Report: Las Vegas has diminishing supply of land available for industrial development

The diminishing supply of land available for industrial development in Las Vegas is going to hurt employment growth and stifle economic diversification, the executive director of Theodore Roosevelt Institute said today.

Las Vegas has 1,360 acres suitable for large-bay distribution and warehouse development, about a five- to seven-year supply, according to an 86-page study from the Irvine, Calif.-based research center.

A tight industrial market pushes rental rates up, leaving freight and distribution companies at a 5 percent cost disadvantage for doing business in Las Vegas, said Alan Schlottmann, executive director of TRI and author of the report.

“That 5 percent is enough to tip the balance with regard to manufacturing jobs and the type of diversified jobs people want to see in this community,” he told 350 members of the Southern Nevada chapter of National Association of Industrial and Office Properties, which commissioned the study.

A cost difference of 5 percent to 7 percent can have a negative impact in the 15 percent to 20 percent range on employment growth and per capita income growth, Schlottmann said.

For example, the study points out that a modest reduction of just 3 cents a square foot in rental cost per month eliminates 72 percent of the difference in shipping from other markets.

The total amount of acreage that is available for industrial development in Las Vegas has been hotly debated for years. Much of the vast desert that people see flying into Las Vegas or driving along Interstate 15 is owned by the government. Areas such as Apex to the north and Ivanpah Valley to the south are years away from development, a panel of local real estate experts said.

The TRI report identifies 6,619 acres of vacant industrial land, but then takes out all of the parcels that are under 10 acres, which are too small for big-box development. Other parcels have topographical constraints, lack necessary infrastructure or bump up against residential development.

Rick Myers of Thomas & Mack Development Group said people drive to Primm and see a swath of land on the west side of I-15 that’s 10 miles long and 2 miles wide, perfect for industrial development.

“It’s off the table. It’s the desert tortoise translocation. You can’t touch it,” Myers said.

The industrial and office properties group has long expressed concern about a material shortage of industrial land and how it will affect the future of Southern Nevada’s economy.

This shortage will generate “severe price differentials” between Southern Nevada and regional competitors such as Phoenix and the Inland Empire area east of Los Angeles, said Ralph Murphy, past-president of the group and member of the study’s steering committee.

The organization has lobbied city and county officials to set aside land with “hard zoning,” or designated industrial zoning that cannot be changed to residential or light commercial.

The TRI report provides an independent, third-party analysis of the economic impact on Southern Nevada from limitations on goods distribution facilities and capacity. It compares the costs of labor, utilities, rent, freight rates and state corporate taxes in five major cities in the Southwest.

Kevin Higgins of Voit Commercial Brokerage said he hopes the report will help convince lawmakers about the need for industrial land in Las Vegas.

“Before, there was either disbelief -- how can you run out of land -- or what’s in it for you? Oh, it’s brokers whining about not making any money,” Higgins said. “Maybe the politicians are right. What does it mean, other than we can’t build any more warehouses? We could not quantify that.

“What we uncovered is the impact is far greater than we thought. We were yelling, ‘Smoke in the theater.’ There might be a little flame to it now.”

Higgins said the area around Las Vegas Motor Speedway, with asking land prices of $10 to $12 a square foot, will allow for short-term industrial development, but that’s not going to last.

Rental rates are in the 40-cent range in North Las Vegas, 50-cent range in Henderson and topping 60 cents in the airport submarket, he said.

“Not too many guys from L.A. say I need to be at Decatur (Boulevard) and the 215 (Beltway) and pay 60 cents,” Higgins said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.