Dermody breaks ground on Reno industrial projects

Last March, on a very cold and windswept day, Michael Dermody stood atop a bare patch of dirt at Lemmon Valley Drive and U.S. 395 to announce that Dermody Properties was breaking ground on the first speculative industrial building in Reno-Sparks market in seven years.

Dermody struck a similar pose roughly eight months later to announce development of two additional buildings at Logisticenter 395 after successfully luring e-commerce giant Amazon into the first building.

Amazon’s decision to leave its longtime northern Nevada operation in Fernley and take down 624,000-square-feet at Logisticenter 395 was exactly the type of tenant Dermody Properties hoped to land when it developed the first building in the 91-acre industrial park, Dermody says.

“We were looking for a certain kind of customer, and the building was developed to a certain standard for Internet fulfillment. It was very fortunate for us that the building fit like a glove for what Amazon needed.”

United Construction helped design the first building, which included 36-foot indoor clear heights, reflective roofing, recycled construction materials and energy-efficient lighting throughout the building — features designed to attract e-commerce customers, says Mike Russell, chief executive officer of United Construction.

“These buildings were targeted for those types of users,” Russell says. “Much of the demand for industrial space nowadays — probably 60 to 70 percent — is driven by e-commerce customers. Based on experience and insight of our team, we understood what kinds of features that these customers need. Amazon took the building three months before the building was even done.”

United Construction is overseeing a fast-track schedule to implement roughly $16 million of tenant improvements for Amazon, which plans to occupy and begin operations in January, Russell says.

The newest additions to Logisticenter 395 may not attract such a high-profile customer but still are being developed in similar fashion. The largest building will be 402,320-square-feet with 36-foot interior clear heights and cross-docking. The second building will be 224,640-square-feet with rear-loading only due to site configurations within the industrial park.

Pacific Coast Capital Partners of San Francisco is again teaming up with Dermody Properties to finance the additional buildings. Although Class A industrial vacancy rates had tightened so much throughout 2013 that timing finally was right for development of new product, Dermody admits he still was apprehensive to be the first developer to turn dirt on a new speculative project.

“You are always worried in this business,” he says, “but we were confident it was time.”

Amazon’s presence at the industrial park makes it a more attractive destination for future tenants of the new buildings, he adds. The park was designed with three different-sized buildings to market the spaces to a wider range of potential tenants.

Dermody Properties also has broken ground on new industrial projects in Louisville, Kentucky; South Brunswick, New Jersey; McCook, llinois; and Bethel Township, Pennsylvania. Those projects total more than 1.8 million square feet of space. However, Dermody says northern Nevada continues to be one of the strongest places to develop industrial properties in the United States.

“Every region is different, and because my roots are here in Nevada I understand it better,” Dermody says. “They all have different strengths and weaknesses, and to me the strength of this market is that it’s centrally located in the Western United States and it’s not too big of a market.

“Northern Nevada has 75 million square feet of industry on only 350,000 people — that is the highest per-capita concentration in the country. Northern Nevada will never be what the California or New York markets are, but for moving goods and logistics, which is the core of warehousing and development, it’s as good as anywhere in the country.”

United Construction expects to break ground Dec. 15 on both of the new projects. The smaller building will be finished by June, and the larger one by July, United’s Russell says.

The return of industrial development in 2014 — huge projects of more than 700,000-square-feet are underway in Tahoe Reno Industrial Center for zulily and at Stead for Petco, have tightened the supply of labor for general contractors and make scheduling much more critical than in the past, Russell notes.

“Subcontractors are spread a little thinner, and sometimes we have to coordinate their schedules more to make sure they have the appropriate manpower,” he says. “We are seeing schedules stretch out a bit more because as this market has picked up we haven’t increased our workforce.”

The industrial team at CBRE will market the new buildings for Dermody Properties.