Southern Nevada gains more warehouses, distribution centers
A boom in e-commerce and a competitive advantage to California is helping to put Southern Nevada on the map for Amazon-type warehouses and distribution centers.
“There is currently about 4 million square feet of industrial/distribution space under construction and another 4 million square feet planned, or to be constructed in the next 18 months,” said Garrett Toft, first vice president with commercial brokerage CBRE Las Vegas.
“All of the sudden, whether it’s site selectors or the companies themselves considering distribution center (location) alternatives, Las Vegas is on the map,” he said, adding that between 2007 and 2014 Las Vegas did not have see any new construction of buildings that could accommodate e-commerce.
“The economy wasn’t there,” he said. “We didn’t have even speculative construction, so even if there was a requirement (demand) out there, we didn’t have a building that was large enough available that they could take a look at.”
Now online apparel company Fanatics is setting up a 400,000 square foot distribution center at the Northgate Distribution Center industrial project developed by VanTrust. Bed Bath and Beyond will be moving into a 525,000 square foot distribution enter in the Logistics Center currently being developed by Prologis. Several more “exciting announcements” are in the pipeline, but negotiations are still underway, Toft said.
A strong and growing e-commerce market is fueling industrial construction activity, he said.
“If (companies) are looking into e-commerce, they’re too late. They have to be doing it,” said Samuel Schaul, real estate broker and owner of Samuel Schaul Co. Inc.
“It’s growing geometrically … it’s is not just (in) the two coasts, it’s everybody in between.”
ON THE MAP
Southern Nevada’s transportation costs and labor pool is attracting distribution centers, Toft said.
“If you look at a large e-commerce company, it’s the total supply chain costs that they’re looking at. The big factors in that are transportation, which is about 50 percent of the supply chain costs, and labor, which is about 20 percent of supply chain costs,” he said, adding that rent is only about 5 percent of supply chain costs.
Las Vegas has “favorable transportation” costs, he said, because Las Vegas is a consumption-based city.
“We don’t produce a lot here, so the trucks come in full and they don’t all leave full,” which helps to keep outbound transportation costs relatively low, he said.
Las Vegas also has a large pool of minimum-wage labor.
The typical e-commerce distribution center is about 500,000 square feet and employs about 500 people, he said.
“These facilities may run nine months out of the year with 500 employees, but for three months out of the year, Christmas season, they’ve got to double their employee count,” Toft said. “Employers have got to make sure that they can hire. If you can’t staff up for the biggest season you’re going to lose a lot of sales.”
Nevada’s labor pool may look extra enticing when compared to California’s, where the minimum wage is slated to reach $15 an hour by 2022 for businesses with more than 25 employees, and by 2023 for smaller businesses.
MORE JOBS COMING
When companies make an investment on a 500,000 square foot e-commerce facility, they’re typically looking at a ten-year commitment, Toft said.
A March CBRE Research report found that a $1 increase in the minimum wage translates to a 40 percent increase in rent on a 500,000 square foot industrial facility, and a $1 million rise in annual labor costs.
“You can continue to see companies that are looking regionally select Las Vegas as an alternative,” Toft said. “You’ll continue to see developers purchase land and construct projects, both on a speculative and built-to-suit basis to accommodate these large requirements.”
That means more jobs for contractors, architects, engineers, real estate professionals and ultimately new company employees.
Contact Nicole Raz at nraz@reviewjournal.com or 702-380-4512. Follow @JournalistNikki on Twitter.
