Newmark Grubb Knight Frank (NGKF) reports that the largest industrial area in the metropolitan region - the North submarket - has been filling with national and regional users looking for growth opportunities. Institutional buyers are gaining confidence in the submarket’s robust future, and investors are eyeing the area as an alternative to the more expensive South and Central submarkets in the Vegas area. This is particularly evident as demand for warehouse product increases and big box users look for expansion opportunities in a land-constrained market.
“Buy land, they’re not making any more,” stated NGKF’s Managing Director, Ben Millis, repurposing a statement often contributed to Mark Twain. In the once-overlooked North submarket, land is a hot commodity and local businesses continue to expand there, benefitting from the relatively affordable prices. Industrial yard space is in demand throughout the area, is difficult to find, and in the case of the drum tight Southwest submarket, has begun to price out the average investor and business owner. The North Las Vegas submarket’s leasing activity strongly mirrors the investment market, with absorption accounting for 75% of the market’s total in the first quarter and leading in activity for the region with year-to-date absorption of 496,280 square feet.
Millis, along with teammate Chris Beets, worked with Pamida Realty on the sale of an 180,000-square-foot sale lease back to Kichler Lighting located at 4750 North Lamb Boulevard. The sale price, $15,100,000 with a capitalization rate of 6.88, is above quoted replacement cost at $83.88 per square foot, reflecting the growing investor confidence, as well as the demand for single tenant assets in the Las Vegas submarket.
The team notes that a lack of quality supply is driving values upwards and pushing investors off the sidelines. One of their recent sales at 3200 & 3280 West Sunset Road for $3,980,000 at a sub 7% capitalization rate is another example of this trend. The 56,452-square-foot Class A warehouse sold at auction for $74.00 per square foot, 10-15% over 2014 prices. “With 8-9% cap rates in the not too distant past, this change highlights the ongoing recovery as well as the enthusiasm of buyers in the market,” stated Beets.
An additional example of the trend occurred with Prudent Ventures LLC and VVP Olsen LLC, who the team represented in a purchase of a 4.7-acre land parcel for $500,000 from Red Rock Leasing, Inc. Due to the right combination of factors, and another interested party, the team turned around and sold the property at the northwest corner of East Gowan and Berg streets for $750,000 to a Texas company to build a larger distribution center for its expanding operations.
Millis and Beets have seen the industrial leasing landscape change as well. Tenants who were hesitant to expand in recent years are now pulling the trigger to take advantage of market opportunities. Two of the team’s recent experiences involved lease transactions for national transportation companies in the North submarket; Regional operator Ryan’s Transportation leased +/-30,000 square feet on 4.95 acres at 412 Gowan, and Tantara, a national tradeshow transportation company in high growth mode, leased a Class A 12,000-square-foot warehouse on 5.8 acres with a 4-acre yard at 3741 Civic Center Drive.
Finding appropriate yard space for users can also be challenging, as NGKF’s industrial team intimately understands. Due to the lack of supply, the team is currently negotiating an off market transaction for a national company to effectively double its space. Again, the location is in North Las Vegas.
“The North Las Vegas submarket’s rebound is expected to drive prices and industrial development in the near future. The increasing demand and lagging supply have culminated into quite the turnaround in just two short years,” stated Millis. “A 90 days pipeline of slated transactions mirror the momentum, which include a 10-acre sale to one of the largest transportation companies in the world, and an 80,000 square foot lease to an international distributor. “
About Newmark Grubb Knight Frank
Newmark Grubb Knight Frank is one of the world’s leading commercial real estate advisory firms. Together with London-based partner Knight Frank and independently-owned offices, NGKF’s 12,000 professionals operate from more than 330 offices in established and emerging property markets on six continents.
With roots dating back to 1929, NGKF’s strong foundation makes it one of the most trusted names in commercial real estate. NGKF’s full-service platform comprises BGC’s real estate services segment, offering commercial real estate tenants, landlords, investors and developers a wide range of services including leasing; capital markets services, including investment sales, debt placement, appraisal, and valuation services; commercial mortgage brokerage services; as well as corporate advisory services, consulting, project and development management, and property and corporate facilities management services. For further information, visit www.ngkf.com.
NGKF is a part of BGC Partners, Inc., a leading global brokerage company servicing the financial and real estate markets. BGC’s common stock trades on the NASDAQ Global Select Market under the ticker symbol (NASDAQ: BGCP). BGC also has an outstanding bond issuance of Senior Notes due June 15, 2042, which trade on the New York Stock Exchange under the symbol (NYSE: BGCA). BGC Partners is led by Chairman and Chief Executive Officer Howard W. Lutnick. For more information, please visit http://www.bgcpartners.com/.