<body><div><figure><img src="https://img.particlenews.com/image.php?type=thumbnail_580x000&amp;url=4by5zg_1E7H2n7x00" alt="https://img.particlenews.com/image.php?url=4by5zg_1E7H2n7x00" width="500" height="649" ></figure>Unexpectedly, the most challenging thing about commercial building in 2026 is finding projects to build.Nevada was flourishing with commercial buildings coming up out of the ground. Between 2020 and 2023 builders and developers, many from out of state, flocked to Nevada to build industrial properties, e-commerce warehouses, logistics and distribution facilities and advanced manufacturing campuses. Everyone expected demand would remain strong.“But the reality was that slowed down, corporate America had some challenges and did a number of things throughout that period,” said John Ramous, Nevada region partner, Dermody. There were tariffs and a war overseas, events that strained corporate America’s expansions.Suddenly there was a lot more inventory than demand, especially where older, smaller properties are concerned. The marketplace is still trying to work through inventory.There were other, routine challenges. “A scarcity of land, a perceived scarcity of power and solutions for power, but a real concern is water. I don’t think any of those challenges are surprises,” said Guy Martin, president, Martin Harris Construction.Northern Nevada also faces a high concentration of advanced manufacturing and data centers in the rural areas just outside Reno-Sparks at Tahoe Reno Industrial Center (TRIC) and Fernley. “There’s such a high concentration of very sophisticated projects being built that it has generated a disparity in wages for trades men and women between the ones that work for, say, advanced manufacturing or even more sophisticated work, versus the standard,” said Martin.Those issues are further fueled by the cost of construction materials that spiked during COVID and only dropped partway before hitting a plateau. Costs are still high.So is the cost of labor and the cost of land. The scarcity of that land is another issue. Infill sites are disappearing. Projects find property by either tearing down existing projects, scavenging existing infill, or carving out the sides of mountains.Challenge AcceptedWhat challenges do builders and developers face in 2026?“Finding work to build, especially from that industrial side,” said Mark Drahos, vice president general manager, Alston Construction, a nationwide builder. “They severely overbuilt the market both in Reno and Las Vegas over the course of the last few years. It started in 2020 and 2021. A lot of developers came into town and just decided e-commerce and distribution were the new shiny penny.” The result is a market overbuilt to the point that Reno’s vacancy rate is hovering around 13 percent and Vegas’s around 11. Normal vacancy rate, where investors feel comfortable putting capital into projects, is more like 5 or 6 percent.Vacancy rates peaked around Q3 2025. Since then, absorption figures have been fairly consistent, the vacancy rate is coming down.“But the peak in the north was about 11.7 percent third quarter ’25, and in Southern Nevada it was about 10.2. We’re waiting for the next quarterly results to come in,” said Ramous.It’s anticipated those results will show Southern Nevada rates less than 10 percent, maybe around 9, and Northern Nevada will still be hovering somewhere around 10 percent. “It’s all trending in the right direction,” said Ramous. “New construction is down dramatically and in fact, other than our building and a couple other smaller buildings that are in demand, the developers have kind of put a hold on new spec development.”There are still projects. Martin Harris Construction is doing hyperscale data work in Southern Nevada for a long-term client. In Northern Nevada they’re building an arena at Grand Sierra Resort for both University basketball and concert events.Dermody delivered a 470,000-square-foot building in Stead in 2025. The project on Moya Boulevard takes advantage of proximity to the 5000-acre Reno Stead Airport.“We delivered our first building there after many years of getting various approvals, FAA and environmental and UPRR which is rail approval,” said Ramous. That first building is expected to be fully leased in July 2026, and Dermody plans to break ground on a 650,000-square-foot sister building.Despite that success, Dermody’s biggest challenge is statistics, or the marketplace as far as vacancy. “A fair amount of new construction was delivered over the last several years,” said Ramous. Both Northern and Southern Nevada saw similar demand drivers and a lot of inventory being delivered, only demand hasn’t been as robust as it was during the pandemic.Current ProjectsThere is some absorption happening. Existing buildings aren’t just standing there. But it’s happening slowly. So far 2026 is better than Q4 2025, when Reno saw negative absorption. The market has rebounded. A little.“Until a lot of that space gets absorbed, you’ll still have your build-to-suits here and there that people are going to be working on, but from a speculative build development standpoint, I don’t think you’re going to be seeing a lot,” said Drahos.Alston was able to dive into some slightly different markets. The company doesn’t usually bid but rather negotiates projects. However, the company bid and won a project for the Legislative Council Bureau in Carson City, a three-story office building next to the legislative building.One area where buildings are going up is data centers. Alston is retrofitting a handful of existing data centers in Las Vegas for an existing client. Tenant improvement work is also keeping builders busy.“There’s nothing really ground up,” said Drahos. “We’ve seen a lot of developers coming to us and requesting some budgets and estimates, which is good. It at least shows there’s a little bit more activity than there was before, but nothing has really cut loose yet.”A Decade of ChangeBy now everyone knows prices for construction materials and labor skyrocketed during the pandemic. Halfway through 2026, they’re still high. It’s one of the biggest changes in construction over the last decade.“Ten years ago, our restructures were running anywhere from $4 to $5 a square foot, and that was hybrid restructures with wood sheeting on top and the metal joist below. It ballooned all the way up to $15 or $16 a square foot,” said Drahos. Costs have dropped. However, they haven’t dropped all the way back to what was normal.High construction costs in Nevada are causing out-of-state developers to question prices when putting together a project. Last year Cushman &amp; Wakefield, a commercial real estate services company, put out a document listing industrial construction costs. Out of the entire country, Reno and Las Vegas were in the top five of highest costs.It’s the document Drahos produces when potential clients protest Nevada construction costs, showing it’s not just Alston Construction’s costs, it’s construction costs in general. “Site costs are a big piece of it as well,” said Drahos. “Just because there’s no good dirt left in either Reno or Las Vegas. You’re either digging into the side of a mountain and excavating, or you’ve got sites that you have to rip out all the bad dirt and come in and import the good dirt, which becomes really costly.”Everything Old Isn’t Necessarily New AgainOne thing working in the market’s favor while waiting for inventory to be absorbed is that with so much product to choose from there’s been a flight to quality. Newer class A buildings are absorbing faster than older warehouses.Some older buildings can be rehabilitated but often the clear height isn’t enough for today’s warehouse user. Twenty years ago, it was common to see a 24-foot clear; today’s user wants to rack product higher-they’re looking for 36 to 40-foot clear.Though some users will take a building with lower clear but more space and just not rack as high. It’s less efficient but rates might come down enough to justify it.With land scarcity throughout Nevada there could come a time when older buildings are retrofitted to be taller, suiting today’s users. For now, it remains cost prohibitive.</div></body>

Block Source: nevadabusiness.com

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Unexpectedly, the most challenging thing about commercial building in 2026 is finding projects to build. Nevada was flourishing with commercial buildings coming up out of the ground. Between 2020 and 2023 builders and developers, many from out of state, flocked to Nevada to build industrial properties, e-commerce warehouses, logistics and distribution facilities and advanced manufacturing campuses. Everyone expected demand would remain strong.

Builders and Developers Face an Overbuilt Market

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Unexpectedly, the most challenging thing about commercial building in 2026 is finding projects to build. Nevada was flourishing with commercial buildings c

Builders and Developers Face an Overbuilt Market

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