Labor worries contribute to rise in industrial vacancies

The vacancy rate in industrial buildings in the Reno area rose slightly during the third quarter, Alliance Commercial Real Estate Services reported last week.

And it's clear, the company's industrial group said, that construction of industrial buildings won't post anything close to the 20 percent upsurge that analysts had predicted at the start of the year.

"One thing we hadn't foreseen was that we would lose a couple of megausers to other, more populous markets because of their concern w couldn't provide an adequate labor force," Alliance said in its report.

The company said the vacancy rate in industrial spaces stood at 7.21 percent at the end of the third quarter, up slightly from the 7.13 percent recorded on June 30.

That translates into 101 available spaces totaling 4.24 million square feet.

Earlier in the year, brokers at Alliance and other companies had worried that vacancy rates might drop below 6 percent, squeezing potential users.

But a couple of companies that Alliance didn't identify vacated space in recent months, leaving big spaces behind 325,000 square feet in one case, 283,000 in another.

Among the big leases during the quarter, Alliance said,were:

* K2, a sporting goods company, leased 202,500 square feet of distribution space in a new, 405,000-square-foot building by Panattoni Development at Lear Industrial Center.

* Fleximat, which also leased a portion of the new building at Lear Industrial Center.

* Worldpak, which moved from Sparks to a 112,000-square-foot space on Parr Boulevard.

* Nevada Distribution Services, which took 129,500 square feet in a ProLogis building on Purina Way.

New industrial construction coming on line,Alliance said, includes a 152,600-squarefoot distribution center for Silver State Liquor at Spanish Springs and a 97,066-square-foot processing plant for Pacific Cheese at South Meadows.

Lease rates are generally flat in industrial properties.

Alliance said the median lease rate in small properties 5,000 to 20,000 square feet was the only exception, rising 13 percent from 57.5 cents a square foot to 65 cents.

In big box industrial space, buildings of 100,000 square feet or more, the median lease rate remained unchanged at 29.5 cents a foot.

That,Alliance said, is a headache for developers who've seen construction costs continue to rise and need rents to increase by 10 to 15 percent if projects will pencil out.

And land costs also continue to rise.

Alliance said the asking price for sites of 10 acres or more without rail service at the Tahoe Reno Industrial Center has risen to $2.25 a square foot from earlier quotes of $1.95 a foot.

In Spanish Springs Business Center, parcels of two to 10 acres are priced at $4.25 a square foot, the brokerage firm said, while land at the Crossroads Commerce Center in Fernley is priced at $2.50 a square foot for non-rail property.

"It looks like the days of sub-$2 industrial land are gone, even in these parks 15 to 30 miles from town,"Alliance said.