBRE. Bank-owed sales are not as common anymore, Grimes adds, which is creating heated bidding activity on the few properties are do come up for sale. “For the first time in a long time we are seeing multiple offers on buildings,” he says. Vacancy rates also are improving in the Reno-Sparks office market, shored up by the increasing prevalence of call center operations that soaked thousands of square feet of vacant office space in South Meadows. At one point during the recession, office vacancy in the South Meadows submarket exceeded 30 percent. Today, it stands a few ticks under 20 percent. Companies such as Custom Ink, Great Call and Blackhawk Networks took more than 100,000 square feet
Blackhawk Networks was one of several call center operations absorbing commercial office space in South Meadows. Courtesy Colliers International
of space in the market and led to positive net absorption of 127,867 square feet, CBRE reports. The majority of new leases were occurred in Class A office space, which outperformed all other office property types. Despite the positive net absorption, high vacancy still troubles the office properties market, Ruffin says. The vacancy rate for all property types above 10,000 square feet at the end of the first quarter of 2014 was 17.5 percent, Colliers reports. Colliers tracks just over 7 million square feet of office space in the Reno-Sparks market. A “balanced” market has vacancy around 10 percent — which means new office construction still is a ways off. There was just one office property built in 2013, a build-to-suit project for RE/MAX Realty Affiliates on Double R Boulevard. The last speculative
office building that came online was a project on Sierra Center Parkway in 2008. That building was vacant for some time before eventually being leased to the General Services Administration. Grimes says that if current trends hold true for the rest of 2014, the Reno-Sparks office market could reach that balanced level by as early as 2015. McKenzie Properties may undertake development of property on Rancharrah land fronting south Kietzke Lane, but developers aren’t expected to undertake any significant office projects this year, Ruffin says. “The market rent in South Meadows is averaging about $1.60 a square foot, and it needs to be closer to $1.80 or $1.90 to justify new,” he says. ●
High vacancy still hampers development in the Reno-Sparks office market. Courtesy Colliers International
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Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com | 11 APARTMENTS continued from page 3 aren’t as aggressive as in other markets, which keeps per-door costs down and increases the potential for near-term returns. Properties hitting the market in the past year have drawn multiple offers from wellqualified buyers. Another reason why sales are expected to remain hot: The region’s falling unemployment rate — 8.8 in February of 2014, the Department of Employment, Training and Rehabilitation reports. By way of comparison, unemployment in February of 2010 stood at 13.2 percent, and it was 13.6 percent in the same month of 2011. That fact, coupled with strong activity in residential and industrial construction markets, gives investors confidence that the recession finally is in the rear-view mirror. “We have all sorts of new companies coming into town and others on the horizon. Industrial developers will start building again, and this is demonstrating confidence in our market that will result in continuation of increasing rents and decreasing vacancies,” Rowley says. Rents are rising fastest in Class A apartment communities, particularly in South Meadows and the Lakeridge submarkets, he adds. Average rents in Class A properties were $1,145 in the fourth quarter of 2013, Apartment Realty Advisors reports, up 9.8 percent from the same period of 2012.
Increases in average rents weren’t as significant among B- and C-type apartment communities. Average rents at B properties were $915 in the fourth quarter, up 4 percent from a year earlier. Average rents at Class C properties were
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$723, up 1.7 percent. The average rental rate of $809 for all three property types combined is an improvement of more than 5 percent from early 2011, ARA reports. The vacancy rate also is declining among most property types. Occupancy at Class A properties in the fourth quarter stood at 97.6 percent, an improvement of 4 percent from a year earlier. Occupancy at B-class apartments was 95.2 percent — a shade lower than in 2012 — while occupancy at Class C properties improved .8 percent to just under 96 percent. The decrease in vacancy rates will prompt property managers to eliminate free rent and other concessions that were used to lure tenants during the turbulent years of the recession, Rowley adds. And as the economy of Reno-Sparks continues to strengthen, investors and properties are expected to continue testing the market. “Investors may be tempted to cash in on the strength of the market, and if interest rates stay relatively low that will be yet another reason why sellers should sell and buyers should buy,” Rowley says. ●
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12 | Northern Nevada Real Estate Journal | Monday, April 14, 2014 | www.nnbw.com
CCIM Designees- Distinctive and Effective Local Chapter Leadership ABOUT CCIM
President
Past - President
Reed Simmons, CCIM Avison Young reed.simmons@avisonyoung.com p: (775) 332-2800
Dominic Brunetti, CCIM NAI Alliance dbrunetti@naialliance.com p: (775) 336-4670
Vice President
Treasurer
Secretary
CCIM designees are part of a network that’s more than 9,000 strong across North America and more than 30 countries.
