The Distribution Industry in Nevada
From Nevada Business Magazine – July 2012
That big-box warehouse down the street may not be the prettiest feature of the Nevada landscape surrounding you, but next time you’re driving past it, consider this: It, and other facilities like it, might just save the state’s struggling economy. Nevada is poised to become a major distribution center in the West.
According to a 2011 study commissioned by the State of Nevada, this isn’t an exaggeration.
The study, conducted by an independent third party, SRI International, working with the Brookings Institute and Brookings Mountain West, identified the key industries that Nevada should focus on as part of its economic diversification efforts—those that will be key to recession recovery and prolonged economic growth. The findings are documented in a November 2011 report entitled Nevada Industry and Competitive Analysis: Identification of Industry Opportunities.
The report calls the logistics and operations industry cluster (which includes logistics, warehousing, distribution, transportation and wholesale trade) “a natural target industry for Nevada,” and one which “has strong potential for job creation over both the short- and long-terms.” Additionally, it identifies an opportunity for Nevada to “serve as a West Coast hub of operations” for warehousing and distribution; advanced logistics; air cargo; integrated manufacturing- distribution, assembly manufacturing and food-processing operations; and freight transportation (ground and rail).
According to the report, key to the state’s success is its locational and geographic advantages, strong existing infrastructure and cost and regulatory advantages.
Location, Location, Location
Some people working in distribution around the state believe Nevada is already a distribution hub—at least on the West Coast. In 2010 (as reflected in the report), there were 6,848 establishments in Nevada that were considered part of the logistics, distribution and transportation industry cluster, which included the likes of CDW, Barnes & Noble, Toys ‘R Us, Bed, Bath, & Beyond, Levi Strauss, Amazon.com, Sysco and others.
“I do see Nevada as a national hub for distribution, and it’s a pretty compelling story, especially in Northern Nevada,” said Doug Kiersey, president of Dermody Properties, a private industrial developer based in Reno with regional offices in Philadelphia, Chicago and Portland. Dermody provides development, operations and finance expertise to its customers.
“Within one day’s truck drive, a company can reach most of its consumers on the West Coast,” Kiersey explained. “[Reno is] equidistant from Seattle and Los Angeles. We have excellent rail service and, via I-80, an east-west transportation route. When a national company looks at laying out its supply chain, they want a place that enables them to reach the most customers for outbound freight. We’re in the perfect spot on the West Coast to attract large distribution users.”
Doug Roberts, partner in Panattoni Development, believes similarly on this point, especially with regard to Northern Nevada. Panattoni, a commercial real estate developer headquartered in Las Vegas and specializing in industrial spaces, has offices throughout the United States, Canada and Europe.
“I think that of all the commercial sectors we deal with, industrial is one of the healthiest—particularly big-box distribution,” said Roberts, explaining that he sees Nevada’s emerging role as a distribution hub as attributable to three main factors: “Reno is centrally located for 11 Western states—that’s number one. Second, the business climate here is attractive for companies. And third, we’ve almost always had space available.”
Reno’s location indeed provides a distinct advantage that Las Vegas does not, Roberts adds. Though Las Vegas has been fairly successful at growing its gaming and hospitality-related distribution business (e.g. convention and exhibition companies, beer and liquor distributors, food suppliers, etc.) due to its inherent strengths, high rents near The Strip and a lack of large, available spaces have stemmed growth in the sector.
“If you look at the distribution patterns of a company, most product comes through LA and the Long Beach Port and moves up to Chicago, in sort of a Nike swoop,” Roberts said. “Mostly this travels by rail and truck. Then from Chicago it goes to other markets. But Reno and Las Vegas somewhat miss that swoop; we’re not within that belt.” Phoenix, however, is the sixth-largest city in the U.S. and is located within that “swoop,” he added, which is why Las Vegas has lost a good percentage of its potential distribution business to Phoenix.