Tesla draws big interest to region

The days aren’t getting any easier for the crew at Economic Development Authority of Western Nevada since Tesla selected the region to house its billion-dollar battery factory.

Though the heavy lifting of getting the electric carmaker to commit to Nevada is over, EDAWN and commercial brokerage houses have been fielding calls from businesses jockeying for position in the Tesla supply chain and from investors hoping to capitalize on investment opportunities in northern Nevada.

Mike Kazmierski, EDAWN’s president and chief executive officer, says his team is going 90 miles per hour and expects to romp down even harder on the gas pedal in coming months. Much of the interest from outside the region, Kazmierski says, is from technology and light industrial manufacturing firms giving Nevada a fresh look.

“Clearly it is stirring the pot and changing the way people perceive the Reno-Sparks area,” he says. “We expect to see a continued increase in companies looking at this region. If we can get them to visit here we have a huge closure rate, 70-plus percent, and that activity will continue as companies think about the area as a place for logistics and distribution.”

Stan Thomas, EDAWN’s executive vice president of marketing and competitive expansion, has spoken with several companies scouting locations close to Tesla, as well as a handful of investors seeking deals on industrial, commercial, retail and residential sites.

“There are going to be a number of suppliers that will want to be as close as they can to that operation,” Thomas says. “We are expecting it, and we are planning for it.

“It will create more housing, more industrial, more new retail coming to this market because of the growth of our population and the names coming in. We were busy without Tesla, but you put Tesla in there and this town will dramatically change in the next few years.”

Tesla already is moving to begin vertical construction. It got a pad ready for its 5-million-square-foot production plant prior to officially selecting a site, and now that that’s done, the company has begun ordering materials and signing construction contracts, says Kazmierski, EDAWN’s president and chief executive officer. The plant is scheduled to go into production by 2017.

As the Tesla project goes vertical, expect a large wave of new industrial development to follow. Companies vital to Tesla’s operations will be looking to locate close to the gigafactory, and vacant Class A industrial space already was at a premium in northern Nevada.

Dave Simonsen, senior vice principal with the industrial team at NAI Alliance, says his team has seen a bit of an uptick from industrial investors scouting the region, a movement that surely will gain momentum over time.

There will be two different levels of demand, Simonsen says. The gigafactory will cause a spike in industrial development from companies clamoring for new space, and as the battery factory ramps up production and puts thousands of people to work, there will be a secondary spike for residential, retail and other services.

“Tahoe Reno Industrial Center will see an uptick in activity for sure due to Tesla’s locating there, and activity throughout the area is going to increase as well,” Simonsen says. “As the population grows and we add more construction jobs, it will spur apartment growth and housing to accommodate those 6,000 employees. Those folks aren’t going to be located at Tahoe Reno Industrial Center, they will be located in Reno.”

Also expect to see a host of infill projects. Those vacant fields surrounding the Outlets at Sparks and the wide-open spaces off north Vista Boulevard could be prime targets for additional apartment or retail developments.

Tight apartment and industrial vacancy rates in the region already had spurred additional development prior to the Tesla announcement. Now, with thousands of eyes on the region, there are even more investment opportunities created.

“The industrial market was strong and we were getting tight without Tesla,” Simonsen says. “Now that they are coming in that is just pushing interest in our market that much further and causing it to tighten that much more. Dermody and Panattoni are looking at other (development) projects. With Tesla that just adds that much more fuel to the fire.”

A potential drawback: Increased demand will create upward pressure on land costs and rents over time. Currently, though, there are still several large vacant industrial buildings to fill in the region.

And not all new development opportunities will be in attraction — Kazmierski says EDAWN expects to spend an equal amount of time working on retention and expansion to help meet Tesla’s massive employee needs and the needs of additional employers in the Reno-Sparks market.

Tesla is the crown jewel in a lengthy list of notable companies — Apple, Amazon, zulily, Ardagh Group, SanMar — that have either relocated or expanded operations in greater Reno-Sparks. The national attention the electric carmaker brings to the region could spur additional companies to inquire about housing their operations in northern Nevada and create additional development opportunities, says Paul Kinne, development manager for Panattoni Development Company.

“We have been on a fairly remarkable run, we competed with areas that we sometimes have a tough time competing with, and we won,” Kinne says. “There will be those companies that want to be close to Tesla, whether they are in Tahoe-Reno, or further down the road in Fernley or Reno-Sparks proper or even Carson City. It’s a regional win for northern Nevada and we all will benefit from it.”