Dermody describes robust industrial economy in region
Michael Dermody has seen his fair share of boom growth and bust recession in his 30-plus year career at the helm of Dermody Properties.
Dermody joined the family firm in 1976 and was named president and chief executive officer in 1983.
In that time, Dermody Properties has benefitted from strong local and national economies, a bit of good fortune and timing, and an eye toward providing industrial real estate tailored to meet customer’s needs to grow from a small family business in Reno to a national real estate investment firm.
This latest round of boom is much different than any other growth cycle in northern Nevada’s history, Dermody said. It’s reminiscent of when the MGM hotel was built in the late 1970s, a major development that proved to be a game-changer for the regional gaming and resort property markets. The sheer scope of the project was a catalyst for northern Nevada’s infrastructure and labor market, and meeting those demands better positioned the region for additional growth that occurred throughout the 1980s, Dermody said.
Today, the addition of Tesla, along with other national/international names such as Apple, Switch and now Google, has put a national spotlight firmly on northern Nevada. And it’s thrust companies such as Dermody Properties into the limelight to meet the demand for new industrial properties for those companies and a host of others.
“The industrial economy here is better than it’s ever been,” Dermody said. “Google is a good example of the national companies that are validating our region even more than ever, and that’s the big news. You have companies that do a lot of due diligence that previously might not have gone into Nevada who are now calling northern Nevada their home.
“Silicon Valley companies are finding it very acceptable to do business here, and that hasn’t happened on this scale since I have been in business,” he adds. “Northern Nevada becoming part of the growth of the Silicon Valley companies is a significant shift for us, and it is unique. It’s not going to happen in Las Vegas, it’s not going to happen in Portland – it’s happening here, and I look for it to increase dramatically in the next 10 years.”
The expansion of Silicon Valley giants and other companies is expected to put a great deal of pressure on many key industry segments of northern Nevada. New inventory for industrial real estate already is in extremely high demand, as is demand for industrial investment opportunities.
The additional demand for labor, housing, office space and the infrastructure to service new growth areas should provide robust development opportunities for Dermody and many other companies. Meeting those demands — as the region did back when the MGM was erected — better positions all of northern Nevada to succeed through this current growth cycle and beyond, Dermody said.
“There are a lot of people working very hard in the cities, and at the county and state levels making sure that we have the infrastructure to handle the growth we have coming,” he said. “It’s wonderful to have Tesla, but in addition comes all the suppliers. The suppliers to Tesla, Google, Apple and Switch are all important parts of the industrial mosaic. It’s bringing in new customers, and it’s also bringing in companies that are willing to pay a higher wage, which is good for the region.”
Dermody, 66, is quick to credit his senior management team with much of the company’s current success. Dermody works as company chairman and CEO, while Doug Kiersey works as president.
“They have done the heavy lifting and I have tremendous respect for the entire team,” he said of his executive team.
But as so often is the case, timing is everything. When it comes to timing, Dermody has been masterful.
In 2007 DP Industrial, a joint venture between Dermody Properties and the California State Teachers Retirement System, sold its portfolio of 24.7 million square feet of industrial space to ProLogis for $1.85 billion in the largest real estate transaction ever recorded in northern Nevada. The portfolio included 114 buildings, with nearly half of them in Reno and Sparks. The remaining assets were scattered between Chicago, Las Vegas, eastern Pennsylvania and Southern California.
It proved to be an extremely fortuitous transaction for Dermody Properties. Less than a year later, the national and regional economy crumbled under start of the Great Recession and property values plummeted.
Dermody said a key factor behind the company’s longevity is its attention to servicing customer needs. The new building Dermody Properties erected for Urban Outfitters in 2011 at North Valleys is a good example. Instead of typically 32-foot clear height, the Urban Outfitters building was constructed with 36-foot clear height, which greatly increases available racking space in a smaller footprint.
When Dermody Properties broke ground for Phase 1 of Logisticenter at 395 off Lemmon Drive in 2013, it was the first speculative industrial building under construction since 2008. That 624,000-square-foot building was erected with the same 36-foot clear height and greater parking space that’s now become a hallmark for large Internet retail companies. As a result, Amazon vacated its longtime Internet fulfillment center in Fernley to move to Reno.
“We try to make a difference in how we treat our customers,” Dermody said. “We really listen to them. By focusing on Urban Outfitters, we set the platform — unknown to us at the time— to create a state-of-the-art fulfillment center for Amazon.”
Although there’s strong demand for new industrial product in northern Nevada, Dermody said the regional market still is more balanced than other areas. Companies are leasing new space within a year of a building’s completion, rather than when permits for new construction are pulled, he said.
Locally, Dermody Properties is beginning the second part of Phase 2 of Logisticenter at 395. The company will erect 450,000 square feet of new class A industrial space. It’s also developing new class A space at LogistiCenter at I-80 near Boomtown.
Dermody said he doesn’t have any grand view of what the next 10 years will bring. However, he’s still as passionate about his work today as ever.
“That’s a difference maker, because customers like that,” he said. “Development is like every profession; you have to be responsible at it. We are not looking for boom growth. We prefer evenly-paced moderate growth, but you can’t dictate what the economy does and we try to adapt to that.”