What area is your expertise?
We primarily focus on office properties located in the Reno/Tahoe region of Northern Nevada, as well as some outlying areas. The Northern Nevada office market is defined as Reno/Sparks as far north as Spanish Springs and as far south as Mt. Rose Highway, HW 431. Our expertise mainly lies within the seven submarkets in the Reno/Sparks market: South Meadows (89521), Meadowood (89511), Central Reno (89509), Airport (89502), and Downtown Reno (89501). We also track West Reno (89523) and Sparks (89431, 89436)
What trends do you see presently in office development in your area?
We have seen a tremendous slowdown in new office development over the past 2 years. The booming economy of yesteryear produced an abundance of office space that has outpaced the economic demands of the market. Direct results of this overbuilding are the inflated vacancy rates and a standstill for new development.
Most of the office development occurring comes in the form of existing building redevelopment and renovation. Much of this activity is occurring in Downtown Reno where the downtown Reno redevelopment district provides incentives for redevelopment through flexible zoning and tax incentives, therefore allowing developers to achieve a highest and best use on older less-functional buildings. This downtown redevelopment has largely coincided with current construction of Reno’s downtown Triple-A baseball stadium and entertainment district. This development is expected to change the face of Downtown Reno.
Who are the active office owners/developers in your area?
SK Baseball has partnered up with Herb Simon to develop a retail/entertainment district surrounding the downtown baseball stadium. This spurred Reno’s largest downtown office space owner to purchase 300 E. Second Street and begin a large-scale upgrade of the 15-story office building which is located directly across the street from the future ball park. Basin Street has also partnered with Hyatt Hotel to build a non-gaming hotel across the street from 300 E. Second St. Another active developer in Downtown Reno is AMH Properties, which has successfully found a number of values-add redevelopment projects.
New construction is nearly at a standstill. The only speculative new office construction to take place in the second half of this year will be IronCrest at the Mountain View Corporate Centre, by Tuntland Land & Development. This project will be a professional and medical office complex in one of the Reno’s premier office parks.
With new office development at a stand still, the majority of developers have become purchasers fighting over the few deals that make sense in this market. The main owners/developers in the Reno/Tahoe region are Panattoni Development Company, Trammell Crow Company, Tanamera, The Ribeiro Companies, Basin Street Properties, AMH properties, Tuntland Development, and Blackfire Real Estate Investors.
Please name one or two significant office developments in your area. What impact will these projects have on the market?
IronCrest at Mountain View Corporate Centre — This is a 5-acre infill development planned for Phase 1 completion first quarter 2009. Developer is Ray Tuntland of Tuntland Land & Development and this is the last available developable land in Northern Nevada’s most successful submarket, Meadowood. The project will consist of nearly 60,000 square feet of professional and medical office space available for lease and purchase located on Kietzke Lane, just south of S. McCarran Boulevard.
The Towne Center at Virginia Lake Crossing — The Towne Center at VLC is Reno’s first suburban mixed-used development located in Meadowood submarket, on South Virginia Street. Building one of four has been recently completed and will provide second story, Class A office space complimented by upscale first floor retail tenants. Developed by SilverStar communities, The Towne Center sits on the former site of the Mark Twain Motel. SilverStar brought the vision Mayor Cashell and the Reno Redevelopment Agency was looking for and acquired the site which stares directly into the future redevelopment of Park Lane Mall. An area of vital redevelopment, the South Virginia Street-Plumb Lane corridor is in the heart of town and will be the future of high class office and retail space.
Where is the majority of development taking place? Why is this area doing well?
The majority of development is occurring in the downtown submarket. Owners/developers are renovating older assets to compete with the renaissance that is occurring in the downtown redevelopment district.
The Mountain View Corporate Centre, located in the Meadowood submarket, has a new office complex breaking ground that will have provide office space suited for medical users.
What area do you expect to be the next big development market? Why?
We expect the downtown submarket to continue on the redevelopment track. The new downtown baseball stadium and condominium projects are creating a buzz that have many locals gravitating back towards the downtown area.
We feel that the South Meadows submarket, which has the most developed office space as well as developable land remaining, still has a few years left before the existing vacancy rates are brought back down to normal levels. However, South Meadows will still be the primary submarket for new development once the market stabilizes and the existing vacancy is absorbed.
What areas are doing well in terms of office leasing? Which areas are struggling with office leasing?
The airport submarket and the central Reno submarket are seeing the most activity due to their lower rental rates. Both submarkets are on the lower end of the rent spectrum and during this time of economic stagflation, we are seeing tenants sacrificing Class A space for more affordable rent payments.
The South Meadows submarket currently holds the highest vacancy rate. This was Reno’s premier submarket for office space and was home to many real estate related industries prior to the residential and financial fall-out. This submarket has been largely overbuilt and now holds a vacancy rate of approximately 26 percent when sublease space is included. The current economic conditions are driving smaller tenants to more affordable space, which isn’t available in the same abundance as other submarkets.
Please give a measure of office vacancy rates and a measure of available sublease space.
o Downtown Submarket Reno —14.62 percent
o South Meadows Submarket Reno — 22.03 percent
o Meadowood Submarket Reno —18.68 percent
o Central Reno Submarket Reno —13.77 percent
o Airport Submarket Reno — 13.89 percent
A total of 16.80 percent vacancy rate without sublease space and a 17.40 percent vacancy rate with sublease space. Total space tracked: 8.75 million square feet.
What impact do current interest rates have on the office market? What predictions do you have for interest rates and their effect on the office market in the next year?
Interest rates remain attractive from the owner-user and developer standpoints. What has had the most inf