Reno, Sparks retail slow to follow housing rebound
Retail, says the old cliché in the development business, follows rooftops.
But although the rooftop business in northern Nevada has firmed — home prices have risen smartly, some new construction is starting to sprout — it’s not yet enough to bring much cheer to retail landlords.
A few bright spots have appeared, and commercial real estate brokers who specialize in retail space see reason for growing optimism in late 2013 and 2014.
Tight inventories of existing homes in Reno and Sparks have pushed prices up by more than 30 percent from a year ago, and homebuilders are beginning to bring a few new houses onto the market.
“It’s better, and I don’t want to minimize that,” says Roxanne Stevenson, a senior vice president and retail expert with Colliers International in Reno. “But it’s still very minimal compared with the boom years. It hasn’t been enough to really affect retail growth.”
Shawn Smith, a specialist in retail properties with CBRE in Reno, says that retailers typically pay close attention to population growth and consumers’ income levels, and both those measures have been stagnant in northern Nevada.
The residential recovery, a dollop of home building in south Reno and the expected benefits of the Southeast Connector highway are boosting occupancy at Damonte Ranch Town Center, a Lewis Operating Corp. center.
With six new tenants, the center now is more than 85 percent occupied, says Gigi Chisel, vice president of northern Nevada development for Lewis Operating Corp.
New retailers in the center anchored by Home Depot and RC Willey include Mattress Discounters, Mountain America Credit Union, Moana Dental Care, Damonte Ranch Animal Hospital and two restaurants, Twisted Fork and Asian Paradise.
Joe Clements, general manager of Twisted Fork, says residential growth in south Reno was a key factor in the opening of the new eatery.
“People are selling, they’re building, they’re moving down here,” he says. “For us, it was the demographics. The city is growing this way. So if you get in, and you do it right, in two or three years when the Southeast Connector comes in, we’ll be in a perfect location.”
Tony Chang, one of the owners of Asian Paradise, said demographics of south Reno also proved important in his negotiations with Mark Keyzer of NAI Alliance, the broker who represents Lewis Operating Corp.
The combination of 15,000 homes, 40,000 people and the coming Southeast Connector proved compelling enough to take the risk, says Chang, who previously operated a restaurant in Taiwan.
Other entrepreneurs with retail dreams also are testing the water.
Stevenson says her office is beginning to field more calls from individuals who have an idea for a store and need space.
“But a lot of them are startups,” she says. “They don’t have money.”
Rising home prices — and the increase in homeowners’ equity that results — could help those cash-strapped startups, says Smith.
Home-equity loans, he says, were a key piece of the financing of many small retailers, including franchise operators, before the recession.
And among consumers generally, he says rising home values are likely to lead consumers to open their pocketbooks more readily as they feel increased confidence about their economic future.
Another bit of good news: Retail strength in northern Nevada tends to follow recoveries that begin in the Bay Area and move to Sacramento.
Retail rents in the Bay Area, Smith says, are above pre-recession levels, and development of retail new retail space is beginning in the Sacramento region.
“It’s getting closer,” he says.
Rick Casazza, a senior vice president and retail expert with Colliers, notes that retail landlords in northern Nevada have faced a double-barreled set of challenges.
At the same time that they’ve been waiting out the return to health of consumers, the very face of retail has changed dramatically as shoppers look online instead of hiking off to big-box stores.
Colliers says 28 big-box spaces — anything with 15,000 square feet or more — stand vacant in the region these days. And observers worry that more may follow as retailers such as Best Buy and Barnes & Noble look for new paths to success.
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