Reno Industrial 3Rd Quarter Market Report - 2006

Colliers International Market Report industrial Reno, Nevada 3rd Quarter 2006

Reno Industrial 3rd Quarter Market Report - 2006

OVERVIEW The industrial vacancy rate this quarter increased seven Average Asking Rents tenths of a percent to 5.4%. The direct vacancy rate is 4.5% and the sublease vacancy rate is nine tenths of a percent. 5,000 to 10,000 SF $0.69 The sublease vacancy rate remained unchanged since last 10,001 to 25,000 SF $0.67 quarter and the overall increase was in direct vacancy. 25,001 to 50,000 SF $0.36 662,367 SF of new product was added to our market this quarter and 518,626 SF of product was absorbed from the 50,001 to 75,000 SF $0.33 market. The total industrial inventory in the Reno/Sparks 75,001 to 100,000 SF $0.35 market is 61,490,967 SF. $850 5.5% 18% 100,000+ SF $1.20 $0.34 VACANCY AVERAGE RENT $840 5.0% $832 $1.06 VACANCY NNN RENTAL RATE 16.1% $830 4.63% 4.5% Overall,15% industrial demand remains strong and the market $1.00 $820 4.0% inventory for available space is low. Industrial spaces that $809 are priced right are moving quickly. Todd McKenzie of CONSTRUCTION12.4% $810 3.63% 3.5% 12% $0.80 10.9% $800 McKenzie properties commented that demand this quarter There is currently$0.70 1,736,092 SF of new product under con- 3.23% 3.0% % 10.4% $792 10.3% e Rent $790 2.5% was strong, as he leased 24,018 SF across 4 units in his struction in the Reno/Sparks market.

ag 9% $0.60 acancy er

V new flex complex at 280 and 320 South Rock$0.50 Boulevard. $780 2.0% $0.48 $0.47 Av 7.0% 7.2% acancy Rate ‘ActivityV has definitely picked up$0.41 this quarter and I think the In Stead, buildings 3 and 4 of the Lear Industrial Center are $770 1.5% 6% 5.7% $0.40

market has caught up to us. There are$0.32 a few more deals$0.30 on $0.30 being constructed by$0.30 Panattoni.Monthly Rental Rate/PSF Building 3 is 390,000 SF $760 1.0% 4.5% the line now,3.4% so we just keep plugging away’. and building 4 is 429,000 SF. Both are big-box, distribution $750 0.5% 3% $0.20 300 buildings divisible to approximately 50,000 SF and 60,000 RETAIL $740 0% 2003 2004 2005 SF respectively. DP Partners' 255,000 SF will be complete in in Billions OFFICE 0% $0 250 NEW PRODUCT November, and they are under construction with a 231 ,000 a n o o INDUSTRIAL This past quarter 662,367 SF of new industrial space SF distributionrd building at 10855 Lear Boulevard in the Sage racy Ren

APARTMENT T officially completed construction. This was comprised of ywa

200 ancisco Point Business Center . Oakland Mantec Ha Stockto

117,877 SF atFr Voit Development Company’s Vista Business

Apartment Rent & Vacancy Chart Richmond Union City

Park in Sparks, 9,890 SF at 1855San Leandr Peckham Lane Colliers near the International 150 ooSan ff ff ii cc ee There is 268,550 SF of light industrial space under con- 4th Quarter 2004 airport, 334,500 SF at the Trammell Crow Company’s Stead struction including 12,008 SF at 860 Maestro and 256,534 Distribution Center at 14525 Industry Circle, and 200,100 100 SF at the Trammell Crow Company’s Brookside Corporate SF at 6645 Echo Court, building #2. MarkCenter onet Rock Boulevard.Repor Building A in this complext is 43,625 SF and is expected to be completed this quarter. 50 Austin,Buildings Texas B and C are to follow. FIGURE Reno Industrial 0 2001 2002 2003 2004 2005 Average Vacancy Rates In Spanish Springs, the 418k SF Parts Unlimited distribution (Projected) 1 center is also under construction.

12% VACANCY RATES 'THE DIRT' National Investment Transaction Volumne 10% 10.5% In addition to the construction mentioned above, there is 9.6% also a tremendous amount of dirt work happening to our 9.0% 8% east. In the Tahoe Reno Industrial Center, Prologis has begun grading their site in anticipation of their 611K SF distribu- 7.3% 6% tion center at Prologis Park. The Trammell Crow Company is also busy grading their site for USA Parkway Distribution www.colliersreno.com 4.5% 4% Center where they will be building 550k SF for building A of this new complex. In the LogistiCenter At East Reno, DP Colliers International Partners is also busy grading 5 sites , and will commence 5345 Kietzke Lane 2% construction of 300,000 SF. Suite 100 Reno, NV 89511 0% 2002 2003 2004 2005 Q3-2006 TEL: (775) 823-9666 FAX: (775) 823-4699

