Reno market dominated by garden offices

As garden offices continue to account for much of the action in the Reno-area office market, the supply of land for new small office projects is tightening.

And that puts the sort of pressure on land prices that makes developers look twice at some projects to make sure they'll be profitable.

Garden offices smaller buildings, often occupied by their owners have accounted for much of the construction of office space in Reno this year.

Tim Ruffin, managing partner and vice president of the office properties group at Colliers International in Reno, said last week that garden office projects this year have accounted for twice as much space as larger, multi-tenant buildings in the market.

The reasons, he said, are twofold: First, Reno's economy includes large numbers of smaller professional service companies that are more likely to own or lease space in garden-style buildings rather than large corporate offices.

Second, the cost of ownership of a garden office building remains attractive as interest rates have been at 40-year lows.

Don Welsh, who watches the garden office market closely for Colliers, said land prices for new projects are beginning to creep upward as they are for all office projects in the area and it's becoming more difficult for developers or owner-occupants to make projects pencil out.

That's particularly true, he said, with projects such as medical offices that require more land for customer parking.

Even as garden offices continue to blossom, Ruffin said he expects more large office projects to be built in 2004.

Among them, he said, are likely to be a 64,000-square-foot building in MountainView at Del Monte and Kietzke, a 48,000-square-foot building at Northern Nevada Corporate Center, just south of the Reno Tahoe Tech Center, and a 50,000-square-foot building in Damonte Ranch.

Those stirrings of activity in the office construction market come as the Reno area's vacancy rate fell to 10.13 percent at the end of the third quarter compared with 11.25 percent three months earlier.

Colliers estimated that the vacancy rate in downtown properties fell to 12.8 from 14.4 percent three months earlier.

Much of that leasing occurred in older buildings, Ruffin said.

In South Meadows, the overall vacancy rate stood at 12.8 percent, but Ruffin said most of the available space is in smaller buildings.

Among major leases in the area in recent weeks were PC Doctor's deal to lease the remaining space on the third floor of Park Center West and Morrison University's lease of 13,500 square feet in the Reno Tahoe Tech Center.

The Meadowood area continued to be the hottest part of town, with a vacancy rate of 9.1 percent on Sept.

30, down from 10.4 percent three months earlier.

Rents, Ruffin said, held steady in recent months with most concessions coming in the form of free rent or lease buy-outs.


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