News - January 17, 2023 - by Ray Hagar

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Northern Nevada "industrial eco-system" is shifting east of the Reno/Sparks area, a leading Nevada developer said on Nevada Newsmakers last week.
 
In Southern Nevada, Par Tolles of the Tolles Development Company, added industrial growth could come south of Las Vegas on the Interstate-15 corridor, although that may hinge on federal legislation.
 
"Land is more and more difficult to come by both in Northern and Southern Nevada," Tolles told host Sam Shad. "The Truckee Meadows, if you will, from the airport to north of Stead is getting to the point where it is almost built out.
 
"So we have to go east (in Northern Nevada) and you can talk about all of those budding sub-markets, Silver Springs or Fernley, even Hazen," Tolles continued. "Our industrial eco-system is going to be predominately moving to the east."
 
Tolles is not alone in his assessment. Lance Gilman, the developer of the Tahoe-Reno Industrial Complex, just east of Sparks, said recently on Nevada Newsmakers that Fernley -- 34 miles east of Reno/Sparks -- "is in the epicenter of what is going to happen over the next 10 or 15 years in Northern Nevada."
 
Southern Nevada's future development may hinge on the approval of the Southern Nevada Economic Development and Conservation Act, which was proposed -- then tabled -- in Congress last year by Sen. Catherine Cortez-Masto, D-Nv, after it took heavy fire from rural Nevada representatives.
 
"In Southern Nevada, I think the lands bill has to get passed at some point to allow the opening up of I-15," said Tolles, whose company has purchased about 200 acres off I-15 near in Jean with plans to build a warehouse/distribution center. He said construction will begin in May or June and the real-estate deal on the final 60 acres will close in a few months.
 
"We got lucky," Tolles said about the purchase. "We bought about the only feasible piece of land between Las Vegas and, call it Henderson. In Primm there is some (land for development) but everything else is BLM owned. The path of progress is to the south and the lands bill will be very important for future development."
 
Major international and Eastern U.S. companies are viewing both areas as ideal logistical hubs, which has long been a selling point, Tolles said.
 
In Northern Nevada, logistics have helped secure the Tesla gigafactory, Panasonic and other major corporations at the Tahoe-Reno Industrial Complex. From Reno, businesses can truck almost any cargo to anywhere in the Western U.S. in one day, transportation leaders have said. An Interstate highway and transcontinental rail line also run through the middle of town.
 
"We seem to be the prettiest girl at the dance right now from a West Coast perspective and its kind of what we have been waiting for, for a long time," Tolles said.
 
Surprisingly, Reno is closer to China's capital of Beijing than Los Angeles because Southern California angles inward to the west. Beijing to Reno is 5,918 miles while Beijing to Los Angeles International is between 6,251 or 6,273 miles, depending on sources.
 
Investment money for Reno and Las Vegas is no longer limited to California or the Western U.S., Tolles said.
 
"I would say that it is broader than that," he said. "I would say international money, certainly multiple-family offices across the country, large pension plans and insurance companies are all interested in Nevada. We have four notable large institutional partners around the insurance industry that have put in calls to us in the last six months, for opportunities.
 
"We (Reno) have always been on the radar as a secondary city and for all of the things we have talked about, we can get overnight to 11 western states from Northern Nevada and more of the Southern and Western United States from Las Vegas."
 
Tolles predicts more investment from outside sources will be coming to Reno and Las Vegas in the future because of the areas' logistical advantages.
 
"If you were an East Coast or Midwest Fortune 500 company that needs a West Coast presence and you want to have a logistics center on the east, in the middle of the country and in the west, Reno or Las Vegas will most likely be in your top two or three choices," Tolles said.
 
Development in Nevada, however may be temporarily stymied by rising interests rate, Tolles said.
 
"It is affecting every aspect of the business, every product type," he said. "But short term rates dictate the ability to build. It's been going up. We could be a lot more speculative in the past because we had time to absorb the cost of those interest rates."

THE FUTURE -- Tolles predicted 2023 will be "bumpy" for developers but sees better days in 2024.
 
"I think it is going to be a bumpy 2023," he said. "I think it will be as volatile as 2022. I don't think it will be a crash landing. I think it will be a soft landing but I don't think we'll see a real recovery and it all driven by interest rates.
 
"Interest rates go up really fast and they come down a lot slower," Tolles added. "But I think we'll start to see a break in the interest rates around 2024. We, as a development community, we live and die by that. So it's sad. I think there is a lot of demand out there and a lot of good redevelopment that we could be doing. I think we're all tapping the breaks until we see a softening. We need to know what our building is worth before we build it.
 
" As long as interest rates are moving around, we don't know what that margin is between what we can build it for and exit for," Tolles said. "So we watch that very carefully. I think it is a survivable 2023, bumpy, but survivable. But I think we'll really start to see it turn around in 2024."

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