How soft is the office market in the Reno area?
So soft that some companies that rented office buildings near the airport in an effort to save some money now find they can afford to move to more luxurious digs in South Meadows.
So soft that one broker has seen tenants attempting to reopen lease talks with their landlords, as they're willing to extend the terms of a lease several more years into the future in exchange for locking in today's low rents.
And so soft that no one expects any construction of new office buildings in Reno or Sparks for a good while.
While no one counts vacancy exactly the same way, there's no doubt it's high.
Tim Ruffin, senior vice president and managing partner of the Colliers International office in Reno, estimates the vacancy rate stood at 19.2 percent at the start of this month a figure that's the highest in at least a decade.
CB Richard Ellis, meanwhile, says landlords are looking to fill more than 15.5 percent of the office space in Reno and Sparks.
Sublease space offices on the market from tenants who closed up shop or scaled back their operations add at least 3 percentage points to the total, says Matt Riecken of CB Richard Ellis.
Tenants and landlords are beginning to respond.
Ruffin notes, for instance, that vacancy rates fell in recent months in office buildings around the airport, where rents typically are among the most affordable in the region.
But now that landlords are hungry to fill buildings in South Meadows many of them left with vacancies after the implosion of the new home industry some of those value-conscious companies are able to cut attractive deals on top-quality space.
Many of those deals, Ruffin says, involve free rent. In fact, Riecken says, one rumored deal provided a full year of free rent to a tenant who signed a five-year lease.
Even if they're not ready to move, some tenants are trying to lock in today's lease rates, Riecken says. Some have talked to their landlords about signing lease extensions in exchange for concessions on rents and hungry property owners have taken the bait in some instances.
Landlords are pressed hardest in the South Meadows and Damonte Ranch areas, where Ruffin estimates 28 percent of the office space much of it relatively new stands vacant. Even downtown, which has seen resurgent demand for office space in recent years, saw a slight uptick in its vacancy rate to 20.6 percent as the first half of the year came to a close, Ruffin says.
Not surprisingly, office construction has ground to a near halt.
The 16,000-square-foot SGC Building near Interstate 80 just off Vista Boulevard was the only new office building completed in the second quarter, and Ruffin says no new speculative buildings are likely to be built for more than a year.
If nothing else, he says, banks have put the brakes on financing for speculative office projects.
Riecken, however, says developers who take redevelopment of older office buildings, particularly in the downtown areas, may be able to move forward.