— By Shawn Jaenson, executive vice president, Kidder Mathews —
Reno’s industrial market has demonstrated remarkable resilience in the face of challenging economic conditions. Despite such uncertainties, the region has maintained a strong industrial presence, showcasing its ability to adapt and thrive. Overall, the market delivered more than 22 million square feet of new construction since the start of 2020 and has experienced more than 50 percent rent growth over the same period, rising from $0.55 (triple net) in fourth-quarter 2019 to $0.84 at mid-year 2024.
As the nation grapples with inflation, supply chain disruptions and shifting consumer behaviors, Reno’s industrial sector has managed to effectively weather these challenges. The city’s strategic location and pro-business environment have positioned it as a critical logistics and distribution hub. These factors have allowed local businesses to remain competitive, even as national economic pressures mount.
Sales activity has seen a recent uptick with four major sales occurring in the second quarter of this year. Prospect Ridge bought the four-building, 893,632-square-foot Airway Commerce Center from Tolles Development; CapRock bought a 707,010-square-foot building from Manulife; and Pure Development sold two buildings – one with 354,640 square feet and the other with 322,400 square feet – to Exeter and Clarion, respectively.
Reno’s central position near major transportation corridors, including Interstate 80 and U.S. Route 395, offers companies efficient access to key markets across the West Coast. This logistical advantage has attracted a diverse range of industries, including ecommerce, logistics, manufacturing and distribution. Notably, the completion of infrastructure projects, such as the expansion of the Reno-Tahoe International Airport, has further enhanced the area’s appeal for industrial operations.
Although a slight slowdown from previous years, leasing activity has remained strong with 49 new deals being completed in the first half of 2024, totaling more than 2.5 million square feet.
Reno’s industrial market is also underpinned by strong fundamentals that contribute to its long-term sustainability. Over the past 10 years (between 2014 and 2023), the market averaged just under 4 million square feet of net absorption annually, while the direct vacancy rate ranged between 1 percent and 6 percent. The region boasts a business-friendly environment with regulatory framework, low taxes and an appealing quality of life that attracts talent. The local government has also prioritized economic diversification, actively supporting initiatives that foster growth in high-demand sectors.
The area’s industrial market also benefits from a growing population and increasing consumer spending, which are driving demand for industrial space. The ongoing investment in infrastructure and technology also positions Reno for future success, making it a viable option for businesses looking to establish or expand their operations.
Reno has showcased impressive resilience in its industrial market amid challenging economic conditions. The combination of sustained tenant demand, ongoing investment and strong market fundamentals lays the groundwork for continued growth. As businesses seek to navigate an evolving landscape, Reno stands out as a strategic location for industrial operations, making it a key player in the Western U.S.’s industrial sector. The outlook remains optimistic, with potential for further development and expansion in the coming years.
This article was originally published in the October 2024 issue of Western Real Estate Business.