Real Estate and Development
Landowners opting for joint ventures over sales
By Brian Wargo / Staff Writer High land prices have sidelined many industrial projects in recent years, but that may be changing. More landowners are entering joint ventures with developers to move industrial projects forward. "They are making the best of both worlds," said Dave Dworkin, a research analyst with Grubb & Ellis. Many property owners overinflated the price of their land and could not find buyers, Dworkin said. That has led them to entertain joint ventures. The demand for industrial space remains strong, and some developers are even gambling on funding projects out-of-pocket, he said. "They are taking care of it themselves," Dworkin said. "It is harder to get financing because a lot of lenders are getting stricter on whom they give money to. They are asking for higher qualifications, and they are sometimes asking for a little more preleasing before they fund." Developers and brokers continue to search for creative solutions to meet the needs of tenants and buyers, he said. To speed up the leasing process, Harsch Investment Properties fully finished several buildings at the Speedway Commerce Center rather than having tenants complete improvements themselves, Dworkin said. The firm reported that the vacancy rate rose slightly in almost every submarket during the third quarter. The southwestern area has 2 million square feet of industrial space under construction, which will be available by the end of 2007 or early 2008, Dworkin said. More than 600,000 square feet was completed in the third quarter, including the 288,000-square-foot Beltway Business Park on Lindell Road. The Blue Diamond Center and Arroyo North, which have plans for expansion, will help meet the high demand for warehouse and distribution space in the southwest, he said. Overall in the region, more than 4 million square feet is under construction, and another 6 million square feet is planned. Grubb & Ellis on the office sector: The vacancy rate of office space continues to rise, and because of the additional amount expected to come on the market, many analysts suggest it will take a couple of years to fill all of that space. The problems within the office market of rising construction costs and the high cost of land and will be offset by demand fueled by job growth, the firm said.
About 2 million square feet of office space is under construction — much of its planning dating back two years when interest rates were low and construction more affordable. Once completed by the end of this year and mid-2008, there will be a lull in new construction, Dworkin said. The firm reports 830,000 square feet was completed in the third quarter, contributing to the rise in the vacancy rate to 12.8 percent, even though some projects were substantially pre-leased when completed. In downtown, the historically low vacancy rate jumped 760 basis points to 8.2 percent, despite the Molasky Corporate Center completion, Dworkin said. Only a small amount of space is available, and downtown likely will experience a larger diversification of tenants to serve the array of development projects planned in the near future, Dworkin said. Lease rates for Class A office space have risen significantly, while Class B rates have remained steady. The increase in Class A rates is due in part to 700,000 square feet of space delivered in the third quarter that featured higher rents than existing space, Dworkin said. While many landlords are offering concessions to lease their space, rates are expected to climb slightly by the end of the year, he said. In other news: • Housing analyst John Burns wrote in his latest monthly newsletter that homebuilder confidence in the Western region is declining rapidly and described how the market has gone from the best to the worst in the nation. In October, builder sales and traffic reached the lowest level since the National Association of Home Builders began tracking statistics nearly 23 years ago, Burns said. Sales and traffic are abysmal nationally, but they are better in the Northeast than in other areas, he said. "All components of the national index — traffic of prospective buyers, current sales and sales expectations — were at historic lows this month," Burns said. "True to their nature, homebuilders remain optimistic that the future will get better, as the rating for sales expectations over the next six months continues to outpace the rating for current sales activity." Burn's latest statistics show that people in Las Vegas are spending 47 percent of their income on housing. • CIP Real Estate, a real estate investment and management company based in Irvine, Calif., and its joint venture partner, Buchanan Street Partners of nearby Newport Beach, have sold two office buildings totaling $30.2 million within the 420acre Hughes Airport Center business park. They were part of a $145 million, 20building portfolio acquired by CIP Real Estate and Buchanan Partners two years ago. The sale follows the $115.5 million, nine-building acquisition encompassing 600,000 square feet of industrial, flex and office space on 31 acres. The two office builldings total about 98,000 square feet and are occupied by Credit One Bank. They were purchased by Kraemer II Glendale and FKC Glendale, both Delaware companies.
• Las Vegas-based LaPour announced it sold its Pinnacle Business Center II multitenant industrial park in Phoenix for $20 million. • Toll Brothers is celebrating the grand opening of 14 model homes in Inspirada, a Henderson master-planned community. Toll Brothers' models include five collections of home designs with 20 floor plans. Ten models opened and four more were recently completed. Its estate homes are priced in the upper $400,000s. Its mansion homes start in the mid-$300,000s, and its townhomes in the mid-$500,000s. Toll Brothers has its own definition for its style of homes that don't always match other builders. Buyers are expected to start moving into their homes by the end of 2007. • Prudential CRES Commercial Real Estate has acquired IPG Commercial Real Estate, forming a partnership of the firms for Southern Nevada's commercial real estate market. Prudential relocated its offices to 127 E. Warm Springs Road. The companies have been branded Prudential Commercial/IPG Real Estate Services. The acquisition brings the organization to a staff of 24, including 17 licensed brokers. Combined, the two companies accounted for more than $200 million in transactions during the past year. • Plise said it has broken ground on an eight-story office building at Rainbow Sunset Pavilion at the southwest corner of Rainbow Boulevard and Sunset Road. Rainbow Sunset Pavilion comprises 14 buildings totaling more than 444,000 square feet of office and 91,208 square feet of retail space on 25 acres. The office building is scheduled to be completed in the fourth quarter of 2008.