Retail activity rebounds, but vacant space slow to fill

Brisk holiday shopping helped existing retailers celebrate the end of 2012. But despite a few anticipated store openings, there will likely be little retail expansion in the area in 2013.

In recent months, the Nevada Department of Taxation says taxable sales in the Reno-Sparks are have been running more than 5 percent ahead of year-earlier figures.

Consumers were expected to spend about $1.6 billion in the state this Christmas season, about 6.9 percent more than last year, according to the Retail Association of Nevada. Retailers were expected to hire upwards of 4,000 seasonal workers to meet the rush.

"About 20 percent will be added permanently," based on historic trends, says Bryan Wachter, RAN director of government affairs for southern Nevada, taxation and workers' compensation. "That will provide work for people who don't have it at this time."

The Nevada Department of Training, Rehabilitation and Employment expects retail employment to be a bright spot going forward. DETR projects 11,000 retails jobs will be added in the state from 2011 to 2015, second only to hiring in the accommodation/food services industry.

But millions of square feet in vacant retail space still plague the market. Near year-end, the retail vacancy rate in the Reno-Sparks market was 16 percent, according to Colliers International, a commercial real estate broker.

And lease rates were continuing to drop, from an asking triple-net price of $1.35 per square foot in the fourth quarter of 2011 to $1.23 in the last quarter of 2012.

"We keep thinking rents have bottomed out but they keep coming down," says Roxanne Stevenson, senior vice president with Colliers International in Reno. "We expect 2013 to be relatively slow and maybe picking up towards the end of the year. We're hoping for growth in 2014."

Stevenson says about 19 so-called big box stores, ranging in size from 20,000 square feet to 125,000 square feet, are available in the Reno-Sparks market and she expects two more to become available in the first half of the year as some national retailers cut back.

Additionally, Tesco, the world's largest retailer in the United Kingdom, recently announced it was abandoning an effort to open small grocers in the United States. None had been opened in Reno, but the company had purchased three properties and a leased a fourth in the area and will be trying to unload them.

Stevenson says what expansion there is in mostly in what she calls fast food and fast casual, and in thrift stores such as Family Dollar Store and 99 Cents Only Stores. A Steak 'N Shake, Chipotle and Jimmy John's restaurants, for example, are due to open in Reno-Sparks in 2013.

While vacant big box stores dot the landscape, particularly the Meadowwood submarket of Reno, other parts of the city are looking up.

The Summit in south Reno is keeping all its current tenants and adding several news stores, including Soma Intimates, a lingerie store, and Savvy Boutique selling jewelry, says Alexia Bratiotis, general manager.

And in midtown, Dacole, an investor developing retail properties, is completing a total of 17 buildings, and now has 11 of the 12 spaces it has currently available leased, all to locally-owned retailers, according to Dacole investor Bernie Carter.

Dacole will also being taking over the old post office in downtown Reno once it is vacated and turning it into 30,000 square feet of office space and 15,000 square of retail space.

"I am extremely encouraged by the midtown and downtown area, where we've seen a lot of very unique boutique and independent restaurants pop up and be successful," says Christine Kelly, owner of Sundance Books and Music on California Avenue, the 27-year-old Reno bookseller that moved to the downtown area in 2011.

"We're seeing a lot of smart businesses," she says.

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What to watch in 2013

Increased employment in the region is directly linked to retail spending and retail spending, in turns, boost employment at stores and restaurants.