The Future of Manufacturing in Northern Nevada

Posted by: Dan Oster
Industrial Specialist

775 336 4665

doster@naialliance.com

 As a member of the Industrial Properties Group, Dan has participated in the sales and leasing of a wide variety of Industrial properties from 1,000 to 700,000 sqft in Northern Nevada. Dan's primary goal is to provide unsurpassed customer service to the clients he represents.

The future of Supply Chain Management will be less about finding cheap overseas locations for manufacturing and more about new methods of manufacturing.  In this article in The Economist, the future of Manufacturing is discussed (http://www.economist.com/node/21553017).  Reno’s location advantage – we are overnight by ground to 40% of the US population - will continue to be a key economic advantage for the region. As mass customization shifts the competitive advantage of firms to those able to make to order, closest to the end user, a Northern Nevada address will provide firms with the ability to win more business!

Click here to watch a video for further insights into the process of 3D printing.

The Californian Diaspora - 2/8 

Posted by: Dan Oster
Industrial Specialist

775 336 4665

doster@naialliance.com

 As a member of the Industrial Properties Group, Dan has participated in the sales and leasing of a wide variety of Industrial properties from 1,000 to 700,000 sqft in Northern Nevada. Dan's primary goal is to provide unsurpassed customer service to the clients he represents.

Imagine you're not visiting Reno. Imagine you're waking up to go to work at your company, but your company is now located here in Reno. How would your business life be different?

Let's start with the assumption you work at a Sugar and Confectionery Products company with $5 Million in annual sales. This will allow us to use Biz.Stats.com, a web site that analyzes public filing of firms to benchmark average costs for businesses of a given size in a given industry.

Imaginary day observation #1: Shorter Commute

You left home at the same time as always, but you're at your desk earlier than usual. How did that happen? According to the US Census Bureau, Californians mean travel time to work is 28 minutes. In Nevada, it's only 22 minutes! Your day hasn't even started and you've already saved 12 minutes in your daily commute. 

The Californian Diaspora - 1/8 

Posted by: Dan Oster
Industrial Specialist

775 336 4665

doster@naialliance.com

 As a member of the Industrial Properties Group, Dan has participated in the sales and leasing of a wide variety of Industrial properties from 1,000 to 700,000 sqft in Northern Nevada. Dan's primary goal is to provide unsurpassed customer service to the clients he represents.

Why have Californians been fleeing their state over the past two decades, 200,000 per year, as compared to the 1980s when 100,000 Americans a year were moving into the state? The reasons are varied, but according to Joel Kotkin, one of the nation's top demographers, "the state is run for the very rich, the very poor, and the public employees." Once the tax structure is taken into consideration and the fact that California has the 48th worst business tax climate according to the Tax Foundation, it's no wonder that middle class young families, ages 5 to 14 and 34 to 45, are the top demographic leaving the state.

When it comes to taxes in the Golden State, millionaires pay a top rate of 10.3% (third highest in the country) and middle class workers, those making greater than $48,000 a year, pay a top rate of 9.3%. That is a higher tax rate than what millionaires pay in 47 of 50 states. Those Californians who are rich enough to live in Napa or West LA are still there. Poor Californians, 40% of whom pay no income tax, are sticking around too. Bearing more than their fair share of the burden, young middle class Californians are now en route to other parts of the nation less restricted by bureaucratic red tape and less encumbered by high state income tax.

In the following series of blogs, we'll make the case for why middle class workers, and the companies who employ them, should choose to put down roots in Nevada.

Sales- Buyers of industrial property are out shopping.

Due to interest rates and prices being low for industrial space and with retail property, this has enticed some tenants to become owners. For this reason, sales interest in Q1 of 2012 was primarily from owner/user purchases as opposed to investor purchases of commercial buildings for sale. Sales transactions for the quarter included Merl Jessop's purchase of 40,000sf at 1201 Industrial for $1,400,000 ($35.00/sf), Ellaville Properties purchase of 31,908sf on 6.56 acres at 543 Overmyer for $2,600,000 ($81.48/sf), Fundis Trucking's purchase of 14,000sf on 9.8 acres at 2920 Walthem Way for $2,200,000 ($157.14/sf), Fog City Investments' purchase of 11,240sf at 903 E. 4th Street for $876,720 ($78.00/sf) and Rice Lakes Scales purchase of 5,000sf at 310 Freemont Street for $340,000 ($68.00/sf).

