A local developer is switching gears on a development near McCarran International Airport once pegged for office space with plans to raise a pair of industrial buildings on the site.
Las Vegas-based Marnell Properties broke ground during the first half of January 2017 on two warehouse-distribution buildings totaling more than 133,000 square feet of space at its Marnell Airport Center near Russell Road and Spencer Street, leaving behind plans for more office development at the park.
Greg Wells, president of investments and real estate, at Marnell Properties, said the office sector crashed during the recession and has yet to fully recover.
The group’s adjacent, 200,928-square-foot industrial development it built next to McCarran International Airport is doing well, also leading to the decision to go industrial, he said.
“When we look at the highest and best use of that site, and we look at the fact that the cargo facility is 100 percent leased and occupied, there’s some pent-up demand in that airport submarket for a higher-quality product and some new, contemporary-type warehouse-distribution space,” Wells said.
The group has been busy in that region, besides the one development. Marnell controls most of the development in the airport area: McCarran Marketplace, a 600,000-square-foot retail center at Eastern Avenue and Russel Road; the Marnell Air Cargo Center; and the Marnell Airport Center. When the industrial project is complete, Marnell will have about 1.3 million square feet of industrial, office and retail in its portfolio.
The two industrial buildings now under construction will be the final phase for Marnell’s Airport Center. The 14-acre development is pegged for completion in the third quarter of 2017.
One of the industrial buildings will be more than 74,000 square feet, divisible down to 8,355 square feet, with the other more than 58,000 square feet, divisible down to 7,307 square feet. Already on the site is a three-story, 80,000-square-foot office building and a 6,300-square-foot office building.
The industrial buildings will feature a 28-foot minimum clear height, 9-foot-by-10-foot dock doors, 12-foot-by-14-foot grand level doors and 277/480 volt power.
There has already been some interest in the industrial space from a small manufacturing company and a local company looking to expand. But the leasing efforts have only just started, Wells said.
“We’ve modeled that we’d be leased up within the first 18 months,” he said.
Those vacancy rates for the overall industrial market in the airport submarket have improved — falling to 7.1 percent in the fourth quarter, from 8.7 percent in the previous quarter, according to data from Colliers International Las Vegas.
The region has been ignored as far as industrial development, leading to falling vacancy rates, though new product is in demand, said Mike Delew, executive vice president at Colliers International Las Vegas. As of the fourth quarter of 2016, there is only 218,000 square feet of industrial space planned, including Marnell’s 133,000-square-foot project.
“During 2016, while there was no new construction, the submarket absorbed 40 percent of the industrial vacancy that existed at the end of 2015, taking vacancy from 11.4 percent down to 6.9 percent,” Delew said. “There are some large blocks of vacant space within the submarket that have been difficult to absorb and will remain so. However, demand for quality product within the submarket should remain strong and it is likely we’ll see another meaningful dip in the vacancy rates by year end 2017.”
Industrial, in general, has been on the move now for the last couple of years.
At the end of 2014 is when a dry spell in the industrial sector started to fade in Las Vegas. At that time, Prologis broke ground on a more than 460,000-square-foot project in North Las Vegas at Pecos and Gowan roads. And the building was quickly leased before being completed. Since, millions of square feet of industrial space has been completed, is under construction or in the planning stages in the valley.
According to data from Colliers International Las Vegas, there is 4.1 million square feet of industrial projects under construction in the valley, most planned for completion in the next 12 months. An additional 7.1 million is also set to break ground in 2017.