As home sales thrive across Reno-Sparks, land supply continues dive
Special to the NNBW
EDITOR'S NOTE: This is the fourth in a 6-part series of stories in the NNBW's newest quarterly edition of the Northern Nevada Real Estate Journal, which looks at various statistics, trends, project updates and more regarding commercial real estate across greater Reno-Sparks. See the full slate inside the Wednesday, Oct. 28, print edition of the NNBW.
- Part One: Amid Northern Nevada retail struggles, innovative projects push ahead
- Part Two: ‘Time will tell’: Reno-area developers, contractors prep for uncertain winter as pandemic impacts continue
- Part Three: Reno-Sparks multifamily housing demand remains strong heading into winter
- Part Five: Dissecting key elements of Reno’s zoning code update, which would alter development, land use
RENO, Nev. — It should come as no surprise that 2020 is a tale of two different stories when it comes to residential land sales.
Doubtless anything could surprise our COVID-hardened senses at this point, but housing and land sales have seen little lingering effects from the pandemic. In fact, COVID-19 has changed the dynamic for housing by creating a push out of urban areas and into the suburbs, says Mark Krueger, principal and founding member of ArchCrest Commercial Partners.
“It’s put housing in the forefront of peoples’ priority because they are staying home more,” Krueger told NNBW. “The result is that we have just absolutely lit it up on housing.”
For the first half of the year ending June 30, there were 1,205 home sales in Reno-Sparks, ArchCrest reports — even though Northern Nevadans were under shelter-in-place mandates and thousands of workers were furloughed. That’s the best first six months for home sales since 2007 — and the pace of home sales has only accelerated into the fall, Krueger said.
“I was predicting we would have 2,100 home sales (for the year), but we will probably be pushing 2,400 or 2,500. (Builders) are selling homes as fast as they ever have in this market,” he said.
Home sales translate into absorption of finished lots — undeveloped sites ready for housing permits.
In all, there were 2,850 finished lots in the Reno-Sparks market midway through the year, the highest number since 2011 when the regional economy was mired in the Great Recession and home values were tanking. The supply of finished lots is enough for 1.36 years of inventory based on current housing sales, ArchCrest reports.
A mixed year for land sales
Land sales, however, stalled out the first half of the year when the pandemic hit. Builders reigned in development plans since they didn’t know what the future would bring, and deals were either scuttled or extended, Krueger said.
“Most got pushed to the second half of the year,” Krueger said. “The future turned out to be positive, and we are having a real good second half. We are closing a lot of deals delayed from the first half, and we are putting new deals together.”
Land sales in the first two quarters totaled $24 million, a 40 percent dip from the first six months of 2019 and a 52 percent decline from the same period in 2018.
However, ArchCrest notes, there are more than $80 million in various pending land deals in the works. Additionally, there was $26 million in multifamily/mixed use land sold in the first half of 2020.
Spanish Springs remains the region’s hottest submarket for residential sales volume, followed by South Reno and North Valleys. As lot supply dwindles in those areas, though, land interest is pushing outward toward Carson City, Dayton and Fernley, Krueger said.
Pricing also is also more attainable in those markets, he added. And the region’s primary homebuilders — Lennar, Ryder, Toll Brothers and several others — are aggressively trying to secure additional land to create new lots for homes in 2021, Krueger said.
Land supply also has become one of the primary concerns for commercial developers, especially those who erect the large e-commerce and logistics facilities that have provided crucial diversification for the regional economy.
More future development pushing east
Brett Edwards, first vice president of land advisory and transaction services with CBRE, says the constriction on land supply will force future development east to Tahoe Reno Industrial Center and Fernley.
“We have a very strong industrial market, the highest per capita in the United States,” Edwards said. “We have national industrial developers wanting to enter this market, but we have a very constricted land supply for industrial.”
Most of what’s readily developed in the North Valleys has already been purchased, Edwards said. CBRE recently sold 75 acres on North Virginia Street for a 1.2 million square-foot industrial building, and another national developer took down 35 acres to house a 500,000 to 600,000 square-foot building.
“Those are the last opportunities in the North Valleys — anything else is going to have to be created,” Edwards said. “That whole corridor is spoken for and will be 100 percent built out.”
The 600-acre Spanish Springs Business Center also is nearly built out, Edwards said, with just one 40-plus-acre parcel left.
Dermody Properties and Reno Land plan to add industrial on the old UNR farmland at South McCarran Boulevard, but there’s simply not much else available within the Truckee Meadows or adjacent communities. Tahoe Reno Industrial Center also is sold out except for resale parcels, Edwards said.
With 4,300 acres of land zoned for industrial use, the Victory Logistics Center in Fernley could bring thousands of new jobs to Fernley in the next five years, he added.
“Fernley is the only area of Northern Nevada where housing is affordable,” Edwards said. “You will see a lot more manufacturing companies coming into that area, not just distribution. There will be a lot of interest in both residential and industrial. I think there will be another 5,000 jobs in Fernley in the next five years.”
Construction could begin next year and require about 500 to 600 workers, with a permanent workforce starting at 150 to 200 people with potential to expand.