Riding the Wave of Industrial Demand
(Las Vegas) ~ By Jonas Peterson,
CEcD Chief Operating Officer
Great communities and great surfers share a common skill. They both have an uncanny ability to look out over the horizon and position themselves for a ride on the next big wave. In Southern Nevada there are a few monster economic waves on our horizon. If we can position ourselves quickly, I believe we have the opportunity to transform our economy and enjoy the glide down the barrel of a killer set.
Earlier this month, LVGEA and RCG Economics released a study showing a new wave of demand for large industrial buildings has already hit. Over the past 12 months we missed out on up to 151 businesses and 18,000 jobs. That wave would have been a good ride, no doubt. However, I believe it is only an “ankle biter” compared to the “Bombora” wave that has yet to hit. The recession delivered a painful blow to our industrial real estate market. But underlying economic drivers such as rapidly increasing consumer spending, changing distribution patterns, functionally obsolete existing space and land constraints have spurred demand in our region across the nation. In fact, according to a recent NAIOP Industrial Space Demand Forecast, “the U.S. industrial market is poised for significant growth, with annual net absorption forecast to reach 175 million square feet in 2014.”
Another report, authored by Colliers International last fall showed that industrial buildings world-wide are nearing full operating capacity. The same report showed that recent shifts in supply chain preferences have made almost 40 percent of the entire U.S. warehousing supply obsolete.
Instead, many large retailers are moving to modern storage and distribution space that is aligned with major ports, intermodal rail facilities and air cargo/e-commerce fulfillment paths.
According to research by Cushman & Wakefield, the type of cutting-edge distribution centers now in demand often cost up to three times as much to build and require three times as many employees to operate as a traditional warehouse. Online retailers now favor large population centers near FedEx or UPS hubs with an abundant seasonal workforce. They need to be located near an affordable labor force and have access to rail, highways, and air transportation. Together, all of these indicators point to a rising tide and more incoming waves of industrial demand for Southern Nevada. We have the labor force, market access, air cargo capacity, and population growth these new companies are looking for. Last year alone, we know up to 151 large industrial firms expressed interest in relocating to our region. Another wave is breaking. I hope we have a great surf story to tell after it has crested.