In the latest push to bring big warehouse space to Southern Nevada, developer Doug Roberts is breaking ground on a project this week and gearing up for another.
And like other investors these days, he doesn’t have tenants lined up.
Roberts, a partner with Panattoni Development Co., has scheduled a ceremonial groundbreaking for today on a 20-acre, $32 million industrial project at the northwest corner of Sunset Road and Jones Boulevard in the southwest valley.
Known as Jones Corporate Park, it will feature two 208,000-square-foot buildings and is scheduled to be completed by late September.
He’s also planning to break ground in about a month on Henderson Freeways Crossing, a six-building, $40 million project spread over 30 acres along Lake Mead Parkway at U.S. 95. The largest buildings are 200,450 and 163,000 square feet.
Roberts is teaming with Chicago-based LaSalle Investment Management on the projects and doesn’t have users for either one.
But he’s betting the buildings won’t sit empty for long, or at all, due to the rising demand for warehouse space and the valley’s shortage of large, available buildings.
“It’s a gamble, there’s no doubt about it,” Roberts said. “But we think we’re right.”
Others making the same wager include:
• San Francisco-based Prologis, which broke ground in September on a roughly 464,000-square-foot building at Pecos and Gowan roads in North Las Vegas. The company said it was the largest speculative industrial project locally in years.
Prologis said in January that it leased the building to a subsidiary of consumer-electronics seller Systemax and that it planned to develop a 153,000-square-foot building next door.
• Reno-based Dermody Properties recently broke ground on a 381,800-square-foot distribution facility on Cheyenne Avenue between Lamb and Las Vegas boulevards in the north valley. The building, scheduled to be completed in October, is Dermody's first development locally in at least seven years.
• Denver-based Pauls Corp. plans to break ground next week on a 40-acre development on Lone Mountain Road near Interstate 15 in the north valley, listing broker Greg Tassi, of CBRE Group, said. The project, with two buildings totaling about 690,600 square feet, is Pauls’ first industrial development in Southern Nevada, according to Tassi.
The Las Vegas Global Economic Alliance, a booster group, released a report last year on industrial real estate, saying the findings showed that dozens of companies considered moving here but picked other cities largely because of a dearth of big, available warehouses in the valley.
Vacancy rates are down and asking rents are up for industrial properties valley-wide, but it’s “the million-dollar question” whether too many developers are building big and outpacing demand, Tassi said.
As plans were being formulated last year, Colliers International broker Dan Doherty said the first developers who launched speculative projects would do extremely well, but he warned that a “sheep mentality” could take root.
“The herd will move in, and we’ll eventually overbuild again,” he said at the time.
To investors’ benefit, the projects aren’t all clustered in one area, and tenants are scouting for big properties, including retailers who need distribution centers for their stores or for online shoppers, Tassi said.
Moreover, there is just one available building in the valley that’s larger than 100,000 square feet, according to Tassi. It's in southwest Las Vegas.
“That’s it,” he said.
Speculative construction was all too common during the boom years, when risky — often reckless — development blanketed the valley.
Investors flooded Southern Nevada with warehouses last decade thanks to Wall Street’s easy money, and landlords had little trouble filling them. The valley’s industrial vacancy rate was just 3 percent in spring 2006, according to Colliers.
But many warehouses were built poorly and in bad locations, sometimes by rookie developers. Properties emptied out when the economy collapsed, and the area’s vacancy rate ballooned to almost 15 percent in 2010.
Construction ground to a halt, too.
After building 31 million square feet of space locally from 2002 to 2008 — with 6.8 million square feet in 2007 alone — investors did not open a single project in 2012, according to Colliers’ Las Vegas research manager, John Stater.
The vacancy rate is now 8 percent, and developers opened 1.1 million square feet of industrial space in Southern Nevada last year.
Stater expects more than 1 million square of completions this year as well.
"Spec is back," said Pat Gallagher, Southwest regional partner for Dermody.