After another record high in apartment rents, is Reno in line for relief?
Average vacancy across all multifamily properties in the region — such as the Caviata at Kiley Ranch apartment complex in Sparks, pictured — remains under 3%, with rents continuing to increase.
Courtesy Photo
Reno-Sparks hit yet another high-water mark for average apartment rents in the third quarter of 2021, yet some relief from years of escalating rental prices may soon be headed this way. The average rent across all apartment product types and sizes was $1,632, real estate appraisal firm Johnson Perkins Griffin noted in its third-quarter apartment survey. The JPG survey tracks just shy of 26,000 apartment units in the Reno-Sparks metro area. That rental number represents a 21% increase from the same quarter just two years prior, and a 94% surge from a decade earlier. However, rent stabilization, and perhaps a slight uptick in vacancy, may be on the horizon due to the expired moratorium on evictions, said Saray Fye, appraiser at JPG. Despite more than 4,900 new apartment doors added to the market since 2016 across 20 large projects, overall vacancy has held steady at around 2% to 3% — it stood at 2.35% in the third quarter of this year, according to the report. Fye said a slight downturn in the fourth quarter is likely — as COVID-related rent moratoriums were finally lifted in Q3 in Nevada, there were some property owners who pushed rents in order to try and recoup monies lost during the extended period that prevented evictions for non-payment of rent. “I am expecting to see some stabilization and even reduction in rents coming with the fourth quarter,” Fye said. “We will come down from this all-time (high) and will see a little bit of stabilization going forward.” Although rents continue to push all-time highs, the price increases are more modest than in past years when there were several $100 or more jumps between quarters. Much of that can be contributed to the vast amount of new doors continually being added to regional inventory, Fye said. “A lot of new product has come online, and there is a lot of new product in the pipeline,” she said. “That has a trickle-down effect into stabilization and is probably part of the reason why we have been holding steady from 2018 to 2020 -- we have just been turning over tons and tons of units.” ‘VERY STRONG DEMAND’ Currently, there are more than 4,000 units in Reno-Sparks under construction, with many properties currently pre-leasing. Many units of those, such as Emory at RED and The Deco at Victorian Square, are high-end luxury apartments at the top of the rent spectrum which impacts average rents as well. While it’s yet to be seen whether the market would bear those high rents for luxury apartments, there are some statistics to dive into. Rents at The Emory in the Reno Experience District (formerly Park Lane) on Plumb Lane and Virginia Street range from $1,740 for a 548-square-foot studio to more than $3,100 for a two-bedroom, two-bathroom apartment. According to JPG, approximately 42% of the 282-unit complex was pre-leased, with 38% occupancy. Basecamp, a 317-unit complex in the master-planned Reno Experience District, was just 2% pre-leased, JPG reported. In downtown Sparks, The Deco high-rise luxury project received its certificate of occupancy in the first quarter. The 209-unit, 10-story building was 59% pre-leased and 54% occupied at the end of the third quarter, JPG reported. As those properties reach stabilization, or 90% occupancy, they will be added to the Johnson Perkins Griffin survey. “They are getting those high rates,” Fye said. In addition to the heavy volume of current construction, there are another 5,800 apartment units planned for Northern Nevada. “With the population growing, there is very strong demand for apartment units,” Fye said. “We expected the market to absorb those units.” That demand has piqued the interest of out-of-state developers as well. Floyd Rowley, founding broker of Rowley Real Estate Advisors, says more and more developers from across the country are looking at Northern Nevada, despite ever-escalating land prices. “In 2017 our developers were mainly local and regional firms who understood the Reno story,” Rowley told NNBW. “We now — finally — have a rent “hockey stick” that we can show these out-of-state developers so they can underwrite today’s high land prices against pro-forma rents two-plus years from now. With our diversified economy we will continue to need more apartments to support our growing region, regardless of whatever recession or inflation may occur at the national level.” KEY TRANSACTIONS FROM Q3
Southwestern Property Corporation purchased 21.89 acres of land at Spectrum Boulevard for a large multifamily housing project at the entrance to North Valleys. Heidi Chisholm and Dennis Bradley of the land team at Dickson Commercial Group, along with Trevor Richardson of DCG’s multifamily team, represented the seller in the $5 million dollar transaction.
Country Club Villas at 2796 Plumas St. sold for $8.05 million.
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