‘Tread very carefully’: Southern Nevada’s once-roaring industrial market hits brakes

JEAN — A few years ago, a horror studio filed plans to film a post-apocalyptic movie in Southern Nevada, albeit far from the glitz of the Strip: It picked an empty hotel in Jean.

The shuttered Terrible’s resort in this remote outpost south of Las Vegas was slated to be torn down for a new industrial park. But today, the hotel tower is still standing amid a sharp slowdown in the warehouse market, and the blighted building fits well with the movie that was penciled for the site.

Its ground-floor windows are boarded up, some windows on higher floors are broken, the parking lot is laced with weeds, and the back of the building is charred, following a fire. A portion of the resort was already demolished, but now, an exposed staircase surrounded by mounds of rubble leads to nowhere.

Reno developer Par Tolles, who bought the property and surrounding land for the industrial park, said he is still bullish on Las Vegas and the site in Jean.

But with Southern Nevada’s industrial vacancy rate sharply higher than it was just a few years ago, he doesn’t want to build in this environment and is looking to start construction next year.

When vacancies are in the double-digits, as they are now, developers should “tread very carefully,” he said.

Southern Nevada’s once-roaring warehouse market has hit the brakes. More buildings are sitting empty, developers have cut back on new projects, and real estate pros say that landlords are offering months of free rent and other perks to land tenants.

Deals have not come to a halt. But overall, tenants aren’t leasing as much space anymore, after developers packed the region with new warehouses in recent years.

Southern Nevada’s industrial vacancy rate, which was only around 2 percent in 2022, is now 11.5 percent, the highest level in more than a decade, according to commercial real estate tracker CoStar.

“Everybody’s competing for the same tenants,” said industrial broker Jarrad Katz, president of MDL Group.

Las Vegas is not alone, as other industrial markets have also slowed.

“This is absolutely part of a larger trend playing out nationally,” said Danny Khalil, associate director of market analytics at CoStar.

Speed up, then slow down

Las Vegas’ warehouse market, once heavy on firms that trucked food, linens and the like to hotel-casinos and convention halls, expanded for years before the pandemic sent it into overdrive.

The public health crisis sparked an accelerated shift to online shopping that fueled demand for distribution space. Warehouse developers launched waves of new projects, often without tenants lined up first, and quickly filled their buildings.

Locally, around 17.6 million square feet of industrial space was under construction in the fourth quarter of 2023, up from about 6.5 million square feet in the first quarter of 2020, CoStar reported.

Like any real estate boom, the market was bound to slow at some point, and last year, it did. Developers pulled back in Southern Nevada amid high borrowing costs, and the vacancy rate climbed fast.

John Stater, Las Vegas research manager for brokerage firm Colliers International, has reported that a slowdown in pre-leasing for new projects pushed up the overall share of empty space last year.

All told, Southern Nevada’s “explosive industrial growth might finally have caught up to it” at the end of 2024, he wrote in a report.

According to CoStar, Las Vegas’ industrial vacancy rate was 9.8 percent in the fourth quarter of last year, up almost three-fold from a year earlier.

Also, 8.4 million square feet of space was under construction in the fourth quarter of 2024, down by more than 50 percent from the year before.

Lincoln Property Co. regional partner David Krumwiede, who oversees Nevada and other states for the developer, said that if tenant demand softens even a little in high-growth markets like Las Vegas, the vacancy rate will climb “pretty dramatically.”

Construction then slows, but with tenants still taking space, this pushes the vacancy rate down. And then, Krumwiede said, it might make sense to build again.

‘Big wet blanket’

As it stands, Southern Nevada’s warehouse sector is still pumping the brakes.

Developers have delivered empty buildings in a market that no longer has the demand from the pandemic boom, according to industrial broker Amy Ogden, a partner with Logic Commercial Real Estate.

President Donald Trump’s whipsaw tariff policies haven’t helped, as several sources noted that the trade wars have cast a cloud over the industrial market.

The first half of this year was “really quiet” amid all the uncertainty around tariffs, Ogden said.

Katz, of MDL, said that suppliers were spooked by tariffs and that many of them raised prices.

Calculations for new projects have been thrown into flux, and tenants may question whether to invest in new space when costs are “such a moving target,” said Owen Sherwood, vice president of commercial sales with Fidelity National Title in Las Vegas.

Krumwiede, of Lincoln, said the “noise” around tariffs has prompted many tenants to hit pause or slow down.

Tolles, founder of Tolles Development, said that amid elevated interest rates and the Trump administration’s “erratic” tariff strategy, the industrial market has been covered with a “big wet blanket.”

‘Battle of Absolute Dominion’

In 2022, during Southern Nevada’s warehouse boom, Tolles laid a big bet on a small pocket of the region.

That February, Clark County commissioners approved plans that called for a 1.9 million-square-foot warehouse and distribution complex on more than 140 acres along Interstate 15 in Jean. The town is some 25 miles southwest of the Strip, and its only residents are in Jean Conservation Camp, a state prison that houses 240 female inmates.

Tolles’ project site encompassed vacant land and other real estate, including the Terrible’s hotel-casino property, which had been closed since the onset of the pandemic.

About a week after he secured the approvals, Tolles closed his $44.7 million purchase of the site.

Tolles Development partner Cory Hunt has pointed to its proximity to Southern California and distance from the Las Vegas Valley’s traffic congestion.

As he previously described it, truckers leaving the ports of Los Angeles and Long Beach can drop off products in Jean and get back in a one-day round trip, without having to stay overnight in compliance with federal work-hours guidelines for truck drivers.

Meanwhile, producers of “The Battle of Absolute Dominion” also applied to the state of Nevada for more than $1.8 million in tax breaks as part of their plan to film the post-apocalyptic movie at the Terrible’s hotel property.

The application, which came before the since-renamed Nevada Film Office in spring 2022, said the movie had already secured distribution through Netflix. It also provided a summary of the plot.

In 2085, cities across the globe have been annihilated after religious terrorists nearly destroy the world. To save humanity, the United Nations adopts an idea suggested by a popular online comedian: a no-holds-barred martial arts tournament.

Tolles Development’s website says the project in Jean is called South Vegas Industrial Center and describes it as a 200-acre development with more than 2.6 million square feet of industrial space.

Tolles said that he doesn’t like the hotel’s currently blighted look and that it will eventually get torn down. He also noted it had a fire several months ago that was quickly put out.

Overall, he said he still loves the project site, even more now than when he bought it. But he figured that tenants need to take more space in buildings before developers put up more projects.

There is still activity in the market, including with data centers. But, he said, regular logistics buildings have “really hit a standstill.”

Contact Eli Segall at esegall@reviewjournal.com or 702-383-0342.