2015 has been a breakout year for the northern Nevada retail market. Landlords are beginning to see some of their vacancy absorbed from national, regional and local tenants.
A new development in south Reno is preleasing, with negotiations ongoing with national brands. Grateful Gardens will also be expanding into Village of Double Diamond Center in south Reno
Legends at Sparks is leasing up space for businesses that plan to open in 2016. In the outlet center, sales for retail space are up 18 percent since this time last year. Retail outlets for Motherhood, Express and Maurice’s recently opened. Zale’s outlet commenced construction and will open in the near future. H&M is currently negotiating a lease for 28,000 sq. ft., and plans to open summer of 2016. Outside the outlet center, Jimmy John’s, Dunkin’ Donuts, Menchie’s and Pacific Dental recently opened. A Sport Clips establishment is planned to open next to Sprint Wireless in 2016. Petco and Payless Shoesource will begin construction on the two new buildings next to Target in December 2015, scheduled for spring 2016 openings. Verizon Wireless and Mattress Firm are under contract to purchase retail space by Target. Also of note is PF Chang’s, Panera Bread, Chick-Fil-A, and Twin Peaks are all in the final phase of negotiations for retail space on Sparks Boulevard.
Northwest Reno does not have a lot of retail space to spare. Every retail center has low vacancy and it is hard for current retail tenants to find suitable locations elsewhere in the area. The same can be said for the North Valleys. The Walmart center in Lemmon Valley is developing new pads for multi-tenants to help with some of the demand. Developers have been looking at land for new developments. We expect preleasing for these sites to start in 2016.
Big box sites are still not receiving much interest. That type of user is not really entering the market. In fact, the big box vacancy has actually increased with the closing of the Scolari’s Markets.
Due to all of the activity in the retail market, rental rates have increased. Anchored centers rates are $1.50 to $2.20 per sq. ft., and strip centers are $1.35 to $1.50 per sq. ft.
Retail sales have been relatively strong in 2015 compared to 2014. The investment market for retail has witnessed a noticeable increase with a lot of capital in the market and cap rates for other asset classes compressing. Both single-tenant triple net offerings and shopping center deals have been trading hands almost monthly. Some of the larger centers that sold were the 75,000-square-foot Southwest Pavilion on South Virginia Street, which is best known as the home of the pink Scolari’s, the Crossroads Shopping Center on Kietzke, across from the Reno/Sparks Convention Center, which sold for $8.5 million ($148 p/sf), and the $22.3 million sale of the retail center at 5017-5093 S. McCarran Blvd. The sale was comprised of four parcels totaling 137,691 square feet.
There were also a number of smaller neighborhood centers that sold in 2015, including the 10,226 square foot center on Virginia and California, which traded for $3.1 million ($310 per square foot). Tenants in this building included Money Tree and Great Full Gardens. Another sale the 19,469-square-foot Vista Knolls inline retail center that sold for $7.2 million ($370/sq. ft.), and Las Brisas retail center on Las Brisas and McCarran. Tenants included Squeeze In, Beach Hut Deli, and Goodwill. The two-building retail center sold for $4,175,000 or $301 p/sf.
The sale of single tenant deals has picked up in 2015. Some examples include the 6,347-square-foot Red Robin at the Sparks Galleria that sold for $2,332,000 or $367 p/sf, the Olive Garden at the Legends in Sparks that sold for $2,771,653 or $375 p/sf, and a Dollar General Store in Stead that sold for $1,960,000 or $235 p/sf.
Redevelopment has also been a factor in 2015. Some successful redevelopment projects underway or near completion include the former Heritage Bank site at 1401 South Virginia St., which is now fully leased, the former Joe’s Diner on South Virginia and Neil which sold for $1.3 million and is being redeveloped into a multi-tenant site, and the former Bourbon Square Casino in Sparks which is being redeveloped into a mixed use project with retail, residential, and office.
Finally, I expect the momentum of 2015 to carry on into 2016. With good steady growth in the housing market, new businesses moving into the area, and a decreasing unemployment rate, the Reno/Sparks retail market might finally be heading in the right direction.
Gary Tremaine is a retail property specialist with Dickson Commercial Group.