Colliers: Government big factor in tightening office market
The office vacancy rate in the Reno area is falling, but the brokerage firm of Colliers International cautions against reading too much into the numbers.
Government agencies, as opposed to corporate users, played a big role in driving the vacancy rate down to 11.3 percent in the third quarter, Colliers said. That’s the lowest level in more than two years.
A big move: Washoe County purchased the former Excel Communications building on Mill Street, removing 50,000 square feet of office space from the market.
“On the corporate side, there are few large transactions and they are becoming more scarce,” said Colliers office brokers Tim Ruffin and Kevin Annis in their quarterly analysis of the market.
They said slowing activity in the residential construction and resale business may be causing the office market to cool.
Office rents, Colliers said, continue to move upward, both as a result of tighter vacancy rates as well as the higher costs of new construction.
New buildings, they said, almost all lease for at least $2 a square foot.
Little new construction is on the books. Land prices, Colliers said, run as high as $15 a square foot for high-visibility locations $12 a foot for other properties and developers can’t make office projects pencil out at current rents.
The biggest project under way is the 64,000-square-foot NevDex building at Kietzke Lane and Neil Road.
Garden office projects smaller buildings, often purchased by the companies that occupy them continued to grow during the third quarter. Some 23,000 square feet of new space was developed by Tanamera at its Reno Tahoe Tech Center Town Center in South Meadows, 34,000 square feet at its Longley Professional Campus and 26,000 square feet at its Vineyards Professional Campus on Sparks Boulevard.
Colliers brokers noted, however, that the vacancy rate in garden office projects across the region now stands at about 17 percent its highest level in years. They said that vacancy rate is likely to fall as developers pull in their horns.
“We did a lot of very, very difficult evaluation over a very, very short amount of time and just concluded that this was the right thing for the company at large.”