Dermody Properties plans to construct approximately 813,000 square feet of new class A industrial space in the coveted west Reno and north Sparks submarkets.
DP already broke ground on a two-building project in west Reno adjacent to Cabela’s. The second phase of Dermody’s LogistiCenter I-80 West will include a rear-load building of 170,500 square feet, along with a larger building of 258,500 square feet that’s a cross-dock facility, said John Ramous, Nevada region partner with Dermody Properties.
Phase 1 of LogistiCenter I-80 West – four buildings totaling more than 800,000 square feet – was completed several years ago and was met with strong tenant demand, which helped spur additional development plans for that particular submarket, Ramous told NNBW in an interview last week.
“It was very well received,” Ramous said. “It’s a very small market, and there are very limited opportunities to build any project of scale. Finding any land over five acres is very difficult (in west Reno). We were successful in finding scalable land to develop, and given our past success we are very optimistic.
“It’s proven grounds, and you really can’t duplicate it on the west side of town,” he added.
The two buildings, which front Interstate 80, are divisible between 75,000 and 100,000 square feet depending on prospective tenant interest, Ramous said. Both buildings were constructed with a slightly smaller footprint to accommodate buffers for nearby neighbors, he added.
“That (size) seems to be the sweet spot in the marketplace,” Ramous said. “We are seeing that pretty consistent with activity. The market ebbs and flows, but that will always be a good size for buildings and divisibility.
“Over the last couple of years we worked closely with the community in getting to those sizes,” he added. “We didn’t max out (in building size) and were able to provide a buffer with some of the residential development on the west side. We were able to build a project that fits our needs, and at the same time we were able to accommodate the needs of the community.”
Although phase II of LogistiCenter at I-80 West is a pure speculative play, Ramous said there’s already early tenant interest in the project. United Construction Company is the general contractor on both buildings, which are expected to be delivered beginning in the first quarter of 2024.
Dermody also is preparing to break ground on LogisCenter at Kiley Ranch. Development plans call for two buildings of 187,632 and 197,732 square feet, with both buildings divisible to spaces around 50,000 square feet, in the highly desirable north Sparks industrial submarket.
Sitework is expected to begin in early July, with an expected completion date of summer of 2024. The site is adjacent to State Route 445 at the corners of Wingfield Hills Road and David Allen Parkway.
Ramous said Dermody Properties acquired the land in January of this year but enjoyed an accelerated construction timeline due to a previously approved handbook for the parcel.
“It made the entitlement process much more streamlined,” he said. “If you can get a handbook already approved, it makes a world of difference as far as timing.”
It’s also one of the few industrial sites left in all the Truckee Meadows that’s on flat ground. Again, like the industrial development at I-80 west, this new project is expected to see strong tenant demand due to the many fully leased industrial facilities constructed further up Pyramid Highway at the fully built-out Spanish Springs Business Center.
“We are excited to be five miles closer (to town) from that successful park,” Ramous said. “The history of that other site is certainly going to command demand for our project, and we are already starting to respond to (tenant) inquiries.”
Ramous added that the site is Dermody’s only land holdings in Sparks, but the company may seek additional development opportunities in Sparks moving forward.
“It has been very difficult to find land for logistics,” he said. “In the future there might be more opportunities, but in general it’s been very difficult to tie up land for industrial development in Sparks.”
The current high interest rate environment has had little effect on DP’s development plans, Ramous noted. In west Reno, the company was unaffected by accelerated borrowing costs because it acquired the parcel several years ago, he said. Escalating rental rates have also helped offset any adversity caused by increased interest rates, he added.
“It really hasn’t been an issue,” Ramous said, “but our yield on costs for new projects has gone up. We are more selective on new opportunities — we want to minimize risk and make sure our locations are spot on. We are much choosier today because of our yield requirements.”
Lead times for building materials and key components like electrical switchgear have impacted industrial development over the past few years, but those long lead times appear to be easing, Ramous noted.
“It has gotten a lot better, and that bodes well looking forward,” he said. “We are finding in general that things are starting to stabilize as far as lead times with lumber and steel.”
Looking ahead, Dermody Properties has another project planned for North Valleys. The two-building project is expected to total about 1.125 million square feet adjacent to the Stead Airport.