Northern Nevada Development Authority says a lack of industrial space in the area is hindering its efforts to recruit manufacturers and other businesses to the region.
NNDA last week said it has brought to its five-county area 17 new businesses in the last 12 months and 4,000 new jobs in the last three years, for an economic impact of $1 billion.
That’s the good news. The bad news is the market for industrial space in Carson City and Douglas, Lyon, Churchill and Storey counties is tightening, making it difficult, NNDA says, to help more recruits find adequate digs.
“We’ve filled up all our space. We have about 24,000 square feet,” said Rob Hooper, NNDA’s executive director, after a press conference with Gov. Brian Sandoval to announce the group’s recent successes. “Two years ago, we had 26 percent vacancy rate. Now, there’s nothing left.”
Danny Campos, vice president for business development at the economic development authority, says NNDA could close deals with half a dozen prospects if the right space were available.
“But builders are hesitant to do spec building,” he says.
Developers say they are reluctant to build speculative space until the market solidifies some more.
“There needs to be a comfort level and we’re not quite there yet,” says Jeff Shaheen, principal with Shaheen Beauchamp Builders LLC in Carson City, which recently completed the rehab on the Mutual of Omaha Bank building and is renovating the old Stewart Title Co., both in Carson City.
Shaheen said the shrinking industrial space is a sign of an improving economy.
“That’s great news,” he says. “But we’re not ready to pull the trigger yet.”
Cary Richardson, vice president of business operations at Miles Construction in Carson City, says there are signs spec building may be around the corner. He says some ready-to-build properties in foreclosure are being bought on the cheap. And some owners are building more square footage than needed — say 100,000 square feet for a tenant leasing 50,000 square feet — with the idea of finding additional tenants, a form of spec building.
“People are testing the waters,” he says. “There is a shortage of space and that’s a good thing.”
But Richardson doesn’t expect to see true speculative building until lease rates rise to the point that it makes economic sense for builders to take the risk.
The vacancy rate in industrial space in the Carson City area is down to about 7 percent, says Andie Wilson, a broker with Coldwell Banker Commercial Premier Brokers in Carson City.
“Our inventory is starting to dwindle,” says Wilson. “Property values are right at the point where they’ve stabilized and will start increasing. It’s very healthy and there’s no urgency.”
Wilson says there are some inherent limits to the local market that are also likely curtailing NNDA’s ability to meet the needs of some businesses. For one, there is no rail service which eliminates some prospects. In addition, many local buildings don’t have docks and maximum clear height — from floor to highest point — is 18 feet, which serves to further whittle down the list of possible tenants. And many buildings don’t have sufficient power capacity for some of today’s businesses, she says.
The area has other advantages for the right businesses and Wilson expects to find an occupant even for a 156,000-square-foot building in Silver Springs, but it will take time. And she doesn’t expect to see new construction anytime soon.
“You can still buy an existing building for less than the cost to build,” she says. “We are not out of the woods.”