Wherever you go these days, it seems you can’t escape the grumbling about a slowing economy. Even when the economy is advancing strongly, planners are continually looking for ways to entice new industry to Nevada, to provide not only economic diversity, but to increase jobs and opportunity. Commercial real estate developers are an essential key to helping accomplish that goal. Nevada Business Journal asked 16 of the state’s top developers how their plans are shaping up for the near future.
If the current economy has done anything for our developers, it is to inspire them to be more strategic about their property purchases and building plans, while waiting to find the right client for the right property. Though vacancies are expected to be up by the end of the year, this may be due in part to construction of new projects many developers are planning.
Who Answered Our Survey?
Developer
|
Largest Commercial Project
|
Size
|
Harsch Investment Properties | Speedway Industrial Park | 1.4 million sq. ft. |
Landwell | Valley Auto Mall | 1 million sq. ft. |
MagnuM Opus Corporation | MagnuM Distribution Center | 346,000 sq. ft. |
Montecito Companies | Montecito Town Center, Phase 1 | 361,000 sq. ft. |
Newmark Merrill Companies | Horizon Town Center | 331,000 sq. ft. |
Paradise Development Ltd. | SunMark Plaza | 500,000 sq. ft. |
PD&C, LLC | Siena Office Park | 335,000 sq. ft. |
Prologis Trust | Prologis Park No. Las Vegas | 1 million sq. ft. |
R.L. Shaheen Co. | Parkway Professional Center | 75,000 sq. ft. |
RDS/Insight LLC | BrookHollow Business Park | 100,000 sq. ft. |
Stoltz Management | Hughes Airport Center | 1.7 million sq. ft. |
Tanamera Commercial Dev. | Reno Tahoe Tech Center | 850,000 sq. ft. |
Territory Incorporated | Centennial Center | 900,000 sq. ft. |
The Ribeiro Company | Quail Corners South I, II & III | 240,000 sq. ft. |
Trammell Crow Company | Southwest Commerce Center | 1 million sq. ft. |
Wade Development | Nevada Pacific Industrial Park | 3.5 million sq. ft. at build-out |
Six of the developers who answered our survey build more than one type of product – office, industrial, retail or multi-use/flex. This allows them to hedge their bets in case any one segment of the industry slows down. However, some specialize in a particular type of development. Four build only multi-use projects, two build only office, two specialize in retail projects such as shopping centers and another two concentrate on industrial developments.
We wanted to know who is leasing these commercial spaces, and whether the construction boom over the last few years was due to Nevada companies growing into larger spaces, or to an influx of firms moving here from out-of-state. The answer to both questions seems to be, “Yes.”
Tenant Mix | Percentage of Total Space |
Nevada-owned companies | 47.2 |
Subsidiaries of national companies | 34.1 |
Companies that have moved from another state | 15.7 |
Other | 3.1 |
We asked the developers to rate their relations with the local government entities they deal with in matters of permitting, zoning and other issues. Most seemed satisfied with the way they were treated by city and county officials and bureaucrats.
Cooperation:
1 = Easy to work with
2 = About average compared to other locales
3 = Difficult to work with
Speed:
1 = Quick in processing requests
2 = About average compared to other locales
3 = Slow in processing requests
Cooperation | Speed | |
Reno | 1.3 | 1.7 |
Sparks | 2 | 2 |
Washoe County | 1.5 | 2 |
Las Vegas | 2.3 | 2.3 |
North Las Vegas | 1.6 | 1.9 |
Henderson | 2.3 | 2.1 |
Clark County | 1.6 | 1.9 |
The majority of Nevada’s top developers are focused on the future and several have 100 percent of their energies dedicated to building. In addition, many are balancing their building efforts with leasing properties already in existence. Responses show most developers are not anticipating a slow market, but rather business is proceeding as usual, if somewhat cautiously.
Question: What are your plans for the next 12 months?
Note: Some respondents checked more than one answer.
Concentrate solely on leasing the projects I already have 7
Building new projects 10
May build if the market improves 3
Question: What measures have you taken to minimize your risk in an uncertain economy?
The most common theme was to hold off on new projects until later in the year, while maximizing the potential of existing projects. In addition, some companies mentioned the importance of increasing sales training and adding new marketing staff. Several respondents indicated their priorities included a targeted strategy for building and renting. One developer mentioned his company “hasn’t experienced a slowdown.” Other plans included the following:
Carefully evaluate the feasibility of proposed projects
Remodel existing available space
Offer flexibility with lease rates and tenant improvement allowances
We don’t buy overpriced land and we don’t overbuild.
Make sure we have significant pre-leasing and major anchor tenants in place
Focus on location, service and price
Look for more immediate and smaller development opportunities
Question: The biggest challenge I have in my development is:
Responses to this question were somewhat varied. Several indicated one of the greatest challenges was developing or waiting for the needed infrastructure to access properties. Most are also dealing with existing vacancies, while finding the right client for the right property. One developer noted the rising cost of electricity in Nevada is an added challenge when appealing to manufacturers looking to relocate, particularly those interested in moving from the East. Additional responses were as follows:
We want larger users and are willing to wait. This makes leasing a little more challenging because there are fewer users in this size range, and we have to be patient.
Finding and retaining new tenants
Dealing with bureaucratic red-tape, delays in processing and permitting
Scheduling and cost control
Finding affordable land to develop, building the right product and not overbuilding
Timely lease-up at acceptable rental rates
Expediting approvals for infrastructure and mapping
Question: The best feature of my development is:
The majority of responses from developers listed location and design as the main strengths for their properties, as well as factors that differentiated them from their competitors. Flexibility in parcel size was close behind. Another listed landscaping as a unique property characteristic. Other features were:
Flexibility – we can accommodate almost any size tenant
Pedestrian friendly
Strong locations that are well-anchored
Technologically advanced
Designed and built to the needs of the tenants
Timeless architectural design
Available contiguous space
Institutional-grade construction
Creativity in structuring deals in response to market conditions
If Nevada residents want a picture of what growth for the state looks like, start with these developers. Most of these companies are focused on growth and are not letting a questionable economy distract them from progressive business plans. The optimistic attitude of developers can serve as a positive sign of things to come in Nevada.