DP's path: Helping tenants develop national footprint

When DP Partners said last week it signed a lease with 1-800-FLOWERS for a 140,000-square-foot distribution center east of Reno, the deal looked like many others put together by the Reno-based company in the past 45 years.

The flower distributor will occupy space at 625 Waltham Way, taking part of a building previously occupied by apparel distributor SanMar.

Like many others before it, 1-800-FLOWERS was a national company looking for distribution in northern Nevada. DP Partners, by far the biggest owner of industrial space in the region, had a big space ready and waiting for a tenant.

But if you want to know where DP Partners is headed, take a closer look at its deal with Reno's Hopkins Distribution Co. to lease a 206,500-square-foot distribution facility at DP Partners' LogistiCenter at Allentown, Pa.

As Reno-based DP Partners one of the largest privately held industrial developers in the nation widens its national footprint, it's looking for opportunities to leverage its existing relationships with northern Nevada tenants who plan new facilities elsewhere.

And DP Partners makes sure that tenants in its properties from New Jersey and Pennsylvania to Atlanta and Chicago give Reno a good look when they're planning westward expansion.

Owning about 11 million square feet of industrial space in the Reno area, DP Partners is four times larger than its nearest competitor in the industrial real estate business.

It will add to the total this year with a 255,000-square-foot distribution center under construction at the intersection of Lear and Moya in Stead, says Mike McCabe, vice president of leasing for the company in the Reno market.

Assuming that new building begins to lease up, DP plans to follow with a 231,000-square-foot building, also in Stead.

"We want to have product coming out of the ground all the time," says McCabe.

At the same time that McCabe's team is leasing the new construction, it's dealing with a couple of large vacancies in older buildings 324,000 square feet at 45 Vista Blvd. and about 180,000 square feet that remains in the former SanMar building in the park that DP has rebranded as LogistiCenter at East Reno.

After a year in which the hot commodity in northern Nevada was small industrial spaces the average lease in the area in 2005 ran barely more than 25,000 square feet McCabe said DP sees increased interest from big users who are scouting Reno for distribution locations.

That, in turn, should push the vacancy rate in DP Partners' portfolio to less than 6.5 percent by the end of the year, he said. It stood close to 9 percent on Jan. 1.

The company's future in northern Nevada, however, is more likely to be found in outlying locations such as Hazen or the North Valleys than the Truckee Meadows.

Land prices in Reno and Sparks are simply too high, McCabe said, for anything except specialized projects that can deliver the returns that land buyers need.

And land prices in Reno as well as the other markets in which DP Partners is developing increasingly demand a quality product that can command good rents.

"You just can't build a big box," said McCabe. "There are a lot of them around."

The company's answer is development of its LogistiCenter brand.

Those centers include up-to-date buildings with 32-foot ceilings, early-suppression, fast-response fire systems, and capabilities for wireless communication located in fully landscaped parks.

And they include one old-fashioned feature: Rail access.

As fuel costs continue to rise, McCabe said, DP Partners thinks that rail will play a growing role for many of the mid-sized companies that lease its space.

The distribution companies that operate in DP Partners properties, like the rest of the logistics industry in northern Nevada, are likely to see shifting priorities as a growing portion of U.S. consumer goods are imported from the Far East, rather than shipped west from manufacturers in the East Coast and Midwest regions.

With a $700 cost to haul a shipping container over the Sierra from the Port of Oakland to a Reno-area distribution site, the region is losing its appeal to high-volume distributors who import from Asia and ship to California, McCabe said.

But northern Nevada remains attractive, he said, for distribution centers that blend merchandise from multiple locations say, a company that has manufacturing in the United States, China and Mexico.

And the region's central location to markets in the West continues to be a competitive advantage for distribution of heavy items ranging from foodstuffs to automotive parts.

In northern Nevada as elsewhere in the country, DP Partners develops industrial property with the financial backing of the California State Teachers' Retirement System, one of the biggest pension funds in the nation.