27 Jan CEO Michael Russell shares industry insights with the Northern Nevada Business Weekly
United Construction CEO Michael Russell recently participated in a Q&A with the Northern Nevada Business Weekly (NNBW) about the trends in development that we are seeing locally. According to Michael, we are seeing an increased focus on sites that require complicated entitlements and grading.
Text below copied directly from the NNBW article:
Q&A with United Construction: Industrial development outlook
United Construction CEO Mike Russell recently discussed the future of the Northern Nevada industrial market with the NNBW and provided insight into development efforts and the strength of the market for 2021 and beyond. Below is an interview with Mike, slightly edited for clarity.
United Construction CEO Mike Russell believes investors will continue to view the industrial real estate sector as a safe haven for strong investment in Northern Nevada.
NNBW: What factors will impact the industrial market as we move through the year?
Russell: We will continue to have COVID impacts such as personnel health, material supply chain issues and potential project schedule delays. In the last several months we’ve started to see significant material cost escalations related to steel, lumber and sheathing in the industrial sector.
The increase in home building across the country, combined with steel and lumber mill capacities, has created high demand for dimension lumber, sheathing and steel-related construction products (rebar, steel piping, structural and miscellaneous steel, etc.).
This increased demand has created price volatility and escalations which have driven industrial construction costs 5 to 10 percent-plus higher just over the last few months. We’ll keep watch on these cost escalation trends to see if they hold at recent higher levels, or if they recede with future home building and industrial construction demand.
NNBW: Site availability in Greater Reno-Sparks is at a premium. How does limited availability of easily developed sites impact new projects?
Russell: I believe we’ll see a few trends. Over the years here in the Truckee Meadows, industrial development has typically gravitated to sites that have simple entitlements and somewhat flat topography.
One trend we’re seeing is development on sites that require more complicated entitlements and grading.
This trend will drive development delivery timelines longer and project costs higher. Industrial development will look east of Reno-Sparks in TRIC, Fernley and beyond to have more industrial land inventory and potentially less site acquisition and development costs.
We’ll still see industrial development at appropriately zoned infill sites throughout Reno-Sparks over the coming years, and developers will get creative at multiple property site assemblies to accommodate industrial development where possible.
NNBW: How will the ongoing pandemic and social distancing guidelines impact work operations across the county?
Russell: Unless the pandemic gets worse, we don’t anticipate much impact from what we’re already experiencing. We require daily health screening, masks, social distancing, health and safety practices per local and federal guidelines. COVID has already slightly impacted some of our project schedules and material deliveries since Q2 of 2020.
NNBW: Will 2021 be a good or bad year for the regional industrial market?
Russell: Industrial development has a strong future in Northern Nevada for the following reasons:
- In our current COVID environment, industrial, food, e-commerce and last-mile demand is very strong since people are staying home and ordering goods and food online for local pick-up or delivery.
- Northern Nevada is experiencing a major influx of businesses and people from around the country (a high portion from California), which will continue to diversify and strengthen our local economy. That in turn will require more industrial sector support.
- While developers are feeling the impact of construction and land acquisition cost increases, exit cap rates are at all-time lows. Industrial lease rates also are/will be rising.
- As has been the case for many years, investors view the industrial real estate sector as a safe haven for investment, which is truer today than ever since retail and office sectors are suffering higher risk.