2,500,000 2,483,244 2,253,944 2,000,000

1,500,000

1,466,780

1,000,000

500,000

268,577 0 2003 2004 2005 YTD-2006 $850 5.5% 18% $1.20 VACANCY AVERAGE RENT $840 5.0% $832 $1.06 VACANCY NNN RENTAL RATE 16.1% $830 4.63% 4.5% 15% $1.00 $820 4.0% $809 12.4% $810 3.63% 3.5% 12% $0.80 10.9% $800 $0.70 3.23% 3.0% % 10.4% $792 10.3% e Rent $790 2.5%

ag 9% $0.60 acancy er

V $0.50 $780 2.0% $0.48 $0.47 Av 7.0% 7.2% acancy Rate

V $0.41 $770 1.5% 6% 5.7% $0.40

$0.32 $0.30 $0.30 $0.30 Monthly Rental Rate/PSF $760 1.0% 4.5% 3.4% $750 0.5% 3% $0.20 300 RETAIL $740 0% 2003 2004 2005 in Billions OFFICE 0% $0 250 a n o o

INDUSTRIAL rd racy Ren

APARTMENT T ywa

200 ancisco Oakland Mantec Ha Stockto Fr

Apartment Rent & Vacancy Chart Richmond Union City San Leandr

150 San

100

50 Colliers International 0 2001 2002 2003 2004 2005 (Projected)

Market Report 12% VACANCY RATES National Investment Transactionindustrial Volumne Reno, Nevada 10% 10.5% 9.6% 9.0% 8% TRENDS Continued from Page 1 DEVELOPER'S CORNER Another concern we hear is the availability 7.3% We continue6% to see strong demand from small The Colliers International industrial team is of workforce for labor-intensive uses. Do to medium-sized companies here in Reno and proud to introduce the “Developer's Corner”. you think there is a workforce problem? 4.5% Sparks4% that are ready to expand. Typically, these This quarter we had a chance to sit down with companies are surprised at how difficult it is to Lance Gilman of L. Lance Gilman Commercial find viable2% options in our tight market. This is Real Estate Services. Lance is part of the devel- The market is full of opinions regarding our trade area labor force. It seems like everyone especially true when a company’s requirement opment team responsible for the Reno Tahoe 0% Industrial Center, soon to be the world’s largest has a study projecting some level of concern includes yard2002 space.2003 2004 2005 Q3-2006 industrial park. with our workforce. We, at the Tahoe Reno Industrial Center, are more like the folks from FIGURE Reno Industrial How have land sales been recently? Are Missouri. Show us. Actions speak louder than Historical Absorption you selling more or less land than you words, and we have yet to have had a truly 2 expected? negative experience in securing employees for 3,000,000 our massive industrial community. Quite to 2,500,000 The Tahoe Reno industrial center property is sell- the contrary, many say our users have expe- 2,483,244 ing at an unprecedented rate. We have exceeded rienced above average, somewhat incredible 2,253,944 2,000,000 our optimistic expectations, and are finding our- results, in attracting a labor force. Our most

selves in the enviable position of adding additional recent example would be the Wal-Mart expe- 1,500,000 arterial infrastructure in order to keep pace with rience. I'm not authorized to speak for them 1,466,780

purchasing demand. Our first phase included directly, however, my understanding is that 1,000,000 5,000 acres, suggesting an employment popula- since this past January, they have received over

tion of approximately 6000 applications for 500,000 40,000 people. To Colliers International their advertised, 650 o f f i c e Colliers International4th Quarter 2004 268,577 date we have absorbed o f f i c e jobs. Industry sources 0 4th Quarter 2004 2003 2004 2005 YTD-2006 approximately 2,000 confirmed that their acres, have approxi- most recent job fair, Market ReporMarkt et WeRepor have also seen an increaset in the number mately 3,000,000 ft. of Austin, Texas covering a three-day existing footprint on period,Austin, generated Texas of companies from outside our market who the ground, and approx- approximately 4000 require rail-served industrial land. While most imately 3,000,000 ft. applications for their of the land in Stead is gone, their options are under construction. At last report, there were 350 first phase labor force. I believe that they typically the Tahoe Reno Industrial Center and 42 building permits under application review at are extremely happy with the response, and the Fernley Industrial Park. Stan Thomas of the Storey County building department. We have the quality of the labor force applying for their Wade Development has commented that they available six phases of 5000 acres each. jobs. A recent labor market inquiry, conducted are currently exploring options to add more rail by Storey County, and focused on the various to their park which will increase the amount of We have seen a strong demand for rail Tahoe Reno Industrial Park users, indicated rail-served parcels that they can offer. served parcels. Are you seeing this as well? satisfaction with the available labor force, and the quality of employee applying for the various In addition to these trends, we are constantly The Tahoe Reno industrial center developers positions. One theory, build it and they will on the look-out for properties that can be have made major financial commitments toward come, certainly seems to be at work here. repositioned in our market. Along with many providing for rail infrastructure into the park. of our local developers, there are many devel- What characteristics of the park are people We have completed two switches, and several opment companies outside of this area who miles of service backbone track. There is no attracted to the most? have an interest in acquiring vintage properties question that companies requiring rail service that can be repositioned and put back on the are showing strong interest in the Tahoe Reno The Tahoe Reno Industrial Park, in Storey market. 245 Coney Island is a good example of Industrial Center. We are presently entertain- County, is a friendly place to develop. There are ing, in negotiations, or have opened escrows, no development fees or exactions, other than this in Sparks. This property was purchased by totaling in excess of 300 acres, identified as rail a simple building permit fee, to run the cost of Northwood Properties and they are in the pro- served property. There appears to be a wide developing a project beyond a buyer's reach. cess of demising the building into 3 units to be base of demand, from three acres to over 100 Most building permits have been processed in sold as condos acres or more. Burlington Northern is in the 30 days or less, and it is still very practical to process of designing their new service yard identify, purchase, and complete a building proj- WHAT'S NEXT within the TRI Park. Negotiations are also ect, in less than 180 days. Both Wal Mart, and We expect our industrial market to remain reaching a point of approval with a short line Hardie Building products are primary examples. strong for the next quarter. We expect the rail company, prepared to serve cars directly There are no special use permits required, thus vacancy rate to slowly increase into the 6% into the park. We anticipate that new intermo- saving incredible amounts of costs and time range with a significant amount of new con- dal capability is also on the horizon. with land planners, architects, neighborhood struction being completed this quarter. Continued on Next Page n

