A commercial real estate megaproject all but halted by the recession is once again seeing construction crews and heavy equipment moving dirt at the site on a new speculative industrial project.
Southern California-based Majestic Realty Co. broke ground in the fourth quarter of 2016 on a 295,500-square foot speculative warehouse distribution center at its more-than-375-acre Beltway Business Park development, which runs along the south side of the 215 Beltway, between Decatur and Jones boulevards on land leased from Clark County. The last speculative building at the complex was raised in 2008.
Officials at Majestic Realty, which is developing the more than 5-million-square-foot complex in a partnership with Las Vegas-based Thomas &Mack Development Group, are positive about the move.
“With the vacancy level within our portfolio dropping below 2 percent, and seeing the new interest as a general barometer of activity within the marketplace, that’s what really led us to the belief that we’d be successful in constructing a new spec building,” said Rod Martin, senior vice president at Majestic’s Las Vegas office.
The building, which sits at Badura Avenue and Jones Boulevard, will feature a 32-foot ceiling clearance; 70 dock-high doors, with cross-dock flexibility; and 130-foot truck courtyard with additional land for trailer storage or extra vehicle parking. It’s pegged for completion in May 2017.
Majestic and its partners originally began work on the Beltway Business Park in 2001, but the recession slowed development plans on the project. The park contains several development types including office, industrial and single-story flex. There is also a retail component known as Beltway Commons that sits near Jones Boulevard and Badura Avenue.
Big tenants such as Switch Communications have bolstered the center’s portfolio with build-to-suit projects within the park during the recession time.
The Beltway Business Park is also home to several other well-known names in Las Vegas: NV Energy, MGM Resorts International, Brady Industries and GES Exposition Services, which keeps an 860,000-square-foot building at the park.
Overall, there are about 80 acres of developable land left to build on the complex, though there’s no specific timeline on when that will be built out, Martin said.
“We’ll really let the market forces drive what are future development plans are, with respect to buildings, and even types of buildings,” Martin said.
Already on the horizon are plans for another 200,000-square-foot building at the complex, which is in the design phase, Martin said.
As far as market forces, the southwest submarket has some specific users on the industrial side.
“Given the submarket, it’s going to be the core industries of Las Vegas’ main economic engine: convention-related, production and event-related, gaming and hospitality,” Martin said.
Despite higher-than-average asking rates in the southwest submarket, many of these tenant types are willing to pay the premium, said Greg Tassi, a senior vice president in the industrial and logistics department at CBRE’s Las Vegas office.
A third quarter report by CBRE showed the southwest submarket’s average asking lease rates at 68 cents a square foot— 6 cents above the valley’s overall average of 62 cents a square foot. And it was about 27 percent higher on average asking lease rates in North Las Vegas, which sat at 50 cents a square foot for industrial space.
Tassi explained that many of the users that take up space in the southwest are more interested in proximity for their employees and convenience in the geographic location than saving money — many of which include trade show companies, gaming manufacturing companies and local distributors such as Pepsi, which keeps a 200,000-square-foot warehouse in the southwest corridor.
In North Las Vegas, larger e-commerce users such as Amazon, which signed onto an 800,000-square-foot warehouse center in the north, moved in as a more regional tenant, rather than as a local distribution point alone. Many of these tenant-types have chosen the valley to be a multistate regional hub and don’t need to be in the middle of town, Tassi said.
Majestic’s space in the southwest can accommodate this larger user.
“The project is designed to be flexible to accommodate e-commerce-type users that will typically look in the North Las Vegas submarket,” Martin said. “This project is designed with additional trailer storage and/or vehicle parking.”
There has been interest already from prospective clients.
“Our conversations are ongoing with a couple of large users at the same time as building construction progresses,” Martin said. “We’ll fill in potentially larger deals with some smaller deals as well.”
Tassi also sees potential for further growth in the southwest region, if things like the convention center expansion bring more trade shows to the local region.
“If the new convention center’s going to bring more conventions to Las Vegas that we’re missing out on, all these expo and trade show companies here locally are going to end up needing more space,” he said.
Many industrial developments in Southern Nevada, including some in the southwest, have been geared toward the larger user.
Jones Corporate Park, which was a 416,000-square-foot spec industrial project near Jones Boulevard and Sunset Road, was one such project in the southwest developed by Panattoni Development Co., though it sold the project to Jackson, Mississippi-based EastGroup Properties in November for $42 million.
Shell construction was completed in the first quarter of 2016 and the current owner, EastGroup, is seeking a single user or tenant needing at least 50,000 square feet of space.
The two-building project, 208,000 square feet each, is only 50 percent leased, Tassi said.
Though developers have thought big, going smaller might be the solution for the future.
Tassi said mid-bay industrial space, which is defined as industrial space that can be cut into units of about 8,000 to 15,000 square feet, is in very high demand. The vacancy rate in this product type is at 3.1 percent.
Majestic is looking to fill the gap for the smaller user in the future. Its 200,000-square-foot building that is still in the design stage will be divisible down to 20,000 square feet, Martin said.
Martin said he sees this as really filling a need in the market.