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Industrial market ‘white hot’

Not surprisingly, investors are suddenly willing to take bigger bets on industrial real estate in the Reno-Sparks market after announcement of the new Tesla battery-making plant.

Two brokerage groups that specialize in industrial properties said last week that the Tesla-related activity only adds more fuel to a fire that was beginning to blaze anyhow.

“The sentiment from investors seems to be that if you are not invested in northern Nevada, you are missing the boat,” wrote Tom Miller of Miller Industrial Properties in an overview of recent activity. “Large numbers of investor groups are vying for the few available income properties in the market.”

The industrial team at NAI Alliance said that’s causing prices to firm very quickly.

“The Tesla effect has kicked in, with sellers seeing no need to fire-sale buildings,” the NAI group said in its report on third-quarter activity. “Tesla should turn a red-hot market to white-hot.”

Miller, meanwhile, said the asking prices on some industrial buildings jumped by 10 percent immediately after the Tesla announcement.

NAI estimated that the vacancy rate in industrial buildings stood at 8.4 percent at the end of the third quarter, up just a bit from 7.9 percent at the end of the second quarter. The addition of newly constructed buildings to the inventory of industrial properties accounted for the uptick.

The brokerage firms both said that vacancy rates remain highest in the older industrial neighborhoods of Sparks and the area around Reno-Tahoe International Airport.

In Sparks, the vacancy rate runs about 12 percent. Around the airport, approximately 11 percent of industrial space stands vacant.

But in southern Reno, Miller Industrial Properties estimates vacancy at 1.5 percent. NAI Alliance estimates vacancy in the area at 3.8 percent.

Both groups said they expect to see more industrial construction as developers work to meet surging demand, and the market for raw industrial land is picking up.

NNBW staff