Big Box Absorption Leads to Market Stabilization in Reno
The retail market in Reno/Sparks continues to improve with big box retailers moving to the market and a steady decrease in the vacancy rate. The retail market in Reno/Sparks has seen an overall decrease in vacancy for the fifth consecutive quarter with the current vacancy rate hovering just under 7 percent. Average market rent is currently $1.50 per square foot, triple net, and appears to be slowly climbing as we continue to experience positive net absorption.
Tenants moving and expanding in the area include Big Lots leasing 30,112 square feet in Spanish Springs, and Harbor Freight and Tractor Supply Company leasing 16,016 square feet and 38,326 square feet, respectively, in Sparks. Sprouts Farmers Market has opened two new locations in Reno and Sparks over the past 12 months, absorbing roughly 60,000 square feet. Grocery Outlet, Tuesday Morning, Marshall’s Home Goods, Burlington and Raley’s Supermarkets have also expanded in northern Nevada.
The Reno/Sparks market has seen increased activity in the finance services and fast-casual restaurant industries. New fast-casual restaurants in the area include Mod Pizza, California Pizza Kitchen, Burrito Bandito, Sizzle Pie, Pine State Biscuits and Habit Burger. Chase Bank and United Federal Credit Union have opened several locations in Northern Nevada within the past 18 months. Chase Bank purchased a former Dairy Queen to convert into the bank’s new northwest Reno location this October. Logic Commercial Real Estate represented the sellers in this transaction.
Charles Schwab is also relocating to the new Rancharrah development in central Reno where it will occupy about 10,000 square feet. This is the most notable new development for 2018 and 2019 in the Reno area. The Village at Rancharrah is currently being developed by Tolles Development Company with an expected delivery date of spring 2020. It will include a 105,000-square-foot, master-planned retail component featuring local and national tenants in a unique retail environment.
Sales activity has remained strong in 2018 with stabilized anchored and neighborhood retail centers selling between 6.5 percent and 7 percent cap rates. Marina Marketplace, Mira Loma Shopping Center and Smithridge Center all sold between a 6.5 percent and 7 percent cap rate in 2018.
Single-tenant net leased investments have been trading between 4.5 percent and 5.5 percent cap rates depending on the credit of the tenant. A Starbucks in Reno sold at a 4.76 percent cap rate in early October. Logic Commercial Real Estate represented the buyer in this transaction. The northern Nevada retail market is very healthy, and all signs point to a strong future for some time to come.
— By Ian Cochran, vice president of brokerage; Greg Ruzzine, vice president of brokerage; and Amanda Lavi, brokerage assistant, Logic Commercial Real Estate. This article first appeared in the November 2018 issue of Western Real Estate Business magazine.