Nevada CRE Executive: State Best Choice for Tesla’s $5B Battery Factory

Brad Elgin

By Gail Kalinoski, Contributing Editor

Tesla Motors Inc.’s decision to locate its $5 billion battery “Gigafactory” in Nevada came as no surprise to at least one local commercial real estate executive. Brad Elgin, vice president of Stark & Associates, a commercial real estate firm based in Reno that serves Northern Nevada, cited the state’s strong industrial market, close access to Interstate-80, proximity to Tesla’s assembly plant in California, lack of corporate income taxes and abundant green energy as natural reasons for the choice.

Gov. Brian Sandoval and Tesla chairman & CEO Elon Musk made the announcement late last week. As Commercial Property Executive previously reported, Texas, Arizona and New Mexico were also being considered for the factory that will mass produce lithium-ion batteries for Tesla’s electric cars. California was in the running, too. The plant is expected to bring 6,500 jobs and have an economic impact of about $100 billion over the next 20 years, including indirectly creating another 16,000 jobs in the community.

“Logistically and economically, it made the most sense for Tesla. The posturing was a negotiation ploy on the part of Tesla to secure the strongest incentives,” said Elgin.

During a press conference on the Capitol steps in Carson City, Nev., Thursday, Sandoval unveiled a tax incentive deal worth about $1.25 billion used to lure Tesla. The package must be approved by the state legislature, which is expected to do so in a special session, perhaps this week. The Reno Gazette-Journal reported the package is 13 times larger than the $89 million granted to Apple, which was a record for the state. The incentives include real and property tax abatements for 10 years. Tesla also would not pay sales tax for 20 years.

Musk stated during the event that “it wasn’t just about the incentives,” adding that Nevada’s “wasn’t the biggest incentive package.” He claimed Tesla wanted a state that could make sure the 5 million-square-foot factory—slated to be opened by 2017—could be ready on time.

“It’s a real get-things-done state,” Musk said of Nevada.

Work has already begun at the site at the Tahoe Reno Industrial Center along I-80, outside Sparks, Nev.

Elgin said the Northern Nevada industrial market is in a healthy position, noting there are many new large, state-of-the-art industrial facilities. Tesla’s neighbors already include Apple, Walmart, Amazon and Zulilly.

“Northern Nevada allows access to seven states in one day and 11 states within two days,” Elgin told CPE. “We also have a favorable tax structure, pro-business environment and solid sense of community.”

The state also has access to green energy, particularly solar energy, which Musk had cited as a priority.

The governor’s office said the Tesla factory, expected to be one of the largest in the world, will have a direct economic impact of about $40 billion and indirect economic impact of approximately $60 billion over 20 years.

Elgin said he expected activity over the next few months as businesses “try to be in the best position to take advantage of the overall opportunity Tesla brings.” He said there should also be a spillover effect.

“The impact on housing, retail, et cetera, should be substantive, but it is important to keep in mind that the growth will not be overnight,” he cautioned. “We will see immediate impact on the construction front, with gradual realization over the next 10 years.”