The agency that supplies water to roughly 2 million residents and 40 milllion annual visitors will now try its hand as landlord.
The Southern Nevada Water Authority has taken on its first tenant and plans to lease more unused space at its downtown headquarters.
The valley’s wholesale water supplier has about 30,000 square feet of vacant office space scattered throughout the five floors it owns in the Molasky Corporate Center, a 14-story office complex at the corner of City Parkway and Ogden Avenue, southwest of the Spaghetti Bowl.
“I would venture to say that as much of that space as we can lease we will lease,” water authority general manager Pat Mulroy said.
The authority also leases two other floors for a total of about 182,000 square feet in the building. All of the floors are at least partially occupied by staff members from the authority and its largest member utility, the Las Vegas Valley Water District.
When the deal was struck in 2004, the authority intentionally secured more space in the building than it needed because the agency was growing along with the rest of the community, Mulroy said.
With the benefit of hindsight, she said, the authority probably shouldn’t have bought or leased as many floors as it did.
“But sitting in 2004 who knew 2008 was going to happen?” Mulroy said, referring to the region’s economic collapse.
Last week, authority board members approved the first lease of vacant office space in the Molasky building – 3,000 square feet to the firm of Faiss Foley Warren. The deal will bring in about $72,000 a year.
“It’s a step in the right direction,” said Clark County Commissioner Steve Sisolak, who serves on the water authority board and pushed for the agency to lease its extra office space.
But outspoken water authority critic Ed Uehling trashed the two-year lease, calling it a sweetheart deal for a private company. Whoever drew it up should be fired, he said.
“To me, this lease is criminal, and it is made to a very juiced-in law firm in this valley,” he said.
Faiss Foley Warren specializes in public relations and government affairs. The firm is under contract with the authority to market the agency’s water-smart landscaping program.
Mulroy said Faiss Foley Warren did not get a special deal on its lease because of its business relationship with the authority, nor will being a tenant give the firm a leg up on future consulting contracts.
The roughly $2 per square foot the firm will pay “reflects the going rate for space in office buildings in today’s market,” Mulroy said.
She added that the lease price does not include janitorial services.
Market analyst Brian Gordon couldn’t speak to the specifics of the lease, but he said current conditions are tilted squarely in favor of tenants.
“The office market is struggling to find a bottom,” said Gordon, a principal at the research firm Applied Analysis. “Absolutely it’s a renter’s market.”
It’s a simple matter of too much supply and not enough demand. The vacancy rate for commercial space valleywide stands at an all-time high of more than 25 percent, and the rate for professional office space is even higher at nearly 28 percent, Gordon said.
That said, the authority’s first lease for vacant space in the Molasky building appears to be well below the going rate for high-end office space downtown, which now sits at about $2.64 per square foot.
Gordon noted, however, that the $2.64 figure includes janitorial and other services and represents the average asking price, not the final price currently being negotiated in this tenant-friendly market.
For the two floors it leases in the Molasky Corporate Center, the water authority is locked into 2004 prices ranging from $2.90 to $3.15 per square foot.
The authority charges the water district $2.12 per square foot for the space it leases in the Molasky building.
The authority entered into its current 20-year, lease-purchase agreement with the Molasky Group in 2004, before the building was constructed.
A few months after the building opened in 2007, authority officials decided to buy five of the seven floors they were leasing, claiming the move would save the agency about $1.9 million annually over the next 20 years.
At the time, Molasky Group officials said they were taking a bath on the deal because the building wound up costing considerably more than expected. As a result, the authority paid a guaranteed price of $34.6 million for five floors that cost about $50 million to build, company officials said.
Contact reporter Henry Brean at firstname.lastname@example.org or 702-383-0350.