More space needed to attract businesses
As Southern Nevada works to diversify its economy, here’s one thing that’s holding us back, costing us jobs and making us less competitive: Our region simply does not have enough existing, large industrial buildings required by many of the businesses that want to relocate here. Supply isn’t meeting demand. As a result, we missed out on as many as 18,000 jobs in the past year.
Think about that for a moment. Companies that could’ve provided thousands of jobs here went somewhere else, largely citing lack of suitable large industrial space as the primary reason for not locating here.
In a study the Las Vegas Global Economic Alliance released last week with RCG Economics, we examined the cumulative demand for large industrial buildings. Major real estate brokers see some of the need; economic development groups and developers see some as well. But when you put the cumulative data together, the results are surprising and demand a call to action.
According to our study, which can be accessed online at lvgea.org/news/, more than half (52 percent) of the large industrial businesses that considered relocation last year were in the manufacturing industry. These business typically offer high wages and provide significant capital investment.
They are the high-value companies we should be proactively designing our communities to attract. Yet, almost all of them (94 percent) identified a lack of building inventory as a reason why they did not choose Southern Nevada.
It’s true that more than one in 10 industrial buildings in our region is vacant. However, the vast majority of these vacancies are smaller sites. In the fourth quarter of last year only five buildings with more than 175,000 square feet were available. That number is even less today. We have buildings, but we don’t have the right buildings.
To make matters worse, our competition is moving quickly to advance speculative projects and capture clients that should be located in Southern Nevada. The Inland Empire is constructing 16.7 million square feet of large industrial buildings right now. Phoenix is constructing 4.4 million square feet of industrial space. In our region, we have only 1 million square feet currently under construction, and all of that space has already been leased or purchased.
Why is our market out of balance? According to our study, Southern Nevada needs to increase the amount of privately held land, increase industrial zoning and decrease permitting process times. New policies should encourage less land speculating and more building. And we need reasonable land prices and financing options for our developers to work with.
I’m very hesitant when it comes to making recommendations about what type of buildings should be constructed. However, our market right now is significantly out of balance. Given the long lead time for new construction, a lack of action now could lead to years of missed opportunities.
Therefore, it seems sensible to once again start constructing large industrial buildings on the basis that high demand will make such speculative projects good bets. In short, build it and they will come.
The good news here is that we can fix this problem. We can capture more of the jobs that employers want to bring to Southern Nevada. Better information and a recognition of missed opportunities are steps in the right direction. However, the real solution requires a community-wide effort to overcome key building obstacles and a willingness of developers to once again bet on Southern Nevada.
Jonas Peterson is chief operating officer at the Las Vegas Global Economic Alliance, a regional nonprofit group whose mission is to grow the Southern Nevada economy through connectivity, community development and aggressive business recruitment, retention and outreach.
