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LAS VEGAS-National industrial developer DP Partners this month is breaking ground for one of the largest speculative industrial buildings this region has seen. The 513,240-sf cross-docked facility with 32-foot ceiling clearance is the fourth building within its new 102-acre LogistiCenter business park in North Las Vegas.
Replacing plans for two smaller buildings, the building comes on the heels of a build-to-suit project of the same size for CDW Logistics and a 190,000-sf lease that soaked up 72% of its second speculative building, which is now 87% leased. The new speculative building is scheduled for completion during the first quarter of 2007.
The new project is the largest big-box warehouse/distribution center ever built on a speculative basis in the Las Vegas market, according to local industrial market sources. "It's a little bit of an aggressive move: nobody's ever done this," Myers says. "But we're starting to see some of these bigger deals in the market by the big players and while there are a few choices for people in the 200,000-sf range, we're the only game in town if there's a need for 500,000 sf."
Myers adds that interest in larger facilities is coming both from in-market tenants and out-of-market tenants looking to open a base of operations in the region. "There are tenants in town that occupy as much as 750,000 sf," he says, "but unless it was a build-to-suit they are typically doing it in multiple buildings, so it's possible we catch a company looking to consolidate operations. We could also attract an out-of-market company looking to come in and lock down a large facility that will accommodate its needs as the market continues its rapid expansion. If not, the building can be split in half; we just met with an out-of-market tenant looking for between 250,000 sf and 300,000 sf."
Located at the southwest corner of Alexander Road and Bay Lake Trail, DP's LogistiCenter is situated between the Craig Road/I-15 interchange to the north and the Cheyenne Avenue/I-15 interchange to the south. When built out, the park will total about two million sf. It new speculative building will occupy about one-quarter of the 102-acre park.
The likely triple-net rent rate range for the new facility is $0.38 to $0.41 per sf per month, which is a pretty significant jump from where prices were a year ago. According to Applied Analysis, the average industrial rent is up 10% from this time last year, while some markets saw asking rents rise by as much as 30%. The main causes include rising construction costs, rising land prices and a lack of available land, says Myers.
"There's so few options for industrial development it's scary," he says. "I can't point to a 100-acre industrial site in town; I don't even know if I deliver 40 acres. Land prices are pushing $12 per sf and current rents don't support that."
Myers and most others blame the rezoning of industrial land for residential use. "It's not good forward thinking," he says, explaining that there needs to be industrial land to support the services that will be required to accommodate the residential growth. With no reasonably priced land for industrial, the demand on the already tight market will allow owners to continue to raise rents, leaving space for only those who can afford to pay top dollar.
"I am beginning to see rollover in our earlier development here and people with rents in the low $0.30s are going to be asked to pay market rates, which are in the high $0.30s to low $0.40s," he says. "People that have to be here will suck it up and pay, but there will be others that will have to leave. It's going to be a very landlord-oriented market for the foreseeable future."
DP Partners began developing LogistiCenter at North Las Vegas in 2002. The first building--a multi-tenant 266,800-sf speculative distribution facility on a 12.7-acre site at 3200 East Gowan Rd.--was completed in the fall of 2003 and is currently 100% leased. The aforementioned second building--a 266,160-sf distribution center--was completed in early 2005. The tenant that soaked up nearly three-quarters of the space, kick-starting its latest project is believed to be Bed, Bath & Beyond, according to local industrial sources. Citing client request, Myers declined to name the tenant. CDW Logistics, a wholly owned subsidiary of Vernon Hills, IL-based CDW Corp., occupied its build-to-suit facility in March.
Given the tightness of the market, Myers says DP is already designing its next speculative project at LogistiCenter North Las Vegas, a 370,000-sf building that could very well end up being a build-to-suit. "We will be going in for permits on that one before our current project is even done," he says.
The DP Partners development team for LogistiCenter at North Las Vegas includes Myers and Marc Markwell, operations manager for the West Coast. Reno-based United Construction Co. is the general contractor, and the project architect is Reno-based Blakley, Johnson & Ghusn Inc. Colliers International has the leasing assignment. The brokers are Daniel Doherty, Patti Dillon, Suzette La Grange and Chris Jensvold.
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