Panel foresees shortage of industrial land

Jennifer Shubinski

Friday, Feb. 20, 2004 | 11:12 a.m.

At the rate Las Vegas home builders are buying up industrial-zoned land for residential use, there will be little property remaining for future industrial development and not enough to keep existing companies, industry experts said Thursday.

The high demand for homes and the shortage of available residential tracts has home builders looking everywhere for land. Builders continually have turned toward buying industrial-zoned land for residential development and local jurisdictions routinely change the zoning to accommodate new homes.

The cycle has land owners holding out for the highest bidder, which is almost always a home builder.

Local experts believe prices will continue to escalate as interest rates remain low.

"Home builders are beating industrial guys to escrow and (home builders) can gobble up 40, 50, 60 acres faster than an industrial user can gobble up 10 acres," said Scott Gragson, senior vice president in Colliers International's Las Vegas land division.

Gragson was on a panel of industrial and office brokers at a local chapter meeting of the National Association of Industrial and Office Properties.

Dean Willmore, principal/broker of Industrial Property Group, said that as the outlook for more large-scale industrial projects begins to diminish, existing industrial property has been appreciating rapidly.

Willmore said that in 2001, industrial investment properties sold for $45.90 per square foot. By 2003 industrial investment properties had appreciated by 68 percent to $77.24 per square foot.

"Yet rental rates have dropped 10 to 15 percent," he said. "I'm not sure what is happening, except maybe we won't have enough industrial space in the next 10 years."

Given today's trends, the Las Vegas Valley won't have enough industrial space in the near future and will have the lowest percentage of industrial product per capita in the West, Willmore said.

"Maybe that's why investors are buying anything they can," he said. The long term affects of a small industrial base could be devastating, panelists said. The rezoning of industrial land is creating bedroom communities -- residential districts on the outskirts of cities where many commuters live, said Kevin Higgins, senior vice president of Voit Commercial Brokerage.

"I hope those municipalities all understand that people need a place to work, and it can't all be on the Strip," Higgins said. Gragson said the tax base could be affected, resulting in higher property taxes for homeowners.

He also said high land prices and a lack of industrial product could cause businesses already in the valley to move out of state when it comes time to expand.