Tahoe Reno Industrial Center
Reno Commercial Real Estate Comeback
During our recent downturn , the recession also affected the commercial real estate in Reno. Industrial, office, and retail were not immune to what is called today the worst recession in Nevada’s history. The good news is that with Northern Nevada seeing increased economic activity, including the arrival of some high-profile companies, commercial real estate in the region is seeing a rising tide effect, according to industry watchers.
Some of the companies that once existed are no longer around anymore, like Circuit City and Good Guys. Vacancy for retail in Reno-Sparks peaked at 17.3 percent in the first quarter of 2013, according to commercial real estate service firm CBRE Inc. Since then, the vacancy rate has gone down to 12 percent in the first quarter of this year. A vacancy rate of 7 percent to 8 percent is typically considered healthy for retail. Reno’s Central/Airport market, which includes the surrounding areas of Reno-Tahoe International Airport, continues to post the highest vacancy rates in the area at 24.2 percent.
Since last year we have already exceeded the retail market with a strong first quarter in 2016 with a net absorption or available space that has been filled, totaling 192,188 square feet, according to CBRE’s latest quarterly retail report. Retail also posted one of the biggest job gains for the state in March, helping lower the state’s jobless rate to 5.8 percent for the month, according to the Department of Training, Employment and Rehabilitation. Due to an overabundance of supply the construction of new commercial property is still stagnant, however there is a demand for improvement to existing centers such as the 19,500 square-foot expansion at the Outlets at Sparks, also known as the Legends at Sparks Marina.
It is the Industrial segment that has really boomed in Northern Nevada. What with Telsa Giga-factory and Switch’s Super NAP-the world’s largest data center once finished, as well as the news that Rackspace is looking at our area, has given our area a much needed boost on the technology side as well as some corporate cred. Dermody Properties, for example, has broken new ground on its LogistiCenter I-80 West speculative project at the Boomtown area just behind Cabela’s. The 800,000-square-foot project will feature four buildings and focus on tenants ranging from 30,000 to 200,000 square feet, said Eric Bennett, first vice president at CBRE. “This will be the first speculative project built in west Reno to take advantage of the mature labor market in northwest Reno and the close proximity to California,” Bennett said. Distribution accounted for 70 percent of all transactions in the fourth quarter of 2015, according to Colliers International. “At the end of the day, it’s packers and pickers,” said Greg Shutt, a vice president with Colliers International. “It’s logistics.” Bennett also pointed to sizable expansions such as ITS Logistics’ 625,500-square-foot facility and pet item supplier Chewy.com’s 566,600-square-foot facility, with several more announcements expected during the second quarter.
Office space has been relatively flat in 2016. Rents have been rising for the last two years consistently and it will probably take another two and a half years for a healthy market to emerge. The three dominant markets for office in the area are downtown, Meadowood and South Meadows, each with their own niche tenants from related industries, said Tim Ruffin. ( Executive vice president at Colliers International)
Looking ahead, the trends look positive for the area, commercial real estate watchers agreed. Reno-Tahoe International Airport added several new flights and routes while also posting its first passenger growth in a decade in addition to record cargo hauls. Nevada also was the No. 2 most popular destination for movers in the West according to United Van Lines’ 2015 National Movers Study.
For Northern Nevada, a big part of it involves the national attention gained from big economic development wins such as the Gigafactory, Ruffin said.
“The whole perception of investing in Reno has changed,” Ruffin said. “The expectations from Tesla haven’t materialized yet but investors are coming in because of the perception.”
Tech Companies Create a Housing Boom in Nevada.
