GUEST COLUMN:

Industrial development catching up to need

Driving north on Bay Lake Trail Drive toward Alexander Road in North Las Vegas, you can see newly tiled concrete panels giving form to the first speculative industrial development in the Las Vegas Valley in over seven years.

The 464,000-square-foot distribution center developed by Prologis at 3700 Bay Lake Trail is one of several local projects planned or under construction that will deliver more than 4 million square feet of much needed industrial space.

Retailers, consumer goods and e-commerce are driving demand for big-box industrial spaces here and across the country. Proximity is the key to profitability in this era of same- and next-day delivery, and retailers want their distribution centers near their customers.

Developers nationwide are working hard to deliver industrial products to meet that demand for space.

Locally, there is a difference but no exception. Ten projects will deliver big-box industrial spaces with multiple bays in excess of 30,000 square feet each, mirroring the national trend. Most developers locally and nationally will work toward leasing the projects to one or two large users.

However, the valley’s industrial market is a tale of two, sometimes three, submarkets: northeast/North Las Vegas (34 million square feet), south/southwest (38 million square feet, or 54 million square feet if you include the airport submarket), and southeast/Henderson (12 million square feet) ­— each with vast differences.

For regional big-box requirements, due to lower land cost, competitive pricing has been available only in the northeast/NLV submarket. During the depth of the recession, the base rental differential between the northeast/North Las Vegas and southeast/Henderson submarkets grew to 60 percent for big-box warehouses. It is currently between 25 and 30 percent.

Three industrial projects are planned in southeast/Henderson, which is positioned to become an increasingly important part of the industrial landscape due to the potential availability of industrial land.

The southwest, being near the airport and Strip, always has been able to command the highest rents and prices in Southern Nevada. Demand for space from gaming companies, trade show and exposition services and entertainment-related companies continues to drive business southwest.

The jump-start on development and rush of developers to acquire land for additional projects have led some to wonder whether Las Vegas will overbuild like Phoenix did last year.

Taking into account the length of time our market has gone without adequate supply, the schedule of deliveries for 2015 and the space and projects being negotiated, that is unlikely. Upcoming industrial development will serve Las Vegas well and enable the type of growth sorely missed over the past seven years.

Tags: The Sunday
Business

Xavier Wasiak is a senior vice president in the industrial group at Jones Lang LaSalle.

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