A much-watched project by Panattoni Development Co. in north Reno may signal growing interest among developers in redeveloping and repositioning older industrial buildings.
Or maybe not.
Panattoni is in the midst of renovating a 169,027-square-foot building at 400 and 450 Parr Blvd. upgrading the power system, adding parking spaces, fixing problems with the roofing and modernizing the fire protection system.
Jason Quintel, a Panattoni partner in Reno, says the company purchased the 1970s-era vacant space for a price well below its replacement cost.
And even after the costs of renovation, Panattoni figures it can create four spaces in the building and get lease rates of 27.5 cents a square foot below much of the competitive space even though the building is on the edge of the Truckee Meadows.
As land for new industrial space becomes scarce and expensive within the Truckee Meadows, Quintel says Panattoni believes redevelopment, renovation and repositioning of industrial space is likely to be more common.
"We're looking at a lot of opportunities such as this," he says.
Others in the industrial real estate business, while universally applauding Panattoni's courage in testing a new market, express mixed opinions about whether redevelopment and repositioning will become a major factor in the region's industrial market.
J. Michael Hoeck, vice president with the industrial properties group of Alliance Commercial Real Estate Services, believes industrial redevelopment efforts will continue to grow as companies look for locations within the Reno and Sparks metropolitan areas.
Big distribution centers such as Wal-Mart's new 880,0000-square-foot center under construction at Tahoe Reno Industrial Center aren't likely to find homes even within redeveloped areas, Hoeck says.
But, he says, there appears to be a solid market for smaller industrial users in renovated space.
One likely redevelopment, he says, is in the "Conductor Heights" neighborhood of Sparks west of Rock Boulevard and just south of the Union Pacific tracks.
A 15-acre area in the neighborhood includes 1960s-era buildings, some of which were damaged during the heavy snows ofearly 2005, and property owners are considering redevelopment.
But it's unlikely, he says, that redevelopment could go forward without some assistance from the city government on questions such as parking requirements and the amount of the property that can be covered by a new building.
"Nobody is going to tear down a building to build something smaller," he says.
Regulatory issues are only one of the factors that will discourage industrial renovation projects, says Eric Bennett, a vice president with the industrial properties group of CB Richard Ellis in Reno.
A bigger issue for distribution companies, he says, is that older buildings don't have the high ceilings or modern fire sprinkler systems demanded by tenants.
Retrofitting fire systems is prohibitively expensive, he says, and few developers want pay the costs of adding 4 feet or more to the height of a distribution center.
Another issue, says Gordon Zack, a first vice president with CB Richard Ellis, is that relatively few industrial properties suitable for renovation come on the market in Reno and ones that are priced right are even less common.
