With Reno-Sparks retail, ‘tough to tell who is going to survive’
Special to the NNBW
- Part 1: Reno-Sparks industrial developers seeing healthy market conditions, though COVID uncertainty looms
- Part 2: COVID’s long-term impacts to commercial office space in Reno-Sparks still unfolding
- Part 4: ‘Focus on the positive and the possible’ when it comes to COVID and commercial real estate
- Part 5: ‘Bridging the gap’ – inside the $33.2 million first step to connect UNR to downtown Reno
RENO, Nev. — Neiman Marcus. Hertz. J. Crew. Sears. Gold’s Gym. JC Penney. Pier 1 Imports. 24 Hour Fitness.
Though the list reads a bit like a wedding gift card registry, it’s actually just a handful of the brand-name retailers to file for bankruptcy since COVID-19 began.
Locally, the retail bloodletting has been equally painful. Longtime retailers such as Learning Express in Damonte Ranch and The Grove at Southcreek, among others, have folded. And more closures of favorite regional retailers could be on the way, especially if the state rolls back its reopening plans.
“The story seems to be unfolding day by day, and the longer it goes on, the harder the struggle is for both national and local retailers,” said Jim Kaplan, who owns the Crossing at Meadowood Square in Reno, as well as retail centers in the New England region. “If they get shut down again, as they are in some communities around the country, it could be a devastating blow to not only local tenants but regional and national tenants as well.”
“It’s really tough to tell who is going to survive and who isn’t,” he added. “You hear rumors every day of different (companies) that are on the brink. Regional, national and local retailers just don’t know what shoe is going to drop next.”
Adapting to the COVID-changing environment
Uncertainty throughout the retail sector has created additional risk for developers.
Kyle Rea, chief operating officer at Tolles Development Company, told NNBW that construction at the Village at Rancharrah continues, but since the new center is mostly restaurants and retail, opening day has been delayed for up to nine months — for now — as initial tenants pump the brakes on expansion plans or hold off on taking on additional financing debt.
“Every restaurant has its own financial situation,” Rea said. “We have restaurateurs at the Village that span the gamut from small single locations to operators with seven or eight locations regionally.
“What’s traditionally thought of as stronger-credit restaurant retail operations, they are the ones that have been suffering the most from COVID. That re-affirms our commitment to local restaurants and retail shops because they can more quickly adapt to this changing environment.”
Rea points to the new location for Perenn Bakery, which also has a location at 20 Saint Lawrence Ave. in Midtown. When Perenn was forced to close its retail operations altogether, it nimbly shifted focus and used its commercial kitchen to create a sourdough bread delivery service for loyal customers, Rea said.
“If you are a Panera, there’s no way you can react that quickly,” he said, referring to the popular Panera Bread franchise.
Existing trends are being accelerated by COVID, Rea added. The massive shift from brick and mortar to online sales has been hasted by COVID — yet at the same time, you can’t get your nails or hair done online, he noted.
And retailers at the Village, with their focus on local, outdoor and curbside service, are well positioned for success in the post-COVID world, he added.
“That cultural and economic force (that is ‘buy local’) is being accelerated now during COVID. People are clamoring to get back out there and support their local businesses,” Rea said. “We are working with all our restaurants and shopkeepers to offer a robust, pleasant curbside pickup experience.”
The Village also has ample space for outdoor seating, and that provides retailers greater flexibility during COVID-19 seating restrictions, Rea said.
“Every single restaurant seat we have indoors can be seated outdoors on Day 1 of the center being opened,” he said. “That’s one of the keys to being safe in a COVID world.”
‘We still are in a wait-and-see-mode’
While boutique retailers such as the Village and small retail centers may struggle, they still are better positioned to ride out any short-term economic difficulties than large big box national retailers, whose financial pain is all too real.
Kaplan pointed out the Whole Foods located across the street from the Crossing at Meadowood Square, while Rea noted that the Village is surrounded by businesses and hundreds of new luxury homes.
Since the Crossing at Meadowood has 31,000 square feet of space available as a result of Goodwill vacating its premier anchor space, Kaplan hastened a refinance of the property to provide greater flexibility in locating a tenant and working with the prospective tenant’s economics.
The space can be subdivided, he noted, and Kaplan is open to the idea of hosting pop-up-shops. He’s also offering an additional broker bonus on top of commission if a new tenant inks a lease.
“Everyone was thinking we would be through this holding pattern by now, and we still are in a wait-and-see mode,” he said. “But some retailers in the market may be looking to upgrade their space or get into a smaller location.”
Overall vacancy in the Reno-Sparks market in the first quarter crept up to 6 percent, CBRE’s retail team reported. Goodwill Industries recorded the most significant lease transaction with 43,000 square feet at Smithridge Center at the old Toys R Us building.
The $33.2 million parking garage project at UNR, being worked on by Clark/Sullivan Construction, marks the first piece of development that would eventually link the southern end of campus to the downtown core.