Panattoni Development has started construction on two of four planned industrial buildings at its 88-acre 580 South mixed-use project at the corners of Mount Rose Highway and Interstate 580. Courtesy Panattoni Development
Industrial developers are forging ahead with recently announced plans to erect build-to-suit and speculative industrial projects in Northern Nevada, but it's at a much more measured pace than in previous years.
Panattoni Development has started construction on two of four planned industrial buildings at its 88-acre 580 South mixed-use project at the corner of Mount Rose Highway and Interstate 580. One building is fully pre-leased, while the second 198,000-square-foot building is speculative development. The cautious development pace is in stark contrast to the pre-pandemic era when Panattoni would have rushed to erect all four buildings at the same time, said Tim Schaedler, Nevada and Northern California partner for Panattoni Development.
“Our plan the entire time was to kick off one building at a time, but when we got that building pre-leased, it unlocked our next building,” Schaedler said. “If we didn’t have that (tenant), we would have built it and waited for it to be substantially leased before starting the next one – but if this was 2019, we would build the entire project at once. Now we are going in phases and seeing some pre-leasing before starting the next one, which indicates the uncertainty in the market.”
Expected delivery of the first two buildings is the first quarter of 2026. Alston Construction is the general contractor for both horizontal and vertical construction at 580 South, which is a joint venture between Panattoni and Clarion Partners of New York City.
Panattoni spent months installing the backbone infrastructure (roads, sewer, water, power) for the project, which will include apartments and retail space fronting Mount Rose Highway, in order to entice developers to take on those aspects of the project.
“Our goal was to get the project to a point where it was build-ready so if there were parties interested in moving forward on the apartments or retail that it would be ready to go,” Schaedler said.
Schaedler noted that materials for both warehouses have already been purchased, so economic uncertainty regarding the impact of tariffs won’t directly affect development at 580 South. However, tariffs could impact materials pricing on development of the subsequent buildings – though costs may be offset by tighter bidding on projects from general and subcontractors who aren’t as busy as they have been in past years due to a region-wide slowdown in industrial development.
Tolles Development Co., meanwhile, is constructing a 290,000-square-foot industrial building in the heart of Tahoe Reno Industrial Center. The economic uncertainty regarding tariffs – particularly on steel imported from Canada – could impact TDC’s development plans, said Kyle Rea, TDC’s chief operating officer.
“It is absolutely concerning and causes us to be more cautious,” Rea said. “The biggest risk factor on this deal is going to be on steel and other commodity materials. A lot of steel that is used for building warehouses in this country comes from Canada, and the price of doing business just went up.”
Courtesy Panattoni Development
Panattoni Development has started construction on two of four planned industrial buildings at its 88-acre 580 South mixed-use project at the corners of Mount Rose Highway and Interstate 580.
In March, President Trump imposed a 25 percent tariff on imported steel and aluminum. Rea said TDC already repriced its development plans to factor in higher steel costs, and it also redesigned the building shell to reduce the amount of steel in the roof trusses and structural support columns.
“We are concerned that (tariffs) could alter the project,” Rea told NNBW. “It could cause us to raise rents if prices continue to go up. God forbid it causes us to pause the project, but we wouldn’t rule that in the case of materials prices going up.”
Tolles Development Co. plans on breaking ground in the third quarter – it’s still working through permitting and design processes, Rea noted.
Northern Nevada’s favorable – and stable – economics still evince a strong level of confidence in the modest-size development project, regardless of the tariff-induced selloff on Wall Street that has cratered public equities markets. The region also boasts lower availability of industrial buildings not found in competing markets, Rea added.
“This is a short- to medium-term disruption in pricing and economic confidence,” Rea said. “Our market has been consistently clipping along. If you compare Northern Nevada’s industrial supply to markets like Las Vegas and Phoenix, we brought on a lot of supply in the last couple of years, but nothing like (those cities). They are truly underwater from a supply perspective, and it’s going to take them years to absorb that to a level where development makes sense again.
Northern Nevada didn't have a tidal wave of new inventory that tanked market occupancy and rental rates. We were a little more disciplined in delivering only what the market could absorb, and I feel that the market can absorb (this building) regardless of tariffs,” Rea added.
The building will have standard 36-foot clear heights and will be a shell space primarily intended for logistics and distribution, though TDC is looking at power delivery possibilities in the event that the facility could be used as a smaller colocation data center. Devcon Construction is the general contractor at 500 Italy Drive.
Rea told NNBW that TDC has been in negotiations for the 15.8-acre parcel for several years and finally was able to strike an equitable deal with landowner AMB Real Estate. The $5.5 million price equates to about $8 a square foot. While still relatively high, Rea noted that the math still pencils out because the site is already rough-graded.
“At today’s rents, that (price) equates to a development that works,” he said. “I feel that $8 a foot is what land prices should be in TRIC, and we feel like rents are where they are going to stay for the next six to 12 months.
“Every time someone says TRIC is out of land, we seem to find some new nook and cranny,” he added.
TDC is about 80 percent complete on a 436,800 square-foot sister building at 100 Wildhorse Canyon Drive in the western portion of Tahoe Reno Industrial Center. That infill project is being built by Devcon as well.
Although regional developers added a record-level of new Class A industrial space over the past few years, the lion’s share has been or is in the process of being absorbed, Rea said. It’s further evidence that Northern Nevada’s industrial market remains buoyant despite the economic floodwaters sinking other western-region markets.
“Industrial is not dead, and TRIC is not dead,” Rea said. “There is still capital that is actively seeking deals in Northern Nevada, and there are companies that really want to do business here and prioritize new Class A buildings. The market is still healthy enough to absorb new industrial, and that’s an encouraging sign for our local economy and the whole supply chain of construction that starts with us.”