Land once targeted for a Bass Pro Shops retail store at the junction of Mount Rose Highway and U.S. 395 will have a much different use as Panattoni Development Co., has kicked off mass grading for its 580 South mixed-use industrial development.
Bass Pro Shops had announced plans for a Northern Nevada retail location back in 2007 but ultimately went in a much different direction, acquiring publicly traded Cabela’s in a roughly $4 billion deal a decade later in 2017.
Panattoni Development said it will invest $155 million in 580 South, which is a joint venture between Panattoni and Clarion Partners of New York City. Approximately $28 million is for horizontal infrastructure improvements, which are expected to take four to five months to complete, said Tim Schaedler, Nevada and Northern California partner for Panattoni Development.
The project spanning 88 acres isn’t affected by the high interest rates that have stalled some regional industrial developments due to unfeasible construction and debt costs, Schaedler added.
“Right now we are dealing with raw land, and our business plan is to complete all the horizontal infrastructure,” Schaedler said. “We are doing that with equity, so we are not influenced by debt markets.
“It is an election year, and we believe there will be pressure to normalize interest rates, which will likely make speculative construction more feasible,” he added. “But right now our intention is to complete all the onsite improvements, utility connections, and rough grade the pads and then evaluate the market in four or five months when that work is complete to decide if speculative construction makes sense at that time.”
Panattoni plans to construct building pads for four industrial tilt-up warehouses ranging in size from 146,600 to 250,880 square feet. Mass grading is expected to be complete in the second quarter of this year, and tenant interest will drive the timeline for vertical construction.
In the meantime, Schaedler added, Panattoni is in preliminary discussions with potential tenants for build-to-suit projects. Alston Construction is the general contractor for both horizontal and vertical construction.
Though the site requires extensive grading and infrastructure improvements, it’s still a highly coveted plot of land for industrial development, Schaedler noted. Industrial vacancy in south Reno stood at 4.2 percent at the end of last year, commercial brokerage CBRE reports.
“We are a very land-constrained market, and that in itself is the opportunity,” Schaedler said. There is not a lot of vacancy, and if costs and interest rates weren’t so high we would move forward today with all four buildings. However, because of those factors, we are being cautious about when to put up the buildings.
“When you are chasing build-to-suits, users have to have a comfort level that a building can be delivered in nine months, and you can’t really say that until the horizontal work is complete,” he added. “Once it’s complete, you can promise delivery of a building, and that’s really the intent of completing the infrastructure from raw land to finish pads.”
Panattoni and Clarion plan on looking for buyers or developers to build out the commercial portion of the 580 South, while they focus on the industrial development.
Sitework must account for a pretty substantial slope running west to east, which will lead to tiered building pads as the project descends toward Virginia Street, Schaedler added.
“It’s a lot of earthwork, but the project lays out pretty well,” he said. “Four to five months of infrastructure work is substantial. We have interior roads being built, and the warehouses are really set back quite a bit from Mount Rose Highway. The land that fronts Mount Rose Highway will either be commercial and/or apartments. It’s truly a mixed-use development, which is a little different from what we typically do.”
Lindy Deller, development manager for Panattoni, said utilities like water and sewer will be brought into the site from across Mount Rose Highway. Additional improvements include extending Herz Boulevard south into the project, realignment of the southbound freeway connection, and pavement restriping on Virginia Street.
Though the project will take quite a bit of work to prepare for vertical construction, 580 South is expected to generate quite a bit of tenant and developer interest based on its location, Deller added.
“Many unknowns have been introduced in the market over the last couple of years, but there is one thing that remains true – there is simply not a lot of land left in south Reno for industrial product,” she said. “South Reno is a desirable submarket for a lot of tenants, as shown by its consistently low vacancy rate. Based on the tenant interest we are seeing to date in the site, we think the location justifies the timing and that the project will perform well.”
Northern Nevada in general remains primed for additional investment capital by developers, Schaedler added.
“Panattoni and Clarion have partnered on industrial developments for over 20 years all across the country,” he said. “Reno is a tight land market, and there’s a fairly clear push of companies continuing to migrate to Northern Nevada. That tenant demand is a key indicator in our decision to invest.”