Large-scale industrial development in Northern Nevada is moving at a very slow pace compared to the frenetic activity of the past few years, but industrial developers are still finding opportunities to build smaller warehouse spaces that can be subdivided into smaller industrial tenants.
Moore Capital of Dallas and Standard Real Estate Investments of Los Angeles recently announced a partnership to build a speculative industrial building in the North Valley. Construction on the 188,000-square-foot building on 11 acres at 9865 N. Virginia St. is scheduled to break ground next month and be completed by summer 2025, according to Tom Theobold, senior vice president of development and custom housing for Moore Capital.
Theobald added that the project makes sense at a time when industrial land is becoming more vacant and construction activity is slowing, due to a shortage of new Class A industrial product that can be divided into smaller spaces larger than 40,000 square feet.
“Our strategy here is to take advantage of the slowdown in construction activity that’s already begun,” Theobald said. “Between now and the end of 2025, we’re going to have about 1.4 million square feet of new space delivered (in Northern Nevada). If you compare that to historically, which has been around 2.5 million to 4 million square feet per year. Our view is that next summer, when we deliver this project, we’re going to be in a very supply-constrained environment.”
“The North Valley submarket is a tight vacancy market and we do have a smaller user that prefers that submarket, so we designed this building to accommodate that,” Theobald added, “But because we’re doing this project in a supply-constrained environment, we feel like there may be a chance that we only have one tenant. That’s our strategy, and we’re hopeful that when we’re done, the (rental) rates will be even better than what we’re currently underwriting.”
Tom Theobald
Robert Zhu, CEO of Standard Real Estate Investments, told NNBW that Standard has been looking for investment opportunities in the West for quite some time, and the North Valley industrial project marks the first partnership between Standard Real Estate Investments and Moore Capital.
“We’re excited to be working with a really high-quality organization,” Jue said. “We’ve been following Mohr Capital for a while, seeing what they’ve done in (Northern Nevada) and other markets, and we’ve been looking for the right opportunity to build a relationship with them.”
“We’ve been trying to find something on the West Coast for a while and have been looking at various markets in California, the Pacific Northwest and the Southwest. Reno is a growing market that’s strategically located, but not as expensive as many of our other markets.”
Jue said the region’s lack of new Class A industrial facilities aimed at smaller industrial or flex tenants is a trend similar to that across the country, as developers are building larger, larger industrial facilities that are generally designed for single tenants.
“Tenants under 100,000 square feet are chronically underserved, so we have an opportunity to add additional supply in that space,” Jue said. “Big box stores don’t make much sense right now, so that’s where the big opportunity is. So that’s what we’re focusing on across the country, but especially in Reno.”
CBRE’s Greg Shutt is handling leasing for the industrial building.
Financing for the facility came from Stearns Bank of Minneapolis and closed in June, Theobald said. Though Moore Capital and Standard Real Estate Investments both have long and successful real estate track records across a broad range of commercial real estate, securing a construction loan remained difficult, Theobald said.
“Mohr Capital has very strong relationships with banks, and having a partner like Standard on board was extremely helpful for this project,” he said. “The challenge was getting lending institutions to work with us. We had a lot of loan committees telling the team, ‘We can’t get any more construction financing. Our balance sheet doesn’t allow us to get financing at this time.’ We found Stearns, and Stearns was the perfect fit for this project.”
Robert JueFCL Builders’ Sacramento office will be the general contractor for the North Valley Industrial Building, and Theobald said extensive grading is expected to begin this month with a 12-month construction period.
Theobald said Moore Capital and Standard Real Estate Investments were able to lock in the price for the facility, a new development from years past, when price hikes due to labor shortages and soaring material costs were commonplace.
“Two years ago, it was impossible to get a contract from a general contractor for more than a few weeks and lock in construction costs,” he says, “and even if you did get a contract, you’d get a call that a subcontractor had increased their price, and costs would just go up and up.
“The current environment in the construction industry is very different,” Theobald added. “We were already able to lock in the price earlier this year, and they (FCL Builders) kept the price the same when the deal was awarded in June. Also, before, delivery of materials was always an issue, as was getting HVAC equipment, electrical subpanels, etc. That’s not the case now.”
This isn’t Moore Capital’s first venture in Northern Nevada. In 2022, the privately held company entered the Northern Nevada industrial market with a roughly 600,000-square-foot industrial building. That property was sold to Dallas-based Dalfen Industrial in 2023. Moore Capital also owns 23 acres in Fernley, next to Fernley’s Pilot Travel Center.
The site is slated for 415,000-square-feet of speculative industrial development, but there is no timetable yet for construction of the facility, Theobald said.
