Industrial vacancies fall after October leasing flurry

The vacancy rate in industrial space in the Reno area appears to have dropped by more than a full percentage point during a busy first few days of October.

The Reno office of Colliers International said last week that seven leases totaling more than 500,000 square feet of industrial space were signed in early October.

Colliers didn't provide details of the transactions, but the company noted that the vacancy rate in industrial space in the region now stands at about 9 percent.

On Sept.

30, the end of the third quarter, Colliers estimated the vacancy rate stood at 10.12 percent in a market that totals about 5.85 million square feet of industrial space.

Vacancies are highest in south Reno and the central-west area of Reno, Colliers said.

It estimated industrial vacancy rates in those areas run higher than 17 percent.

A big factor in the vacancy rate is the availability of the 420,000-square-foot SanMar building at Patrick.

The wholesaler of promotional clothing items plans to move to a 490,000-square-foot building the former General Motors distribution center on Vista Boulevard in early 2005.

At the same time, however, Colliers noted that only two large spaces 200,000 square feet or more are available in the market, and one of those spaces is available only for sale.

That's a reflection of slow activity in speculative construction.

At the start of this year, Colliers projected construction of 1.7 million square feet of speculative industrial space in the market.

Less than 500,000 square feet has been finished, and only about 200,000 square feet is in the pipeline.

"With construction costs having spiked 25 percent or more, rents would have to rise into uncharted territory for developers to make any profit, so it is no wonder they've decided to wait until either demand justifies new construction or the cost of building softens," Colliers reported.

Build-to-suit construction has totaled about 606,000 square feet of industrial space this year.

That figure could jump sharply in 2005.

Colliers said executives at Spanish Springs Business Park, Tahoe-Reno Industrial Center at Patrick and Nevada Pacific Industrial Park at Fernley all report a land rush from potential buyers.

And that, in turn, keeps upward pressure on prices.

Some small parcels in suburban areas that aren't served by rail are selling for as much as $4 a square foot.

Rents, however, have remained flat, Colliers said, although landlords no longer offer concessions to tenants.

The lack of speculative building, however, might begin to push rents upward in 2005.

Among the major transactions completed in the third quarter, Colliers said,was completion of a 450,000-square-foot building for James Hardie Industries at Tahoe-Reno Industrial Center, the lease by Winans Furniture of a long-vacant 100,000-squarefoot warehouse at Sparks and the purchase by Natural Organics of a 100,000-square-foot building at Dermody Aircenter in Reno.