Industrial strength: Amazon leads industrial surge in Reno-Sparks real estate

By Jason Hidalgo, RGJ

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Amazon's warehouse move helped spur a record-breaking third quarter for the Reno-Sparks industrial market as the area posted a new high for square footage leased or sold.

Leasing and sales activity totalled nearly 2.7 million square feet, breaking the area's previous record for gross absorption of 2.4 million from the third quarter of last year, according to NAI Alliance. The average size from the 49 transactions reported was 54,537 square feet. Net absorption, however, was a more modest 770,614 square feet due to the return of several large properties to market.

Still, the numbers are a big change from the recession years, when activity practically was at a standstill, said Dave Simonsen, senior vice president of the NAI Alliance's industrial properties group.

"Sales activity is up, the inventory of properties for sale is decreasing and the price per square foot for those properties is significantly up in the last 12 months," Simonsen said. "It's a complete flip from 2009."

The North Valleys submarket led the charge in the third quarter with two big transactions. At the top of the list is Amazon's 634,000 square-foot deal, which involves moving its fulfillment center operations from Fernley to Reno. The move will start after the holiday season, said Amazon spokeswoman Ashley Robinson.

"We'll start moving in January and finish our gradual transition by spring," Robinson said. "All Amazon employees will be offered a chance to work at the new fulfillment center and there will be no job loss."

The other big deal involves a 606,000-square-foot facility for Seattle-based retail supplier SanMar. Rounding out the rest of the top five are transactions for Randa and Krone in Reno and Cenntro Motors in Sparks.

Don't expect to see the same year-end rush of low-priced building sales from 2013 to make a repeat this year, Simonsen said. A steady increase in pricing combined with the Tesla effect should prevent any fire sales in industrial property, according to Simonsen. Activity already was increasing prior to the official Tesla announcement and should see an additional boost from contractors and suppliers working on the gigafactory, he added.

"(Activity) typically slows down around Thanksgiving but I'm not sure if we'll see a slowdown this year," Simonsen said. "Add the Tesla stuff on top of our already strong activity and we should be very, very busy in the next few years."

Industrial vacancy rose to 8.4 percent from 7.9 percent, but NAI Alliance ties that to new construction — another big change from the recession, Simonsen said. Given the rate of demand, the additional square footage should be absorbed with no issues, he said. Simonsen also does not expect a repeat of the overbuilding seen in 2007 prior to the recession.

"Inventory that was struggling to be filled through the recession is now filled and the market is in need of more space," Simonsen said. "I would not consider our market overheated right now."