For many Americans, Nevada brings to mind stunning natural beauty and—for most, of course—Las Vegas, the country’s entertainment capital. What the state has not been well known for is its manufacturing industry, but that may be changing. Since 2017, when electric vehicle (EV) giant Tesla opened its 5.8 million-square-foot (538,800 sq m) battery manufacturing facility in the desert outside Reno, Nevada, state officials have made efforts to grow the burgeoning industry in hubs statewide. The expansion has led to a rush of interest and deals in the real estate sector, but despite abundant opportunities, challenges to growth remain.
Turning point
Ten years ago, Tesla started preliminary work on the company’s facility—dubbed the “gigafactory”—near Reno. The project’s size and scope drew attention from around the globe. Not only was it planned to cover nearly 6 million square feet (557,000 sq m), the project was intended to be a net zero energy building. Tesla also purchased surrounding land in case company leaders decided to expand the facility.
The factory will support production of 35 GWh of battery cells every year—roughly enough to allow assembly of 500,000 EVs annually, according to the company. To staff this massive development, Tesla said it plans to hire 6,500 full-time employees over the next decade as it expands the Reno facility, the first to be built in the company’s ongoing gigafactory program.
Tesla’s multi-billion-dollar project marks an important moment in the state’s manufacturing industry, which has been expanding rapidly in recent years. According to the Nevada Governor’s Office of Economic Development (GOED), in 2024, the state’s manufacturing GDP hit $4.5 billion—thanks to Reno alone. Although the state has become a major player in the EV supply chain, particularly in the manufacturing space, Nevada also has many businesses revolving around the production of lithium or products that require lithium, including batteries.
GOED identifies advanced manufacturing as one of its key target industries for its State of Nevada Tax Abatement incentive package. The state grants tax abatements to qualifying companies to help promote economic growth and diversification, and prioritizes ones that help drive regional competitive advantage, innovation, and wage gain, among other things. Firms that receive the incentives gain abatements on such things as capital equipment purchases, business taxes, personal property taxes, and recycling.
“The package has proven to be an excellent fit for all facets of manufacturing and attracting, promoting, and maintaining a strong, healthy, competitive manufacturing sector,” says Melanie Sheldon, senior director of business development at GOED.
Attracting interest
Incentive packages are critical to attracting companies to the state, but other important factors are also at play. Nevada is known as a more business-friendly state, with lower costs for startup, regulatory, licensing, and annual fees, as well as lower taxes and competitive utility rates for commercial operations, according to GOED. In fact, the state ranked seventh in the Tax Foundation’s 2023 State Business Climate, an independent ranking of states in five areas of taxation.
What stands out most about the ranking is how it compares to neighboring states that also compete for businesses: California ranked 48th, Arizona ranked 20th, and Idaho ranked 21st. Having an edge over its neighbors has become a big advantage for Nevada. “I think a driver for Las Vegas has been that we’re close to Southern California but not California,” says Rob Lujan, senior managing director for JLL’s industrial team in the brokerage’s Las Vegas office.
For many companies, across the real estate spectrum, looking to plant a flag on the West Coast or even to move out of Southern California in search of a lower-cost market, Las Vegas’ geographic location has been a big driver in its growth. Now, manufacturers seek to do the same thing, Lujan says: “Lease rates have skyrocketed in California, but in Nevada we are less expensive, the transit costs are cheaper, and labor is less expensive.”
Major markets in Nevada, such as Reno and Las Vegas, are less than a day’s drive to 60 million customers and five major US ports serving the Pacific Rim, according to GOED—a big selling point for companies in search of distribution centers. Nevada also has more than 7,500 acres (3,035 ha) of flexible, available Foreign Trade Zones—secure areas supervised by U.S. Customs and Border Protection that are referred to internationally as free trade zones, which can offer advantages to manufacturers and other types of companies through lower duty fees, taxes, and international shipping costs.
Path to growth
Numerous major industrial parks have been built recently and land has been rezoned for industrial use to accommodate companies planning to expand or relocate their manufacturing operations. The Apex Industrial Park was completed earlier this year, about 20 minutes drive north of Las Vegas. Spanning 18,000 acres (7,300 ha), the project was envisioned to be a massive manufacturing hub and was in the works for decades. Now, several high-profile industrial real estate developers, including Prologis, Dermody Properties, and CapRock Partners, are all building projects at the site.
As of November 2023, there are six large projects underway at Apex that total 9.8 million square feet (910,000 sq m). CapRock, an industrial developer and owner based in California, started expanding into Arizona and Nevada markets back in 2017. Since then, the company has steadily built up its Las Vegas portfolio to more than 4 million square feet (372,000 sq m) of space, whether acquired, built, or entitled, says Taylor Arnett, senior vice president of acquisitions at CapRock. “We’ve found that Nevada is really a great place to invest, especially [by] being an overflow market for California,” Arnett says. “Development regulations are more streamlined, quicker—it’s easier to entitle designs and develop industrial buildings.” CapRock’s latest purchase in Nevada happened in July, when it acquired a 700,000-square-foot-plus (65,000 sq m) distribution warehouse property in Reno.
Despite all the growth and promise of the state’s industrial and manufacturing industries, however, various factors could still hamper further expansion. For one, Nevada has long confronted water shortages. With demand for water expected to rise as the state targets growth in batteries, renewable energy, and other green technologies, Nevada officials have been focusing on water conservation and developing new, smart infrastructures and technologies to help scale those efforts, according to GOED.
One of the biggest barriers, though, is that most of Nevada’s land is owned by the Bureau of Land Management (BLM). Just over 80 percent of the 56.2 million acres (22.7 million ha) of land in Nevada is federally owned and managed by BLM, meaning a scarcity of private land remains for development of more industrial and manufacturing facilities. A partnership of developers, brokers, and industry groups such as NAIOP is pushing the government to release BLM land for future development, however, especially given the rate of population growth in such cities as Las Vegas, according to JLL’s Lujan.
“The focus is for Nevada to continue to realize its vision for the future,” says GOED’s Sheldon. “[Namely,] a sustainable, innovative, and connected economy with high-paying jobs for all Nevadans. Nevada’s unique economic assets—from its competitive business environment and nascent innovation ecosystem, to natural resources and geographic location—make it primed for explosive growth in the years ahead and [to be] a cornerstone of national security.”
Learn more about development opportunities in Nevada at the 2024 ULI Fall Meeting.
