— By Aiman Noursoultanova, Senior Vice President, CBRE —
Reno has become an increasingly attractive market over the past decade for multifamily investors due to its continued strong performance, fueled by a desirable business and regulatory climate. Rents have doubled since 2013, while vacancy has continued to remain healthy despite robust construction activity. Multifamily investors took notice once noteworthy companies like Apple, Google, Microsoft and Tesla began to increase their investments in the region.
Strong Population, Job Growth Fuel Investment
Reno’s population grew by 15.3 percent in the past decade. The area is projected to see 51.6 percent population growth by 2060, the 40th highest of all 384 U.S. metro areas, according to Washington D.C.-based economic and demographic data firm Woods & Poole Economics. As a testament to the area’s growth, the Reno-Tahoe International Airport recently announced a $500 million development and expansion project to accommodate airport traffic.
The area’s rise in population is attributed primarily to job growth and a desirable quality of life. This started with Tesla’s initial Gigafactory investment in the region, then continued with Apple’s 1.1-million-square-foot data center campus. Google also purchased 1,210 acres and plans for a future data center development. Meanwhile, Tesla announced a $3.6 billion investment to expand its Nevada manufacturing complex for semi-truck production. This will include two new factories and plans to employ about 3,000 people. Microsoft also confirmed it recently purchased 274 acres just outside Reno proper to support the expansion of its cloud infrastructure.
It’s no surprise that Reno ranked as the third most popular destination for companies moving out of California, according to a 2022 study from Claremont McKenna College’s Rose Institute of State and Local Government. From 1990 to 2019, 2,832 California companies moved to Las Vegas, followed by New York at 1,455 and Reno at 1,908. EDAWN announced 27 companies had either relocated or expanded their workforce in the Reno region in 2022. This equates to 2,263 new jobs, at a record average wage of $32.67 per hour, including 12 new headquarters.
High Levels of Construction Underway to Meet Demand
The market has experienced robust construction activity over the past five years. More than 1,000 new units have entered the market annually since 2018, with 7,200 units added over the past five years, per Costar. Some notable projects currently under construction or nearing completion include the Reno Experience District by Lyon Living (more than 1,200 new apartment units) and the 369-unit Ballpark Apartments by Pacific Development next to the Greater Nevada AAA baseball field. The Dean, the tallest student housing project in Reno’s history at 12 stories, is currently under construction across from the University of Nevada, Reno. It’s being built in a submarket that has rapidly expanded due to the university’s ongoing development and expansion.
Downtown Sparks Victorian Square has seen many new high- and mid-rise multifamily projects deliver in recent years thanks, in part, to the extensive growth occurring at Tahoe Reno Industrial Center east of Reno. Sparks is also undergoing a town square revitalization, complete with a movie theater, outdoor concert venue, shops and restaurants. The area surrounding the 1-million-square-foot Outlets at Legends development in east Sparks has also flourished with new multifamily development, as has the Spanish Springs submarket north of Sparks.
Reno’s North Valleys submarket, which has seen heavy industrial development, has a multitude of multifamily and affordable projects under construction. South Reno is seeing numerous large-scale, Class A developments as well. Downtown Damonte Ranch, a new, strategically planned, mixed-use district on 73 acres, was also announced in 2022. It will feature an outdoor town center with retail shops, restaurants, Class A office spaces and luxury apartments. Although construction has been robust, rents continued to grow steadily while vacancy remained under 4 percent over the past decade.
Nationally, CBRE forecasts rent growth of 3.5 percent for 2023, down from 6.7 percent in 2022 and 13.4 percent in 2021. This is still relatively healthy, however, when compared with the long-run average of 2.5 percent. Looking ahead, Reno/Sparks continues to perform well despite softening market fundamentals. The job growth that has buoyed the market continues to occur, particularly in newer, higher-wage industries like healthcare, technology, manufacturing and aerospace/aviation. With single-family home prices still high and limited inventory on the market, renting will continue to be in strong demand, especially as high interest rates persist through 2023.