Las Vegas Business Press :: News : Rising construction costs tighten industrial market

Rising construction costs tighten industrial market

BY TONY ILLIA
BUSINESS PRESS

The valley's industrial market grew to 80 million square feet last year, with 5.6 million square feet worth of absorption valley-wide, said Dave Dworkin, Grubb & Ellis' research analyst. The market ended on a high note with a staggeringly low 3.7 percent vacancy rate in the fourth quarter because of high demand and rising construction costs.

Although the southwest market remained the valley's most active submarket, it was also the most costly. It saw a major building price hike, Dworkin reported, as the cost for a 10,000-square-foot concrete tilt-up building shot up from $100 per square foot to $160 per square foot in a year.

"Vacancy rates should remain low in 2006 and lease rates will continue to rise dramatically," Dworkin said. "Landlords should enjoy a prosperous 2006 as tenants will fight to obtain space in an ever-tightening market."

The southwest industrial submarket had 1.8 million square feet of absorption in 2005, with large undertakings like Thomas & Mack Development Group's 424-acre Beltway Business Park taking shape along the I-215 Beltway between Decatur and Jones boulevards.

Yet industrial development in Southern Nevada may be close to extinction as future projects deplete an already diminishing land supply. The sluggish release of federal lands, coupled with a frenzied speculative environment, is driving prices beyond the reach of industrial projects.

The market, as a result, will have to undergo a double-digit rent increase over the next several quarters in order to make projects pencil-out. It may also result in the long speculated development of outlying areas where land is still affordable.

"Several communities lie within an hour of Las Vegas and may benefit considerably from the increasing need for industrial space," Dworkin said. "The question is which community and who will be the first to develop."

PROJECTS

Del American is building a 50-story, 888-unit luxury condominium tower dubbed "Vegas 888" at Flamingo Road and Hugh Hefner Drive, just east of the Palms hotel-casino. The 565-foot-tall, curved-glass building is scheduled to open in 2008, with residences from 800 square feet to 8,000 square feet in size, priced from $750,000 up to $10 million. Tutor-Saliba-Perini is the general contractor. Del American bought the 10-acre parcel a year ago for $50 million, or $5 million per acre.

Tommy "Rocker" Greenbough has unveiled plans for a 46-story, 252-unit condominium tower near the southwest corner of Dean Martin Drive and Flamingo Road. The $150 million, one-acre project will replace Greenbough's bar-restaurant, "Tommy Rocker's," currently at the site. The high-rise has received county planning approval and is expected to begin construction in 12 months.

Turnberry Associates recently topped off the fourth and final tower of its 788-unit Turnberry Place condominium complex at Paradise Road and Riviera Boulevard. The 40-story, 231-unit high-rise will be completed in September. The first Turnberry tower began construction in 1999. An estimated 211,000 cubic yards of concrete has been poured for all four towers.

MILLION-DOLLAR DEALS

ED Decatur LP purchased four acres of vacant land at 2025 S. Decatur Boulevard for $5.62 million or $1.4 million per acre, from A&J Investments. Colliers International's Scott Gragson, John Kilpatrick and Robert Torres represented the seller.

GSG Spanish Ridge II LLC bought five acres of vacant land at the southwest corner of Hacienda Avenue and Riley Street for $3.29 million, or $658,600 per acre, from Gragson Tee Pee LLC. Colliers International's Scott Gragson, John Kilpatrick and Robert Torres represented the seller.

John and Ruth Ahlbrand dba ReMax Central bought a 13,285-square-foot office building inside The Park at Spanish Ridge at 8984 Spanish Ridge Ave. for $3 million, or $225.82 per square foot, from GSG Spanish Ridge. ReMax Central's Dale Rowse represented the buyer, and Colliers International's Suzette La Grange and Chris Jensvold represented the seller.

Slade Development Inc. bought 1.22 acres at 3600 W. Procyon St. for $2 million, or $1.63 million per acre. CapSource's Steve Byrne provided the loan.

Frederick and Copper Gillman bought 6,438 square feet of office space at 2904 Horizon Ridge Pkwy., Ste. 201-231, in Henderson, for $1.45 million, or $225.23 per square foot, from Willow Creek Offices. Grubb & Ellis' David Scherer, Barton Hyde, Mike Hsu and Matthew Kreft represented the buyer, and Shea Commercial's Taylor Torres and Bridget Richards represented the seller.

William Quinn IV purchased 2.26 acres of vacant land near the northeast corner of Cecile Avenue and Marco Street for $1.18 million, or $522,566 per acre, from Russell and Neva Ricks. Colliers International's Jennifer Kilpatrick and Brian Riffel represented the buyer, and Lee & Associates' Shawn Barashy represented the seller.

tonyillia@aol.com | 702-303-5699

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