‘Time will tell’: Reno-area developers, contractors prep for uncertain winter as pandemic impacts continue
Special to the NNBW
EDITOR'S NOTE: This is the second 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. Look for more stories later in the week at nnbw.com, or check out the Wednesday, Oct. 28, print edition of the NNBW.
RENO, Nev. — As October draws to a close in Northern Nevada, and cold and flu season draws nigh, regional developers and contractors are girding for an uncertain winter.
The lingering pandemic, coupled with seasonal illnesses, could bring challenging times to the regional construction industry. So far, though, the industry has largely been spared from the effects of COVID-19, says Matt Clafton, vice president and general manager for Alston Construction.
Part of that is due to additional preventative measures such as masks and workplace distancing, Clafton told the NNBW, as well as workplace changes such as electronic timecards and esign-in to eliminate interpersonal contact points.
“Folks in the construction industry are used to personal protective equipment — hard hats, boots, safety glasses, gloves. They are used to following safe practices,” Clafton said. “This is just one more step in those safe practices, and they also are out in the open air.
“We take this very seriously. When we get into what’s normal cold and flu season, no one will know for sure if it’s cold or flu or COVID-19 related. I suspect there may be more challenges as we get into the winter months, but time will tell.”
Lumber shortages and supply chain concerns
COVID-19 aside, a national lumber shortage has created huge ripples across the construction industry.
When the pandemic first hit, lumber mills ceased operations — but homebuilders didn’t. That created a lumber shortage that’s led to unprecedented spikes in cost.
Cost of lumber commonly used to frame houses has risen more than 170 percent since April, the National Association of Homebuilders reports. Those price hikes can add between $14,000 and $16,000 to the cost of a new single-family home.
Developers are revisiting building plans as a result. Kyle Rea, chief operating officer for Tolles Development Company, says the company has considered redesigning certain projects using metal or steel framing.
“Now that the trade war with China is at the tail end, steel pricing has come down, but lumber pricing is just through the roof,” Rea notes. “Lumber prices probably will come down closer to the winter.”
Soaring lumber prices aren’t the only major issue facing regional contractors operating under what’s become the new normal of COVID-19 restrictions. Supply chain issues are impacting construction schedules and creating difficulties in completing tenant improvements in a timely manner.
Clafton says one example is the electrical switch gears that distribute power from mainlines into buildings. They typically have a lead time of eight to 12 weeks, but now they are being delivered between 14 to 16 weeks after ordering.
That creates pressure on scheduling, as well as developers’ ability to quickly accommodate tenants who sign leases. E-retailers entering the market want to get up and running as quickly as possible to serve their customers, Clafton says, but tenant improvements can be delayed due to materials procurement issues.
“Our challenge is being out in front of materials procurement,” he adds. “Anything can be dealt with as long as you understand the timelines. If you know materials are being pushed out, you can manage projects to that (timeline). You know eyes wide open there are some procurement challenges, so you need to factor those into your project schedules and pricing.
“It’s almost like the day after negotiating a lease, that’s when you need to be ordering materials, but developers don’t like to front a bunch of money upfront until they have a lease signed. It’s a bit of a challenge, and you have to be creative, or tenants may have to go at-risk and put some money up to assure developers they will lease their buildings.”
Project delays and new opportunities
Other developers have pumped the brakes on projects until COVID-19 eases its grip on the nation and Northern Nevada.
For example, TDC’s Rea says the company was just days away from going vertical on a Hyatt Place hotel at the Summit Reno mall, but that project has since been put on hold until 2021 or even 2022.
Despite the ongoing difficulties surrounding the pandemic, other developers are advancing ambitious redevelopment plans. Foothill Partners Founding Partner and President Doug Wiele is investing $30 million to transform the old Lowe’s building on Oddie Boulevard into a hub for shopping, working and entertainment.
“I want to do socially relevant projects,” Wiele told the NNBW. “I want to find interesting emerging neighborhoods or interesting demographics that suggest the opportunity for change and come in with daily-needs-oriented shopping opportunities.”
Foothill Partners completed similar transformations in Berkeley and Monterey, and it’s currently redeveloping Reno Public Market at Plumb Lane and Virginia Street.
Wiele says that although certain segments of the retail industry have been clobbered in recent months due to the pandemic, retailers in daily-needs, home improvement and fast-casual clothing categories, along with specialty grocers, are thriving.
“Big box retail is dead,” Wiele adds. “(Those stores) have become culturally irrelevant, and for us it creates an interesting business opportunity to reimage what these large retail buildings can be.
“Our confidence in retail is all about identifying, understanding and strengthening local culture. That’s what Reno Public Market is about. Looking at The Oddie, the daily needs are there. We see an opportunity with this big old derelict building to speak to local needs.”
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.