New and improved retail spaces planned
If Reno’s retail sector were on the stock market, brokers’ recommendations would be buy.
The market, as measured by vacancy rates and lease rates, started recovering in 2014 and all indicators project it to continue its rebound in 2016.
Commercial real estate brokers all track the market differently, but all agree the trends are moving in the right direction.
Overall vacancy is down to 14.72 percent, according to Kelly Bland, senior vice president, retail properties for NAI Alliance in Reno. For space above 20,000 square feet, the vacancy rate is 12 percent while the rate for properties under 20,000 square feet is 18.61 percent, a mix that Bland says is typical.
“Our peak was in 2012 when overall vacancy was 18.52 percent and now we’re done to 14.72 percent,” said Bland.
Lease rates are improving more slowly. In 2008, before the recession, overall rents were about $1.83 per square foot, according to Roxanne Stevenson, senior vice president, Colliers International in Reno.
“That’s the asking rate, not what deals were done for,” said Stevenson. “They’re now about $1.27, $1.28, but they did get as low as $1.23.”
Stevenson said she saw two trends in the market in 2015. Following a nationwide trend, big box space long on the market finally got leased but to non-retail tenants, such Saint Mary’s Medical Group moving into the former Scolari’s grocery on Robb Drive and half of the old Walmart store in Northtowne Marketplace being leased by a call center.
“It’s good to get them off the market,” said Stevenson.
The other trend is sales of shopping centers, such as Smithridge Plaza off McCarran Boulevard near Virginia Street and nearby Crossroads Shopping Center on Kietzke Lane.
Stevenson says the investments are being driven by low inventory and high capitalization rates in California as well as all the positive economic development news in northern Nevada, which started when Tesla Motors chose the area for its massive battery factory.
“Jobs are the big driver,” said Shawn Smith, vice president, CB Richard Ellis in Reno. “It’s been a much easier pitch.”
Predicted job growth for Tesla and other major businesses moving in have yet to materialize, but even without that the state recorded the fastest job growth in the country in the first quarter of 2015, after hitting rock bottom in 2009 and 2010.
Smith and others say new national eatery chains, especially in a category called quick service, are moving in. Chick-fil-A, for example, is looking for space in both Reno and Sparks, said Smith.
Dick’s Sporting Goods is on track to build a 50,000-square-foot store at Meadowood Mall, he said, and Cinemark is in negotiations to move the Park Lane Century 16 movie theater to the mall as well.
The existing theater will be torn down, said Smith, as the long-vacant Park Lane mall lot is on the market. The 45-acre spot is under transit-oriented development codes from the City of Reno so, if developed, will likely end up a mixed-use project with residential and commercial buildings.
Local developers are still busy. In December, Blake Smith broke ground on 1401 Midtown in the former Heritage Bank building on Virginia Street. The 9,000-square-foot building will be expanded into 21,000 square feet of office and retail space.
Smith said it is 78 percent pre-leased and will include the city’s largest jeweler, Michaels & Sons in a 4,500 square-foot space, and Morgan’s Lobster Shack, a Truckee, Calif. restaurant.
“We’re building as fast as we can and should be ready by spring or summer,” said Smith.
Reno’s historic post office, too, may soon open the doors on a national home furnishing and decor store new to the area. In December, developer Bernie Carter signed a letter of intent with the retailer for the 12,000 square foot space that makes up the post office’s first floor.
The Basement marketplace there is now nearly full, said Carter, with an apothecary, florist, chocolatier, juice shop, jean store, coffee shop and outdoor clothing retailer all recently opening.
His Midtown Sticks project, too, welcomed four new businesses, including Hello Yoga clothing, Dragonfly skincare, Sierra Bell women’s clothing and Fountain of Youth medical spa.
In Reno, Amazon opened a new 140,000-square-foot delivery station at 9740 N. Virginia St. in October; a second building for handling large products under the company’s “AMXL” division is planned for 2021 at 1316 Capital Blvd.