Big box industrial development in Northern Nevada has slowed to a snail’s pace compared to the frenetic activity of the past few years, but industrial developers still see opportunities to build smaller warehouse spaces that can be divisible to smaller industrial tenants.
Mohr Capital of Dallas and Standard Real Estate Investments of Los Angeles recently announced a partnership to construct a speculative industrial building in North Valleys. The 188,000-square-foot building on 11 acres at 9865 N. Virginia St. is expected to break ground in the next month and be completed by summer 2025, said Tom Theobald, senior vice president of development and build-to-suit at Mohr Capital.
The project makes sense in a time of increasing industrial vacancy and downturn in construction activity because there’s a dearth of new Class A industrial product that’s divisible into smaller spaces of 40,000 square feet or larger, Theobald added.
“Our play here is taking advantage of the slowdown in the construction activity that’s already started,” Theobald said. “There’s going to be approximately 1.4 million square feet of new space delivered (in Northern Nevada) between now and the end of 2025. Compare that to what historically has been occurring, which is somewhere between 2.5 million and 4 million square feet annually. In our minds, there’s going to be a very supply-constrained environment next summer when we deliver this project.
“The North Valley submarket is a tighter market with respect to vacancy, and there’s smaller users that like that submarket, so we designed this building to accommodate those users,” Theobald added. “However, we also feel like there’s a probability, because we’re delivering this in hopefully a supply-constrained environment, that we might just get one tenant. That’s our strategy, and when we get it completed hopefully (leasing) rates are even better than what we’re underwriting right now.”
Tom Theobald
Robert Jue, chief executive officer of Standard Real Estate Investments, told NNBW that Standard had been searching for investment opportunities in the west for quite some time. The industrial project in North Valley’s is Standard Real Estate Investment’s first partnership with Mohr Capital.
“We’re happy to be working with a really quality organization,” Jue said. “We’ve been tracking Mohr Capital for a while and seeing what they’ve been doing in (Northern Nevada) and other markets, and we have been looking for the right opportunity to get into a relationship with them.
“We’ve been trying to find something on the West Coast for a while, and we’ve looked at all the different markets throughout California, the Pacific Northwest and the Southwest. Reno is a good growing market that’s strategically located, yet it’s not as expensive as a lot of other markets.”
Jue said that the region’s lack of new Class A industrial facilities targeted to smaller industrial and flex tenants is a theme mirrored across the country as developers by and large constructed larger big box industrial facilities designed for single tenants.
“The under 100,000 square-foot tenants have sort of chronically been underserved, and there’s an opportunity to provide additional supply for that space,” Jue said. “Right now, that is the big opportunity since the big box stuff might not make as much sense, and so that’s what we’re focused on across the country and in Reno in particular.”
Greg Shutt of CBRE will handle leasing for the industrial building.
Financing for the facility came from Sterns Bank of Minneapolis and closed in June, Theobald noted. Even though Mohr Capital and Standard Real Estate Investments both have long track records of successful real estate ventures across a range of commercial real estate, securing a construction loan still proved challenging, Theobald said.
“Mohr Capital has very strong banking relationships, and having a partner like Standard on board was very helpful for this project,” he said. “The challenge has been getting lenders to step up – a lot of loan committees are telling their teams, ‘No more construction loans; our balance sheet doesn’t allow us to do it right now.’ We found Sterns, and we were a very good fit for them for this project.”
Robert Jue
FCL Builders Sacramento office will be the general contractor on the North Valleys industrial building. Mass grading is expected to begin this month, with a 12-month construction window, Theobald said.
Mohr Capital and Standard Real Estate Investments were able to lock in pricing on the facility, Theobald said, which is a new wrinkle compared to previous years, where price escalations were a routine occurrence as labor availability tightened and materials prices escalated.
“Two years ago, locking in a construction price was impossible to get more than a two- or three-week commitment from a general contractor,” he said. “And even then, you would get the call that their subs have increased their prices, and costs would just keep going up and up.
“The environment now in the construction industry is much different,” Theobald added. “We were able to lock in our price as far back as early this year, and they (FCL Builders) still committed to it here in June when we closed. Also in the past, delivery of materials was always an issue, as was the ability to obtain HVAC equipment, electrical sub panels and that sort of stuff. That’s not so much the case now.”
This isn’t Mohr Capital’s first venture in Northern Nevada – the company. In 2022 the privately held company entered the Northern Nevada industrial market with a nearly 600,000-square-foot industrial building. The facility was sold in 2023 to Dalfen Industrial of Dallas. Mohr Capital also has 23 acres in Fernley next to the Pilot Travel Center in Fernley.
A 415,000-square-foot speculative industrial development is slated for that land, though a timeline for construction of the facility has yet to be established, Theobald said.