Northern Nevada Logistics Sector has High Hopes for a Prosperous 2018
Wednesday, January 3rd 2018
Northern Nevada’s network for storing and distributing goods sees a big year ahead in 2018.
Developers are bullish, and one in particular, Panattoni, will show it with mammoth new warehouses planned for north and south Reno.
Meanwhile, for those who operate within those buildings, the past year was already a good one. But at least one company, locally owned ITS Logistics in Sparks, is taking it to a loftier level in the coming year.
“Last year I could not give such a positive outlook, but this year, I give you a bullish outlook throughout all of 2018,” CEO Greg Sanders told the Northern Nevada Business Weekly in late December. “There are a lot of good things happening and we’re very bullish on that.”
It’s a convergence of several factors, he said. Manufacturing is up and consumer confidence is rising. The rebuilding of infrastructure after natural disasters in California, Texas and Florida will hit full stride, with impacts stretching far beyond those states.
And then there’s the geographic ace card: No matter what the economic conditions, the Northern Nevada region sits in an ideal location reachable within a day’s drive to major cities up, down and around the West Coast.
Sanders also points to the maturation of retailing in the world of e-commerce, hence the proliferation of major warehousing sites — Amazon, Zulily and Walmart, among others — that has brought a host of still more to the local arena, notably at the 106,000-acre Tahoe Reno Industrial Center east of Sparks, as well.
“It’s where supply chains are going. Most every retailer now is getting really good at e-commerce,” Sanders said.
The fastest-growing segment of ITS Logistics’ business plan is its non-asset brokerage, which has grown in five years to a team of 70 or more brokers doing $100 million in revenues as it assists ITS customers in moving goods outside of ITS trucks’ geographic territory.
A NEW ERA FOR TRUCKING
While that end of business grows, Sanders said one of the biggest challenges for the logistics industry with the dawn of 2018 is in the trucking sector.
Effective in mid-December, every carrier must have electronic logging devices, known as “ELDs,” under guidelines set by the Federal Motor Carrier Safety Administration, a branch of the U.S. Department of Transportation.
No longer will commercial drivers work with pen and paper to maintain logs, and that, Sanders said, will help to even the playing field among carriers.
“Everyone has to follow the rules now,” he said.
While big operations like ITS, with its own fleet of 250 trucks, 500 trailers and 300 company drivers, will manage, other smaller outfits might not.
“Some will choose not to play the game, and that could create a shortage that will raise prices,” Sanders said. “And for those who play by the rules, productivity will decrease 5 to 8 percent, so they will have to charge more to the customer.”
As the era of ELDs unfolds, the impacts will be slow to materialize, he said.
“No one’s really seeing it enforced until about April,” Sanders said. “It will be a learning curve for the government. But if you’re compliant, you’re probably in pretty good shape.”
On the warehousing end, speed of service will be increasingly important, Sanders said, and Northern Nevada, with its prime central location, plays into that scenario nicely.
“You gotta think how people are buying,” he advises. “They want things fast. Robotics is growing. We keep looking into it. But I know that if you’re just storing goods, you’ll be a dinosaur.”
Others, too, see nothing but open road ahead in the mission of storing and distributing goods, as well as building the facilities to do that, across the West and beyond.
‘MAKE SURE WE’RE DOING IT RIGHT’
The most recent example of regional construction growth is in the industrial corridor in the north valleys from central Reno.
There, Panattoni Development will, in the coming year, build a roughly 800,000-square-foot industrial-use building, in what’s billed as the largest such structure erected on a speculative (without previously committed tenants) basis so far in Nevada.
Panattoni is partnering in the project with the California State Teachers’ Retirement System, the second-biggest pension plan in the world, said Doug Roberts, Panattoni’s partner for Nevada and Arizona.
“They’re really bullish on Reno,” Roberts said of CSTRS, as the pension plan has already joined Panattoni in financing previous projects in the region. “We’re continuing to build. The demand is there.”
But all that growth is not without its challenges, he added.
“The county is grappling with growing pains,” he said. “The recession was pretty tough on the community, and now things are rolling again. We have to make sure we’re doing it right.”
He said Panattoni sees 2018 as “definitely a good year,” but added: “The challenge will be to make sure that all the concerns of the stakeholders are addressed.”
CENTRAL LOCATION A MAJOR PLUS
One thing hasn’t changed, recession or no recession: The Northern Nevada region is blessed geographically with access to all points in the West.
“That’s what Reno’s been able to benefit from: equal distance to all major markets. Phoenix, Seattle, Salt Lake City, LA. We’re the center of the West,” Roberts said, citing Urban Outfitters Inc., as a key example of a far-off entity (Philadelphia-based) that chose Reno, specifically at Stead, for its launching pad to West Coast outlets.
He said the region’s place on the map also shows positively in one key statistic: The highest distribution market square footage per capita in the nation.
“Based on population, we’re at 85 million square feet of warehousing-distribution space,” he said. “Las Vegas, with four times the population, has 125 million square feet.”
That’s 85 million square feet in the Reno market that will grow in the coming year, he said, starting with the North Valleys site.
“We’re also starting on another spec building in south Reno, about 270,000 square feet at the corner of Longley Lane and Airway Drive,” Sanders said.
Unlike a decade ago in the last economic runup that was fueled in a big way by overheated expectations in many business sectors, this time there is substance to the growth, Roberts and others believe.
They point to job growth, and especially housing construction, notably multifamily units, a sector that had been dormant for a number of years.
The current run of economic prosperity, Roberts said, “is not euphoria-based on nonsensical facts.”
“This isn’t just growth for growth’s sake. Overall, the market fundamentals are much more in line now with reality,” he said.
By Bill O’Driscoll