Monthly Commercial Market Update

Office Overall vacancy is around 17-20%, down from 2010. 2011 showed small decreases in office vacancies and an increase in net absorption which is positive.  Asking rates and construction are predicted to be stagnant with submarkets such as Downtown and Meadowood possibly seeing some small increases. Our office market goes hand in hand with the health of our economy and employment, so naturally there are a lot of variables. With that being said, it appears that we will see minor decreases in office vacancy for 2012 with lease rates staying relatively stable. With interest rates predicted to stay low, SBA loans will continue to be an attractive financing instrument for buyers. Speculative office construction will continue to be basically non-existent with some build to suit construction happening for owner/occupants. 2012 Outlook              Industrial Northern Nevada’s industrial market got some needed help in 2011. Overall vacancy dropped in 2011 and ended up at 14.6-14.7%, down from 15%+ in 2010. Owners are advertising low rents and first year teaser rates which are keeping the market low. However, there has been a flight to quality space and we may see a shortfall of Class A space in 2012. Rents are predicted to stay relatively stagnant.             New construction in our area has been very slow for industrial in the last few years but we saw two large build-to-suit projects in 2011. One was Urban Outfitters in Stead who is building a 472,000 square foot building and the second being Now Foods building a 130,000 square foot building.             We have seen increased interest in Northern Nevada as of late which should transition into increased absorption and lower vacancy in 2012. Multifamily Multifamily was one segment that saw increased activity in our area and nationwide. The large majority of transactions that took place were smaller properties with a few notable large properties trading hands. Overall vacancy was approximately 6% in Reno-Sparks last year, down from around 7% in 2010. Rents decreased to an average of $822 at year end, down 2% from 2010. With the number of investors moving into the local market, I think we will see a drop in rents due to an increase of inventory from both for-rent single family homes and multi-family units. Cap rates will become compressed and price per door may increase due to the demand from investors coming into the market. We are seeing rehab projects in many smaller units in the downtown markets taking place with more consistency now. ]]>

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