A big furniture designer and manufacturer will open a nationwide distribution center in North Las Vegas this fall.
Southern Enterprises of Dallas has agreed to take nearly 150,000 square feet inside Dermody Properties' LogistiCenter at Cheyenne, Dermody officials announced Thursday.
But the deal is more than a simple lease. Local brokers say it could also be a small but first step in building up an important, local sector. And it shows that demand for speculative industrial space is as strong as developers have advertised, at least for now.
For Dallas-based Southern Enterprises, which sells through Target, Wal-Mart, Home Depot, Kohl's and Amazon, demand came from a need to supplement its lone distribution facility in Carlisle, Pa. The company will fill 25 percent of orders from the local plant, which will employ at least 10 workers. The center will put the company closer to West Coast markets in particular, said Chief Financial Officer Gary Horowitz.
Though the building will serve as a distribution center, having Southern Enterprise here is "a tiny peg in the slot toward bringing manufacturing here," said Dan Doherty, senior vice president of Colliers International's local office and a broker for Dermody.
"Anytime we deal with a furniture retailer or wholesaler, it maybe helps us build that bridge to someday bringing manufacturing here," he said. "Maybe a few more furniture companies look at the market, and we do end up with some manufacturing, because that's the missing link in the Southern Nevada economy. We make almost nothing and consume massive amounts of everything."
Southern Enterprises inked its lease in July, just as LogistiCenter's walls were going up. Among spec buildings, which often don't sign tenants before completion, it was an unusually early agreement, said Brendan Egan, Dermody's West Region development director.
"It's a validation of what the market is doing. There's pent-up demand," Egan said.
The 382,000-square-foot LogistiCenter, at Cheyenne Avenue and Lincoln Road, is now nearly half leased. Reno-based Dermody is mulling offers on the remaining space and will likely have the entire building leased upon completion in October, Egan said.
The building follows other successful, local spec buildings. Prologis broke ground on a 464,000-square-foot building at Pecos and Gowan roads a year ago, and leased it before completion to electronics company Systemax. It also already has a taker for a 153,000-square-foot building under construction next door.
"Every new spec building we've seen recently has been leased prior to completion," Doherty said. "This is another step in the right direction, and hopefully, the next buildings under construction will see strong preleasing activity as well."
Local statistics from Colliers show as many as 5 million square feet of industrial development on tap in the next 18 months, most of it in warehouse and distribution.
Dermody, which has built more than 4 million square feet locally in the last 40 years, is looking at land for more development, Egan said.
He added that Dermody is "watching the market very closely" for signs of overbuilding, but research from Colliers indicates strong demand for space. Tenants leased 1.86 million more square feet of space than developers built in the second quarter, for the market's best net absorption since the first quarter of 2007. Vacancy has returned to a normal 6.6 percent.
Not that there'd be anything wrong if some of the market's spec space sat on the market for a bit, Doherty said.
"At what point does supply start to exceed demand, and by how much? It will absolutely happen," Doherty said. "We will not build for the next two to three years and have every building leased up by the time it gets a certificate of occupancy. There will be some spillover, but we hope it's a healthy amount. For any market to grow, it does need readily available space, because not everyone can wait five or six months for a building."
Wil Chaffee and Eric Larkin of brokerage NAI Vegas represented Southern Enterprises in the lease. Dermody's financial partner was Hillwood Investment Properties.