Demand for office, retail expected to stay strong

Nearly a million square feet of new

retail space is proposed for construction

in the Reno-Sparks area next year, but

the region's continued growth will keep

pace with the construction, says a new

study.

An overview of the market released

last week by Grubb & Ellis Nevada

Commercial Group also said:

* The office vacancy rate, expected to

be about 12.7 percent at the end of this

year, probably will continue to drop in

2003. Investment-grade properties will

remain in particularly high demand.

* Even though the market for industrial

properties has begun showing signs

of life only in the past few weeks, the

cautious stance of developers means

vacancy rates continue to be manageable.

* Investor demand for northern

Nevada properties will remain strong.

Vacancy rates and interest rates both are

low, meaning investors are looking to real

estate rather than fixed-income investments.

The market for retail space, the Grubb

& Ellis study said, saw the addition of

375,000 square foot of space during

2002, and the vacancy rate rose to 8 percent

at year-end compared with 6 percent

at the start of the year.

Much of that increase, however,

reflects the moves of Target and Mervyn's

to new quarters in south Reno, leaving

their previous buildings dark at Moana

and Kietzke.

Monthly rents in existing neighborhood

and community shopping centers,

the report said, are in the range of $1.25

to $1.50 a square foot, with new developments

commanding up to $2.75 a square

foot.

Looking at the market for office properties,

Grubb & Ellis said capital continues

to come into Reno and other

medium-sized cities from around the

nation.

But most of the bargain-priced properties

have been picked off, the study

said. Those remaining are buildings that

are showing their age.

Because interest rates remain low,

owner-occupied office buildings will continue

to be a bright spot in the market.

Grubb & Ellis said new office buildings

are selling for about $200 a square foot,

and medical space is running $230 to

$250 a square foot.

The market for industrial properties,

where the market absorbed 900,000

square feet this year, has seen growing

interest in larger buildings in recent

weeks, the report said. Because construction

came almost to a halt this year,

Grubb & Ellis said increased demand

may find a moderate shortage of buildings.

In the home-construction arena,

Grubb & Ellis said tight inventories of

raw land will drive up prices. Big developments,

it said, will include Reynen and

Bardis' Double Diamond Ranch,

Lifestyle's Woodland Village in North

Valley and Barker Coleman's Eagle

Canyon in Spanish Springs.

Carrying the momentum into 2004,

the report said, will be new planned communities

such as Damonte Ranch,

Somersett and Pioneer Meadows.