Industrial properties: How’s the market, and what lies ahead?
While I hear that other industrial markets such as the Inland Empire and other submarkets of Southern California, Salt Lake, Phoenix, Seattle-Tacoma and Portland have seen rents come back up and in some cases get back to pre-recession rates, the northern Nevada market is not healing as quickly. Vacancy rates for the industrial sector are still hovering at close to 14 to 15 percent, which is where we have been for the past year or so, and industrial building purchase and lease pricing is not showing signs of moving upward quite yet. The good news is that it is no longer getting worse each quarter and there seems to be more consistency developing in the business. There are also rumblings that many industrial property owners feel that, while it will not happen quickly, lease and sale pricing is most likely going to rise within the next couple of years. In a recent conversation with Travis Durfee, market officer for Prologis, the largest industrial property owner in Northern Nevada, he said, “We are forecasting flat to minor lease rate increases in the next two years, but an 8 to 9 percent spike at around the three-year mark.”
Another interesting phenomenon that has developed is that there are not as many price-point breaks in relation to size compared to how it used to be in a healthy market. It used to be that you had price-point breaks that were as follows: Under 5, 000 square feet, 5,000 to 10,0000 square feet, 10,000 to 30,000 square feet, 30,000 to 50,000 square feet, 50, 000 to 100,000 square feet, 100,000 to 200,000 square feet and 200,000 square feet and larger.
Now it is: Under 10,000 square feet, 10,000 to 30,000 square feet and 30,000 square feet and larger.
Kristina Miranda, who was hired recently as a staff accountant at Clausen & Company, is currently enrolled at the University of Nevada, Reno and is earning a Bachelor of Science in business administration.