Third-quarter office vacancy rate declines

The Meadowwood area has become

the center of commerce in Reno, and

doubters need look no further than the

area's vacancy rates, says a Colliers

International report released last week.

Tim Ruffin, managing partner and vice

president of Colliers' office properties

group, said office vacancy rates in the area

have dropped to 9.71 percent.

Strong leasing activity from financial

services companies helped drive down

vacancy rates in the area along McCarran

Boulevard from Plumas to Kietzke Lane.

Traditionally, a vacancy rate below 10

percent indicates a landlord's market, but

Ruffin said weakness in the nearby South

Meadows area keeps Meadowood landlords

from becoming greedy.

In South Meadows, the Colliers study

found vacancy rates are near 20 percent,

and leasing activity has been slow.

"The few deals consummated have

been at significant discounts to asking

rents," Ruffiin wrote.

He said one recent renewal was signed

at $1.20 a square foot down from the

original lease at $1.60 a square foot.

Ruffin added, however, that few property

owners followed suit, and South

Meadows rents remain near their levels

from year-end 2001.

"That said, credit tenants can continue

to get concessions in the form of free rent

or additional tenant improvement dollars,"

Ruffin said.

The vacancy rate in downtown properties,

he said, has held steady.

Government offices continue to absorb

downtown space, and population growth

in northern Nevada brings increased

numbers of attorneys, accountants and

other service firms.

One 42,000 square feet vacant in one

building 300 E. Second St.

accounts for nearly a quarter of the

downtown vacancies, Ruffin said.

Overall, Colliers estimated the vacancy

rate at 11.31 percent in the Reno market,

and Ruffin said the 293,300 square feet

absorbed in the market this year is the

second-highest total in the city's history.

(By comparison, some 75 million square

feet of office space stands vacant in the

San Francisco area.)

A big factor in the high absorption

rate, Ruffin said, has been a near halt to

speculative construction of office buildings.

Little leasing activity is coming from

out-of-town tenants looking for space,

Ruffin said, but some local operations

such as Intuit continue to expand.

Nationally, a study released last week

predicted that commercial real estate activity

will remain soft for at least another year.

Rising vacancies, corporate belt-tightening,

downward rents and rising expenses

will mark the year for most of the nation's

investors in commercial real estate, said

the report by Lend Lease and

PricewaterhouseCoopers.

Over the next five to seven years, the

study said, annualized long-term rents

from commercial real estate will be in the

7-8 percent range.