Smaller parcels are available for industrial users so long as they're willing to pay a price that's clearly headed upward but big new industrial projects will be located outside the bowl that is the Truckee Meadows.
Prices for industrially zoned land in the Truckee Meadows already are rising.
"The most prominent market trend a nearly dried up pool of zoned developable industrial parcels has resulted in a near land rush on the part of knowledgeable buyers to acquire the remaining parcels at prices that will forever be called bargains," says Gary Baker, president of Lee & Associates, a commercial real estate broker in Reno.
Recent industrial land sales in the region have been running in the range of $5 to $6 a square foot.
But Baker cites the example of Lanier Development, which several years
ago paid more than $5 a square foot for the 19 acres fronting U.S.
395 just south of the Barnes & Noble distribution facility near Mount Rose Highway.
Today, he says, Lanier wouldn't consider offers of $13 a square foot for the property.
While supplies of industrial land have been decreasing steadily as the Truckee Meadows develops, the new element in the equation is a recovery in demand for industrial space.
"The economy is perceived to be recovering.
There's a lot of pent-up demand that is breaking loose," says Dave Simonson, a vice president in the industrial group of Colliers International.
"We've got a ton of sales, both with investors and users."
That recovery in demand, Simonson says, comes at a time that construction of new space has been slow.
Only 628,565 square feet of industrial space has been constructed in the region this year, As recently as 2000, more than 2.1 million square feet were added to the market.
If construction snapped back to those levels, little of the work would occur in the Truckee Meadows.
Instead, development of large-scale industrial projects is headed for Stead and the Tahoe/Reno Industrial Center east of Sparks.
Stead is likely to get much of the immediate attention, says Par Tolles, area director for Trammell Crow Co.
in Reno.
That area,Tolles says, has the critical mass land, utilities, infrastructure and labor that keeps it in developers' sights.
Stead also benefits from its proximity to the Truckee Meadows.
Lee & Associates' Baker notes, however, that the Tahoe/Reno Industrial Center is only about 12 minutes east of Vista Boulevard on Interstate 80, and he predicts that land now seen as distant won't seem remote in coming years.
"Land prices are still below $2 per square foot and there is plenty of
it over 4,000 acres to be precise,"
Baker says of the area east of Reno, He says the Tahoe/Reno Industrial Center is likely to be more important over the long term than Stead because more land is available east of the Truckee Meadows.
Smaller users, however, still can find industrial land in the Truckee Meadows, says Colliers' Simonsen.
But he notes they're paying dearly prices as high as $7.50 a square foot for the convenience of building close to the homes of executives and workers.
Yet another option redevelopment of existing industrial space within the Truckee Meadows may be just over the horizon, says Sue Smith, a broker with Commercial Properties of Nevada.
"When prices get high enough, that will become a reality," Smith says.
Prices are moving in that direction.
The pressure on lease rates,Tolles says, these days is seen mostly in fewer concessions from landlords.
The next step will be higher cash prices.
The market for existing industrial buildings is lifted by the same tides higher land cost, higher construction cost that's boosting the price of new industrial buildings, says Simonsen.
And Baker thinks the companies looking to lease industrial space in the region should move quickly because he believes prices are poised to spike.
But leasing, he says, may not be the best option.
"A firm desiring to acquire a facility should first look hard at the few existing facilities available for sale in our market because they are, in my opinion, generally undervalued in comparison to buying land," he says.
