RENO CAPITALIZES ON RELOCATIONS FROM PLACES LIKE CALIFORNIA
The Reno/Sparks office market is in a unique position: caught in the throes of a rapidly expanding commercial marketplace and aided by an ever-increasing population base. The most vibrant commercial real estate sectors in our area are industrial and multifamily, and they have been for decades. The office market is also seeing new companies, new developers and new buildings.
For the first time in many years, we will see a true speculative office development begin construction this summer. McKenzie Properties will be going vertical with its Skypointe development. Tolles Development Company is in the middle of completing its Rancharrah project, which contains 64,000 square feet of retail space and 36,000 square feet of office space. Last, but certainly not least, Reno Land Inc. and its partner Lyon Living have started the first phase of their Park Lane development, a 46-acre, master-planned development that will include office, retail and multifamily.
This new development shows the Reno/Sparks area is on the move, and fast. The area provides for a quality of life that is difficult to find when combining Lake Tahoe, the Sierra Nevada mountains and the Truckee River, which bifurcates the city. In comparison to the more populated cities of California, Reno is more affordable while still maintaining easy access to the many attractions California provides. Reno also works with the many companies that relocate from or maintain their existence in California. All companies that relocate to Reno expect a quality work environment that meets or exceeds their previous location. Reno/Sparks has invested in the resources to improve its downtown, roadways and UNR to facilitate this growth, now and well into the future.
This growth has led to an overall reduction in the office vacancy rate, going from 10.56 percent in 2018 to 9.93 percent at year-end 2019. We’ve also seen rent growth gain 4.4 percent year-over-year, ranging from $2.20 to $3.25 per square foot (full-service gross) for Class A office product. On the negative side, owners and developers are being impacted by the cost of construction. Whether it’s ground-up development, a rehab project or tenant improvement, all are impacted by construction costs and how they impact returns.
Looking into the future, we expect a very solid growth pattern to continue for years to come. Obviously, there will be challenges and, like every other community, we could see that impacted by the national and local political climate, geo-political issues or, as we’re dealing with now, a significant health occurrence like the coronavirus. This strong and vibrant community was looking very bleak during the last recession, but now the promise of a vibrant community has been realized and should continue.
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