Kevin Annis, CCIM Archcrest Commercial Partners kannis@archcrestnv.com p: (775) 852-9800
Tom Traficanti Heritage Bank of Nevada ttraficanti@heritagebanknevada.com p: (775) 321-4131
Sheila Colfer, CCIM Dickson Commercial scolfer@dicksoncre.com p: (775) 850-3143
The Northern Nevada CCIM CHAPTER provides member services, awards scholarships, and delivers other educational and informative programs to commercial and investment real estate professionals in the northern Nevada region.
Directors Ian Cochran, CCIM Stark & Associates icochran@starktcn.com p: (775) 825-4400
Lyle D. Chamberlain, CCIM Lee & Associates-Reno lchamberlain@lee-associates.com p: (775) 851-5310
Ryan Johnson, CCIM Johnson Group ryan@johnsongroup.net p: (775) 823-8877
Roger Kadz NSDC rkadz@nsdc.com p: (775) 770-1205
Andrew Tourin First Centennial Title Company andyt@firstcentennial.com p: (775) 689-8510
A CertiďŹ ed Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate.
Local CCIM Designees Brian Armon, CCIM Cushman & Wakefield p: (775) 851-9500
Lance Faulstich, CCIM Cushman & Wakefield | Commerce Real Estate Solutions Northern Nevada p: (775) 851-9500
Todd Blonsley, CCIM Marcus & Millichap p: (775) 348-5220
Robert E. Ford, CCIM Coldwell Banker Comm Prem Bkrs p: (775) 888-6200
Ron Boles, CCIM Dickson Realty Commercial p: (775) 850-3116
Garrett Hallenbeck, CCIM Hallmark Investments & Management LLC p: (775) 786-8488
Brad Bonkowski, CCIM NAI Alliance Carson City p: (775) 888-6162
Skip Hansen, CCIM Skip Hansen & Associates Inc. p: (775) 324-1070
Jack H. Brower, CCIM Sperry Van Ness Gold Dust Commercial Associates p: (775) 883-3936
Join or support the local chapter by contacting Amanda Pratt at apratt@MarketLinkRE.com or (775) 354-3454
Be sure to do business with the most knowledgable brokers in the region... a CCIM Designee.
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Dave Henselman, CCIM Commercial Project Management p: (775) 853-3742
Gigi Hay Chisel, CCIM Lewis Operating Corporation p: (775) 331-6900
James M. Hicks, CCIM James M. Hicks, Land & Invest p: (775) 771-8119
Chad D. Coons, CCIM Gillmor Coons Real Estate Group, LLC p: (775) 782-3434
Thomas Y. Johnson, CCIM Sperry Van Ness p: (775) 883-3936
Samuel Douglass, CCIM John Uhart Commercial Real Estate Services p: (775) 884-1896
Rick LaMay, CCIM Avison Young p: (775) 332-2800
Brian Egan, CCIM Egan Commercial Real Estate p: (775) 284-4444 Chris Fairchild, CCIM Avison Young p: (775) 332-2800
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James Lowey, CCIM Morrissey Realty p: (775) 322-4401 Tom Miller, CCIM Miller Industrial Properties p: (775) 828-4665 Melissa Joy Molyneaux, CCIM Colliers International p: (775) 823-9666
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Michael A. Nevis, CCIM NAI Alliance p: (775) 336-4623 Aiman Noursoultanova, CCIM CBRE p: (775) 823-6983 Paul T. Perkins, CCIM Perkins Company p: (775) 327-6265 Bruce L. Robertson, CCIM Sperry Van Ness p: (775) 883-3936 Floyd Rowley, CPA,CCIM ARA p: (775) 224-3183 Mary Irene Self, CCIM Wells Fargo Wealth Management p: (775)689-6316 Kevin Sigstad, CCIM RE/MAX Premier Properties p: (775) 828-3380 Dave Simonsen, CCIM NAI Alliance Commercial RE p: (775) 336-4667 Dewey Struble, CCIM Maximizing Investment Real Estate Returns p: (775) 453-0027 John Uhart, CCIM Uhart Commercial Real Estate Services p: (775) 884-1896 Andie Wilson, CCIM NAI Alliance Carson City p: (775) 888-6200