 Contact NAI Alliance at 775.336.4600 for all your commercial lease needs.

New Office Listing - 592 California Avenue

Posted by: NAI Alliance Office Group

775 336 4600

The Office Properties Group is proud to announce a new property listing at 592 California Avenue, Unit A, in Reno, Nevada.

There is 1,450 square feet of office space available.  The lease rate is $1.15 per square foot, full service. 
For more information on this property or to view all listings please visit us at http://naialliance.com/

Industrial Space Showdown

Posted by: J. Michael Hoeck, SIOR

Industrial Specialist

775 336 4621

jmhoeck@naialliance.com

Mike began specializing in industrial brokerage with Colliers International in 1999, and in May 2005, joined Alliance Commercial as a Partner and as Vice President of its Industrial Properties Group. In May of 2007 Alliance Commercial became NAI Alliance and Mr. Hoeck became a Senior Vice President.

Last week, I came across an interesting article in the Wall Street Journal entitled “Industrial-Space Showdown.” Morgan-Stanley and Blackstone Group are both jockeying to take control over a defaulting CalWest portfolio. This is a major portfolio, which includes 23 million square feet of property throughout many of the western states. Currently, industrial space property has a much slower rising value, and this article has brought up an intriguing point about how investors are starting to buy more of these properties around the country. Investors are seeing a future strength in the economy, which will increase the need and value of industrial space. While the deal over who will take control over CalWest’s assets is still undetermined, this article shows a valid point how investors are seeing a change in the market and gravitating towards buying industrial space. Prices are well below replacement and cap rates are 150 to 250 basis points above the values 3 years ago.

-Information Provided by The Wall Street Journal, April 2012

Commercial Rentals- How low can the rates go?

With industrial space vacancy on the rise (see Market Activity- Where are all the big industrial property deals?) rents are still showing weakness with only slight signs of heading upwards and it continues to be the tale of two markets. Class A rents are stable and set to increase when a few more large industrial real estate transactions occur. Whereas Class B & C product still languishes with years of supply. Owners of older product have been on their knees praying for 3 years now. The reduced size of the average transaction (20,459sf compared to 41,205sf from the prior three quarters) helped the cause of Class B & C this quarter. Class A buildings typically do not divide into small increments. So, when transaction volume does well and the average deal size is low, like this quarter, Class B & C product sees greater activity. Of the 20 largest industrial property transactions of this quarter, ranging from 13,800sf to 77,000sf, 15 of them (or 75%) signed within Class B & C buildings. With that in mind, there is plenty of competition amongst owners of older buildings, keeping rents low and many prayers unanswered.

Contact NAI Alliance at 775.336.4600 for all of your commercial lease needs.

Testimonial

"I would highly recommend J. Michael Hoeck because of my recent experience researching and securing commercial real estate. Right from the beginning he was eager and sensitive to my needs and requirements. He always presented himself as a professional and was extremely organized in his presentations. Mike has worked in the Reno area for many years and that was a benefit because of who he knew in the area to get things done."

-Richard Seegmiller, Owner of Truckee Precision

Testimonial

“Advertising was excellent with signs, flyers, internet, and mailers. Your team got the property out to a large geographical area and it worked. Also communication was excellent with conference calls every other week and updates in between.

I would like to thank Mike Hoeck, Dave Simonson, Dan Oster, Mike Nevis, and Stacy Blanton for the great job they did. I will recommend NAI Alliance to anyone in need to sell their commercial real estate.”

-Randy Blackwell, Chickwell Properties, LLC

Market Activity- Where are all the big industrial property deals?

