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Internet distribution centers bring big business

ROB SABO
Northern Nevada Business Weekly

Urban Outfitters, which will construct a large Internet fulfillment center in Stead, is only the latest in a recent string of major retailers that have given Northern Nevada the nod for new fulfillment facilities.

Those decisions were spurred in part by the ability of a Reno location to provide quick delivery service for Western states customers, says Paul Kinne, business development manager for the Economic Development Authority of Western Nevada.

In addition to Urban Outfitters, Toys”R”Us and GSI Commerce Inc. in recent weeks announced plans for new Internet fulfillment centers in Northern Nevada.

They join large-scale operations already in existence: Barnes and Noble operates nearly 1 million square feet in south Reno, and Amazon.com conducts business from a large facility in Fernley.

Kinne says Urban Outfitters, which has had a modest presence in Reno since 1998, conducted an internal study and also hired a consulting firm to determine the optimal location for a large West Coast Internet fulfillment center. Both studies arrived at the same conclusion.

“They have access to 11 western states from Reno,” Kinne says. “What they told us was that from Reno and their location on the East Coast, they can hit 83 percent of Internet customers within two days drive.”

Urban Outfitters also operates an Internet distribution facility in South Carolina.

Gov. Brian Sandoval, who spoke at a press conference last week announcing Urban Outfitters new location, said economic development is his top priority, and Urban Outfitters won’t be the last big company to bring operations to Reno. Sandoval was asked to call Urban Outfitters executives and tout the benefits of locating in Northern Nevada.

“It is important that we show nationally that we have a lot to offer here. Northern Nevada is one of the logistical capitals of the world in terms of Internet fulfillment,” Sandoval said.

Urban Outfitters’ decision to double its existing operations in Northern Nevada was brought about in part when a construction and development team from Reno traveled to the company’s Philadelphia headquarters to pitch their services.

United Construction’s Craig Willcut, Mike Russell and Mike Thomson, along with Dermody Properties’ John Atwell and Michael Dermody, flew to Philadelphia earlier this year to listen to Urban Outfitters executives describe their needs for a West Coast Internet fulfillment center. The company currently operates from a 214,000-square-foot distribution center in Stead that ships goods to the company’s western-region retail stores – a different kind of business than fulfilling Internet orders from individual customers.

United’s Willcut says the Reno team’s meeting was instrumental to showing Urban Outfitters that Dermody Properties and United Construction could achieve the company’s goals.

Urban Outfitters will expand into 462,000 square feet of newly constructed distribution space. The majority of the facility will be warehouse and racking space, with 10,000 square feet for offices and a 2,000-square-foot data center. A second phase of Urban Outfitters’ plans involves expanding the new facility to nearly 900,000 square feet, which would create one of the largest distribution facilities in Northern Nevada.

Total investment in the facility is $60 million, including $28 million for the building and 38.4 acres land at Dermody Properties’ Silver Lake Business Park. The company will spend another $28 million for materials handling, automated sorting and racking equipment.

United expects to break ground in early or mid May. The building shell should be completed in November, but it is expected to take an additional six to seven months to set up the vast network of automated equipment inside the structure.

Willcut says that about 160 tradesmen will be employed fulltime on the project. The job comes at a crucial time for United Construction, which has some work in Las Vegas but hasn’t undertaken a large-scale project in the Truckee Meadows since completing a new 50,000-square-foot facility for WMS Gaming in South Meadows.

“This job is very significant to United Construction as well as the whole construction community,” Willcut says. “Nevada leads the nation in construction unemployment, and this job is very significant for the construction industry in Northern Nevada.”

Michael Thomson, director of design for United Construction, was architect for the building. Design-build subcontractors chosen for the project include RHP Mechanical Systems for the HVAC, L&L Plumbing and Heating, Jensen Electric and Desert Fire Protection. Odyssey Engineering was the civil engineering firm, Tectonics Design Group performed the structural engineering work, and Barbara Hatch of GreenDesign Landscape Architects did the exterior landscaping plans.

Urban Outfitters located in the region in May of 1998, occupying less than 5,000 square feet with Bender Warehouse Group. By July of 2007 the company had grown its Northern Nevada operations to about 87,000 square feet, Bender President Steve Reid says, and Urban Outfitters discontinued its services with Bender to occupy a larger facility.

Urban Outfitters currently employs 65 and says it will hire an additional 150 workers when its new fulfillment center goes into full-scale operations in June of 2012.

Michael Dermody, president of Dermody Properties, says luring Urban Outfitters to Northern Nevada was a joint effort between developers and construction and commercial real estate professionals. Eric Bennet of CB Richard Ellis also played a role in landing Urban Outfitters’ new location.

“All these projects are teamwork,” Dermody says. “They are the construction, the brokerage community, the landowner and development company. It is teamwork.”