Panattoni Development’s presence in north Reno is about to swell with one of the largest industrial structures built on spec so far in Nevada.
A joint partnership between Panattoni Development and the California State Teachers’ Retirement System recently announced a 47.74-acre land deal for the expansion of Panattoni’s North Valleys Commerce Center. Getting this project under way will be a significant milestone for Panattoni’s presence north of Parr Boulevard.
The parcel will contain an 802,113-square-foot industrial building with 36-foot-high interiors and 60 trailer parking spots, the largest such structure built on a speculative (without previously committed tenants) basis so far in the state, the developer said.
What went unsaid, though, was that this latest deal is just one of the accomplishments Panattoni has had in the area this year.
A few weeks before the land deal closed, one of the developer’s existing North Valley developments, the Lear Industrial Center, reached 100 percent occupancy.
It’s not just that the 1.4-million-square-foot, four-building complex west of Moya Avenue hit this mark — though it is an example of the overall industrial market’s improving health — but the fact that the tenants have been coming in with commitments for the long haul.
“The significant thing is the fact that these are long-term leases,” said Doug Roberts, Panattoni’s partner for Nevada and Arizona.
The tenants are a mix of companies, from fashion leader Urban Outfitters and Fortune 500 medical supply firm Cardinal Health to construction-supply firms Legend Valve and Wasco Skylights.
Elsewhere, the original portion of the North Valleys Commerce Center along North Virginia Street, which is roughly the same size as the Lear Industrial Center, has a mere 190,000 square feet of available space, despite finishing construction on only two of its three buildings.
“The last building at North Valley Commerce Center is 352,900 square feet, and the tenant took it before we even started building it to make sure they reserved their spot,” Roberts said.
“We don’t always get that lucky, but we’ve had a pretty good run of late,” he said.
Panattoni’s success with the North Valley and Lear centers — and its hopes for equal success with the new facility, to be called North Valley Commerce Center II — is in line with the fortunes of the overall North Valleys industrial market.
In the third quarter of 2017, the area had a total vacancy rate of 5.58 percent, with slightly more than 1.02 million out of 18.3 million square feet of industrial space looking for tenants, according to figures from the Reno office of Colliers International.
For the Reno-Sparks area as a whole, the Colliers Q3 report showed that, as in previous quarters, companies have been leasing space in older as well as newly built and newly started, facilities.
Included in the newer North Valley totals is a 240,500-square-foot spec building being completed on Lear Boulevard by developer Prologis, 80,000 square feet of which have been leased.
While the Prologis building accounted for the total square footage completed in Q3, Panattoni’s North Valley Commerce building represented the total amount under construction during the period.
The increase in spec buildings such as these, rather than facilities built for specific occupants, represents a shift in the way developers are doing business throughout the region, Roberts said.
“Build-to-suits are very active in a market where not a lot of spec building are going up,” he said. “Back in 2010, 2011 or even 2012, spec wasn’t really happening; if people happened to need buildings, they went that build-to-suit route.”
Five years further on, now that the economy is stronger, developers have been more willing to engage in speculative projects and have found tenants eager to occupy them.
“What we’re seeing is, rather than built-to-suit, they’re going spec-to-suit,” Roberts said. “So we have a building being designed that we’re going to build no matter what, and the tenant will come in before we start construction and modify it slightly for their needs.”
Tenant demand for these buildings not only keeps vacancy rates low but helps ease the task of paying for future projects. Developers are having to work harder these days to get financing, compared to the relatively free-and-easy days of the previous decade.
“When I built a building in 2006, I always had a buyer for that, so I would repeat as many times as I needed to,” Roberts said. “Now, we have to think about it more; the lenders are more cautious, the underwriting’s more stringent.”
Then again, the combination of a stronger post-recession economy and the presence of major tech industry players Tesla, Switch and Google in the state has boosted this area’s reputation.
“Reno has been attracting companies pretty much because of logistics, but I think its national reputation has turned a corner because of all these big projects that we’ve seen,” Roberts said. “It just has a better feel than it had 10 or 11 years ago.
By Sean M. Grady