The NAI Alliance staff poses for a photo in 2020.
A commercial real estate study conducted by NAI Alliance has concluded the Carson City economy is thriving.
NAI Alliance is owned by Andie Wilson and former Carson City Supervisor Brad Bonkowski. The firm conducts a study of commercial vacancies in the area every two years.
Their conclusion in this year’s “Carson City Vacancy Study 2021” is that, while there is some concern for the retail and office sectors, the industrial vacancy rate is far lower than the national rate at just 3.8%.
“A red-hot industrial market is an indication of a strong economy in spite of recent economic stresses,” according to the study.
But that low number reveals a problem.
“Supply chain struggles and resulting cost of building hikes did nothing to incentivize builders to create more industrial space,” they wrote.
As a result, there simply isn’t space for businesses to lease in the Carson City-Mound House area.
“Deterred by a lack of appropriate space, companies are simply choosing not to relocate to or expand in this area,” according to the report.
Carson has an overall retail vacancy rate of 14.9%, more than double the national rate of 5.7%. Carson’s rate in 2009 was 19.8%.
The study says there is a huge contributor to that number — the still-vacant Kmart building. When the 169,000-square-foot building is excluded, the retail vacancy rate in the capital falls to 7.9%.
While more than half the retail centers in town are fully occupied, the report says many others have difficulty attracting tenants.
“In retail, desirability is dictated in no small part by the center’s anchor,” they wrote.
Retail space may have suffered permanent damage from the pandemic — particularly the big box stores.
“Many of us figured out how to buy most of what we need online, and the chance of that behavior reversing is slim,” they said.
Likewise, office rentals may have suffered some damage from the pandemic as more people moved to working from home.
“Some feel large corporations have learned they can relieve their overhead by allowing some employees to remain working from home,” according to the report.
But Carson suffered far less from that than the nation as a whole, because in Carson, 34% of office space is occupied by public entities — city, county, state and federal employees — and remained occupied during the shutdown.
The national office vacancy rate jumped to 16.4% during the pandemic. In Carson, it inched up to 8.4%. But when publicly owned and occupied properties are removed from the calculation, Carson’s vacancy rate rises to 12.75%.
NAI Alliance noted that 34% of surveyed office space is publicly owned, utilized by city, state and federal employees. In 2011, the rate was 17.8%.
The vacancy rate for medical office space was 6.1%, up from 4.1% in 2019.
“While this figure is considerably lower than the industry-accepted equilibrium vacancy of 10%, it’s still a considerable move toward it,” the report states.
The report also points out that Carson has a tight multifamily housing market. The vacancy rate there is just 3.6%. They point out that is significantly better than the 1.5% vacancy rate
in 2019 but still well below the industry equilibrium rate of 5%.
Much like the rest of Northern Nevada, a tight market is driving up prices. They report that, in Carson, the average one-bedroom apartment now goes for $1,282 a month, a 20% increase since 2019.
Finally, they report that land sales increased considerably during the pandemic.
“Much of the land that was taken back by banks and investment groups during the Great Recession finally sold in 2020 and 2021,” the report states.
NAI Alliance presented the study in partnership with Miles Construction, Heritage Bank, First Independent Bank and the Nevada Builders Alliance. NAI Alliance offers brokerage services for commercial real estate properties in Carson City and the surrounding areas.