Tom Miller, CCIM
Sparks Sub Market update
The Reno – Sparks Industrial Market is subdivided into sub-markets. Various brokerages tend to use slightly varying definitions, but they are generally conidered to be: North Valleys, Sparks, Airport, South Reno, Central and West Reno, East I-80 Corridor. These areas are seperate and unique in terms of location but additionally in terms of the type and age of industrial product that is located there.
The Sparks sub-market has been the only submarket negatively affected in 2007, due to numerous move-outs. In 2007, While the market saw Gross Absorpotion of about 6 million sq. ft., overall market Net Aborption (net change in occupied space), was off from previous years due to a number of firms that expanded within the Reno market, leaving vacated space empty behind them. Almost all of these local expansions moved out of the Sparks Sub market. DDS, Trex, Parts Unlimited, ACH Form, Tire Rack, Micro Metl, DIS all moved away from the Sparks Submarket creating a negative absorption of over 1 million sq. ft.. The newer Industrial centers in Patrick and Fernley were the recepiant of most of these expansions with Stead and Spanish Springs getting one each as well.
With the Sparks sub market representing about one third of the areas overall industrial market; these numbers are significant. So what does this mean ? Will this be a growing trend ? Or is this just an odd coincidence ? My opinion is yes and no. If you want a better answer……..’it depends’.
Let me explain. In 2006-2007, When firms in that submarket looked into their expansion options, the Sparks sub market simply did not have anything to offer them in terms of big box warehouse space. The expanding firms found that space in the East I-80 corridor and in the North Valleys. In addition, the timing of these expansions were such that the market wa sjust starting to see a potential slowing of demand from new, incoming firms. Landlords started to compete more aggressively for these relocations and pricing on the new spaces started to approach the older pricing in Sparks. This, of course was goods news to these expansing firms, making the decision to expand even more attractive. With the Sparks sub market being left with loads of vacancies.
Another factor in the decisions to relocate would have to be the aging inventory in the Sparks area. Sparks was the first Reno-Sparks area to be developed for larger warehousing users. THis product is now showing its age. Lower clear heights, shorter truck courts, less trailer storage areas, less fire sprinkler capacity. These factors all work against the need for increased efficency for high-volume distribution centers.
This might look like all negative towards the Sparks market, but we don’t feel that is the case. In the short term this sub market will feel the pinch of the loss of all these distributors. However the availability of that space will allow options for existing firms in this market to expand locally. Additionally, the large vacated spaces provide options in most cases for dividing those spaces into the smaller or mid sized spaces to accomodate user sizes that the big box buildings cannot provide, since almost none of the big box developement that occurred in 2007 can be divided down into smaller or midsizes.
There are also many distribution operations that do not need the newer bells and whisteles that teh latest properties provide. While everyone would prefer a highly efficent facility to operate from, to characterize the inventory in Sparks as all mostly functionally obsolete would be inaccurate. Many users are not nearly as hig volume as many of the firms that have needed to move out. The truck courts ahve been accomodating the 53′ trailers for years now, although maybe not easily, it can bew done. a 24′ eave height will accomodate most all DC’s except the super-high efficent centers and the fire sprinkler systems are adequate for most products found in warehouses that rack within reasonable heights.
These factors will make the infill user for these spaces come back to Sparks. Their advantages will be good pricing, better landlord concessions, excellent infrastructure and great proximity to local services and labor.