The amount of vacant industrial space in the Carson City area declined sharply in recent months, a strong indicator that economic recovery is starting to take hold in the Capital City.
The jobs created by the new and expanding industrial companies are beginning to be reflected in higher occupancy in apartment complexes, and the new paychecks are beginning to show up as retail sales, says commercial real estate broker Brad Bonkowski.
"The numbers have improved, and in some cases, they have improved phenomenally," said Bonkowski, a principal in Coldwell Banker Commercial Premier Brokers, a commercial real estate firm in Carson City.
The brokerage last week released a new study of commercial real estate vacancy rates in Carson City, updating a previous analysis that was completed in 2009.
Unlike the Reno-Sparks market, which is the subject of numerous quarterly studies by commercial property brokers, the Carson City area receives scant statistical analysis. For that reason, the Coldwell Banker Commercial study is much-anticipated.
The headline news in the new study: Industrial vacancies have declined by nearly 47 percent since 2009. The current vacancy rate of 11.4 percent in industrial buildings in the area hints that speculative development and construction may be needed to meet demand within 18-24 months, Bonkowski said.
Typically, he says, a 12 percent vacancy factor signals that developers need to get moving.
More industrial employers may be on their way.
Rob Hooper, executive director of Northern Nevada Development Agency, said last week the economic development organization is working with numerous promising prospects including one very large company whose identity is being kept under wraps.
The dramatic reduction in industrial vacancy more than 1 million square feet was vacant in the area in 2009, compared with 542,783 square feet today isn't yet showing up in the state government's employment numbers.
In July, the Department of Employment, Training and Rehabilitation estimated the jobless rate in the Carson City area stood at 12.6 percent. It said 2,400 people were employed in manufacturing, down more than 7 percent from a year earlier.
But Bonkowski said apartment rentals clearly point to an improving economic situation in Carson City.
The Coldwell Banker Commercial analysis by brokers Bob Ford and Rick Terrin found a vacancy rate of 11.4 percent in apartment complexes, which compares with a 14.8 vacancy two years ago. (The analysis looked only at complexes with 10 units or more.)
Retail activity, too, shows signs that more people in Carson City have paychecks to spend.
Taxable sales in Carson City were up more than 8 percent in the state fiscal year that ended June 30.
Vacant retail space, meanwhile, is beginning to fill slowly. Dennis Smith of Coldwell Banker Commercial found that about 11.4 percent of the 4.7 million square feet of shopping center space in Carson City is vacant. That vacancy rate is an improvement of about 2 percentage points from 2009.
Among major retailers who have soaked up some of the vacant space are Burlington Coat Factory, Big Lots, Kohl's, Sportsman's Warehouse and Olive Garden.
Still Bonkowski cautioned that small retailers and independent restaurants continue to struggle. And he said vacancies in retail centers are particularly common on the north end of Carson City.
"We are seeing the start of a fragile recovery in retail," Bonkowski said.
Office vacancies, however, remain high. An analysis by Keith Howell of Coldwell Banker Commercial found a vacancy rate of nearly 18 percent in office buildings with at least 5,000 of space to rent.
That vacancy rate is up a smidgen from two years ago. The good news, Bonkowski said, is that the vacancy rate appears to be stable although it's at historically high figures.
In medical office buildings in Carson City, the vacancy rate stands at 30 percent, found Cheryl Evans of the real estate brokerage. That, too, is up less a percentage point from two years ago.
Hospitality segment continues to struggle
Hotel and motel properties remain the weakest segment of the commercial real estate market in Carson City.
Recent prices on sales of hospitality properties in Carson City have been running about $17,200 per room, finds an analysis by Brad Bonkowski and Andie Wilson of Coldwell Banker Commercial Premier Brokers.
That compares with prices that averaged about $80,000 per room before the onset of the recession.
Were prices over-inflated in the middle of the last decade? Or is the market seriously oversold today?
Probably a little of both, says Bonkowski.
He notes, however, that lodging-property values are depressed by weak occupancy rates.
"The occupancy factor, at 47.8 percent on average, points to the fact that Carson City may have too many hotel properties, or possibly just not enough higher-end rooms," Wilson and Bonkowski wrote in their analysis.
They said investor interest in hotel and motel properties remains fairly strong because prices currently are less than the cost of building new hotels.
"There is a clear opportunity to remodel/reposition some of the older hospitality properties," the brokers wrote.