No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein.. Colliers International Market Report industrial Reno, Nevada

Developer's Corner Continued BARRY BROWN AARON SOMER planning groups, or planning commissions. Senior Vice President Associate The development agreement, approved Barry Brown has been in the business for over thirty Aaron Somer joined Colliers International in by ordinance, pre-addresses all of these years beginning with Coldwell Banker Commercial October of 2005 as an Industrial Specialist, focusing issues, and includes a waiver for any and (now CBRE) in southern California in 1972. He on landlord and tenant representation in Northern all impact or development fees. Clearly it was promoted to VP and Resident Manager in the Nevada. Prior to joining the Reno office, Aaron is much faster, and significantly less costly, White Plains office and Sr. VP in the Stamford, consulted for various technology companies in to develop in Storey County's Tahoe Reno CT office overseeing four offices. For his leader- the Silicon Valley and was the Principal of Somer Industrial Center. ship he was given the Mahoney Award followed Development Inc., a start-up real estate investment by a Chairman’s award. He returned to the west company. Aaron is a graduate of the Santa Clara National site locators have identified the Tahoe Reno industrial center as one of and managed the Stockton office and eventually University where he earned a BS in Marketing in the top two or three industrial projects in returned to Brokerage in 1999 in Reno. He formed 1996. Aaron is a member of the CCIM Chapter the United States. The criteria is primarily his own company in 2001 consulting for Tanamera of Northern Nevada, Western Industrial Nevada centered around the abundance of utility commercial Development and then continued with (WIN), and the Economic Development Authority infrastructure, and it's ease of access. In Tenant and Buyer Representation until he joined of Western Nevada (EDAWN). Aaron is a for- addition to rail and highway's, there is an Colliers International as Sr. VP/Managing Partner in mer Junior Board Member for Big Brothers Big abundant supply of electricity, generating April of 2005. He is now Sr. VP Industrial Properties Sisters and remains active as a fundraiser. Aaron is capacity on site, transmission direct elec- concentrating only on industrial sales and leasing. President of the Santa Clara University Reno/Tahoe trical service, transmission direct natural Alumni Chapter. gas, thousands of acre feet of water rights, Barry holds a Bachelor’s degree in Economics from selling at rates well below $10,000 per acre Stanford University, and received many honors in JUSTIN W. NOIN foot, a state-of-the-art US filter sewerColliers sani- basketball International and volleyball, which he continued after o f f i c e Colliers International4thAssociate Quarter 2004 tation system, with expansion and adjust- graduation,o f including f i c being e a member of both the 4th Quarter 2004 ment capability, along with as sophisticated Justin Noin originally joined the San Jose office of 1963 Pan American Games and the 1964 Olympic Colliers, moving to Colliers Reno in late 2005. He a fiber optic telecommunications serviceMark as Gameset volleyball Repor teams. t exists in the nation today. Marketearned Repor a B.S. in Civil Engineeringt with an emphasis Austin, Texas Austin, Texasin Water Resource Engineering from the University Currently land cost are: of Southern California. Prior to joining Colliers, 1 to 10 acres $2.50/Sq. Ft. Justin served as a Student Pilot and Electronics 10 acres or more $2.25/Sq. Ft. Technician in the United States Navy, where he 1 to 10 acres rail served $5.00/Sq. Ft. was awarded the 1999 NAES Lakehurst Junior 10 acres or more rail served $3.50/Sq. Ft. Sailor of the Year. In addition to his role at Colliers, All prices include acre foot of water per acre purchased. Justin is a member of the Reno-Sparks Chamber of Commerce and volunteers with Big Brothers and Big Sisters in Reno. In his free time, Justin enjoys leading an active life offered by Northern Nevada including hiking, camping, triathlons, and earning his private pilots license.

www.colliersreno.com

Colliers International 5345 Kietzke Lane Suite 100 Reno, NV 89511 TEL: (775) 823-9666 FAX: (775) 823-4699

No warranty or representation, expressed or implied, is made as to the accuracy of the information contained herein..