The housing market has been improving statewide throughout Nevada, and we expect around 50,000 people to arrive to the area in the next five years, according to the Nevada Association of Realtors. Prices have rebounded to just over half of pre-recession highs. Foreclosures and short sales have dropped to 6% in the two major cities combined markets. Demand has finally caught up to the supply and now it is getting harder and harder to find available homes. Residential development is still possible in Nevada due to its diverse landscape. From high desert surrounding Reno to the lush pine forests of neighboring Lake Tahoe, the natural sights are sure to please many. A typical Reno home now sales for $299,250, nearly double the price from the city’s recession low in January 2010 when homes fetched a meager $167,000, according to data from the Northern Nevada Regional multiple listing services. Luxury prices in Reno soared 20% year over year, according to special report on luxury sales release by Redfin last month. The Seattle-based brokerage firm says that average luxury home in Reno sales at around $1.1 million – cheaper than nearby San Francisco, where the average price for a luxury estate is $5.9 million. One has to remember that San Francisco is a mere 1 hour flight away and a 3 1/2 drive. Jet Blue now has a direct flight from Reno to New York as well.
Nevada is going under a transformation and there are more than just electric car companies that are a part of it. Dozens of companies have begun to move their operations to the state, many to the Tahoe Reno Industrial Center. Wal-Mart also has a 1 million-sqft. distribution facility there. Also located in TRIC is Las Vegas-based Switch and their data center, the largest in the world once it is completed. The Amazon distribution center and the Apple data center are also additions to the Reno community. A Palo Alto-based company, Tesla is building its $5 billion, 10 million-sqft. Gigafactory in northern Nevada in order to produce the lithium ion batteries that run their vehicles.
The Economic Development of Western Nevada (EDAWN) is continuing to focus its efforts on stimulating business, which thereby increases visitor count. Please watch this new video produced by Edawn on THE NEW NEVADA. The RSCVA has partnered with EDAWN, UNR, the City of Reno and the Regional Transportation Commission in order to market the region at a national level. There has also been increased awareness to the region due to newly added air services to and from Reno. For example, in June Southwest will begin nonstop Reno flights to and from Orange County. In addition to these, Reno-Tahoe has seen a snowy winter that has attracted ski bums from all over and promises a high water level on Lake Tahoe for summer adventures like rafting, kayaking, boating and water sports.
Affordable Housing Vanishing in Reno
In 2015 housing prices skyrocketed in Northern Nevada. Northern and Southern Nevada are battling neck and neck for fastest growing region. Prices are almost back to what they were in 2005. Nevada had a 4.5 percent job growth in 2015, according to the Nevada Department of Employment, Training and Rehabilitation. Northern Nevada is expecting close to 10,000 new jobs per year according to DETR and the Economic Development Authority of Western Nevada Projections.
There is no doubt that the employment increase is due in part to the Tahoe-Reno Industrial Center, the largest Industrial Center in the world.
Tahoe Reno Industrial Center (TRIC) is a massive 107,000 acre park that encompasses a developable 30,000 acre industrial complex with pre-approved industrial and manufacturing uses. The uniqueness of the park and the county in which it resides is outlined in a recent article (click here)
Located nine (9) miles east of Reno on I-80, in a pro-growth Nevada county, the four 5,000 acre phases now available for development include:
- Rail serviced sites
- Municipal water and sewer utility companies
- High pressure gas to all sites
- Five (5) generating power plants on site with more than 900 megawatts of electrical power available to all park users
According to the Builders Association of Northern Nevada the housing inventory if far below demand. A healthy market has 6 months worth of houses to supply buyers and we have slightly less than 3 months available. This is why we are continuing to see rising housing prices as demand increases faster than supply. The rental market has increased as well with the median rental price at an all time high of $946 per month, according to real estate website Zillow. Rentals are also expected to increase this year despite new developments. A similar lack of Multi-Family inventory and land is causing a rental crises in the region and raising prices.
During the next 5 years, housing prices are expected to increase another 6 % in Nevada, according to a December 2015 report by CoreLogic, a financial services and real estate consulting firm. Similar percentages are also expected all over the country. However not everyone agrees they will go up that high. The Reno/Sparks prices might remain flat or rise more slowly, according to BANN forcast. A sudden increase of housing units, both single or multi-family would also change the supply in the region and affect prices.