There were 39 deals 5000sf or greater in industrial space during the quarter which is in line with an average quarter. What lacked this quarter were large industrial leases making an impact on absorption. We are still in search of a 100,000sf deal thus far in 2012. Whereas the average deal size over the prior three quarters was 41,205sf, this quarter has seen 20,459sf for total gross absorption of 797,897sf (down 43.2% from the prior quarter). The five largest industrial deals of the quarter were Thrift Books (77,000sf), Wesco’s expansion (67,936sf), National Business Furniture (48,000sf), Patterson Pacific’s expansion (45,100sf) and Webgistics (40,320sf). Positive net absorption in 2011 led us to believe that companies had already downsized/right-sized during 2009 and 2010 and giving the impression 2012 would be another year of positive activity for the Reno/Sparks Industrial Market. To counter the new activity, closures or downsizing announcements from Warehouse Services (224,000sf), Ryder Logistics (130,000sf added to their sublease space), Western America (100,000sf), Hopkins Distribution (100,000sf), Insite Logistics (60,000sf) as well as others show that tenants are not finished giving up space. These actions led to negative net absorption of 499,662sf for the quarter despite three prior quarters of positive net absorption and dropping vacancy.

We’d like to say Q1 of 2012 was an abnormality and that the industrial real estate market is poised to bounce back in the second quarter but there are three more possible announcements of large scale downsizing to come. To offset any new closures, there are three large deals pending and a number of other hopeful transactions set to sign in Q2. Current activity is brisk so hopefully the closures will be differed to other quarters or are outpaced by a slew of industrial users committing to our area. The jury is still out on whether Q2 will be an increase in potential energy for our roller coaster industrial market or a brief leveling out of the ride.

Reno/Sparks Industrial Market 2012 Q1 Review

Industrial properties, as with much commercial real estate, have been riding a roller coaster and the first quarter for 2012 proved to be a dip. We saw more industrial space vacate than absorb as an unexpected number of large tenants either left the Reno/Sparks area or downsized their operations. Vacancy for the quarter increased from 14.6% to 15.3%. Due to the last three quarters of 2011 having shown strong activity in the industrial real estate market, this led to the general expectation for the same in 2012. We anticipated new activity to outpace closures thus increasing net absorption and possibly leading to upward pressure on Class A rents. Given increasing talk of national economic recovery, the first quarter proved to be a step back for industrial properties, but gauging from current activity, we are still confident our end of year numbers will match our predictions.

Distribution Centers Moving Inland

Posted by: J. Michael Hoeck, SIOR

Industrial Specialist

775 336 4621

jmhoeck@naialliance.com

Mike began specializing in industrial brokerage with Colliers International in 1999, and in May 2005, joined Alliance Commercial as a Partner and as Vice President of its Industrial Properties Group. In May of 2007 Alliance Commercial became NAI Alliance and Mr. Hoeck became a Senior Vice President.

Recently the Journal of Commerce published Driving DCs Inland, referring to the movement of automated warehouses inland and away from high warehousing rent of major population centers. According to Forest Research, “U.S. e-commerce should expand 10% annually to $279 billion by 2015;” meaning that more of these automated centers are going to be needed in the near future. Companies are looking for warehouses in states such as Nevada, because of their cheaper labor rates and ease to access large population areas within two days. Northern Nevada has a business climate featuring business friendly tax structures, abundant labor, affordable housing, and a great quality of life. Twenty-five of the top 100 3PL companies operate in Northern Nevada. The large e-commerce companies “employ five to ten times more employees then traditional DC” and many times in these areas people who work for the distribution companies have prior experience. Overall, e-commerce companies are starting to follow the trend of moving their DCs inland and seeing the potential it could hold for their future.

Information provided by The Journal of Commerce Magazine, March Issue.

New Industrial Properties Tenant

NAI Alliance would like to welcome iGourmet to the Reno area. They offer a wide variety of fine foods from aged cheese all the way to walnut oil. They can even ship gift baskets to Europe for anyone who has friends or family living abroad. Visit their site at www.igourmet.com and add some fine cuisine to your menu!

If you are in need of an industrial property or retail property for lease, please contact NAI Alliance for Information on competitive rates on commercial leases here in Reno/Sparks, NV.