— By Roxanne Stevenson, senior vice president of Colliers —
Reno’s retail market saw a dip in net absorption and a slight uptick in regional vacancy toward the middle of 2024. Tenant demand began to moderate this year after the robust leasing activity of 2022 and 2023. Vacancy reached a record low at the beginning of the year, dipping to 3.8 percent in the first quarter, though it now sits just above 4 percent.
When analyzing the state of Reno’s retail market, there are several categories to consider:
Tenant Activity
Strong tenant demand, particularly in food and beverage, automotive,
fitness and experiential concepts, should continue to stabilize the market. Reno has seen a handful of existing tenants expanding, as well as new entrants in recent years. Trader Joe’s opened its second location in South Reno and intends to plant a third flag in northern Sparks. Bob’s Discount Furniture and Twin Peaks are also opening their first locations in Northern Nevada at Redfield Promenade.
Other notable and active tenants include Miniso, In-N-Out Burger, Starbucks, Dave’s Hot Chicken, Panera, Ace Hardware and Einstein Bros. Bagels. A few tenants, however, have shuttered their doors. There were three 99 Cents Only locations that filed bankruptcy and will vacate their spaces. These locations will be taken over by Dollar Tree. Big Lots is also shuttering all of its locations after filing for bankruptcy, with the majority of these leases going to auction.
New Developments
Many new construction projects have broken ground throughout the region. South Reno saw developments chug along at Double R Marketplace and at the Summit, which is making way for a new Dave & Busters, Mountain Mike’s Pizza, Hyatt Place Hotel and Chipotle. The market has a few proposed projects that could soon begin, including Kiley Ranch Marketplace in Spanish Springs. Fortunately, there is little risk of oversupply from new inventory. However, space constraints remain a theme across the market, with tenant demand steady despite macroeconomic headwinds.
Investment Activity
Sales activity has been subdued this year compared to 2022 and 2023, while pricing has stabilized. One of the larger transactions this year was Rhino Investments’ acquisition of a portion of the Outlets at Legends in Sparks. The company has plans to parcel each building and sell them as triple-net leased investments. Sales activity has continued to be impacted by higher interest rates and constrained capital sources, though recent interest rate cuts in September could bring capital off the sidelines before the end of the year. A few Class A shopping centers hit the market recently and are seeing strong investor interest.
Retail Forecast
Overall, the market stands on stable ground, while low vacancy rates should push asking rents up through the end of the year. There are some challenges facing the market, however, with rising household debt, lack of available labor, high construction costs and slowing population growth. Demand from expanding concepts and new tenants to the market should stabilize fundamentals into 2025. Low vacancy rates will keep upward pressure on asking rents at premier shopping centers. Additionally, new construction projects could kick off in the coming months, which would help alleviate the market’s space crunch.
This article was originally published in the October 2024 issue of Western Real Estate Business.