Nevada Archives - REBusinessOnline

The Disappearance of the Shadow Inventory Renter in Las Vegas

Taylor Williams — Fri, 20 Dec 2019 13:17:22 +0000

From 2009 through 2015, Las Vegas renters were afforded the luxury of renting many of the high-rise condominiums around the Strip and Downtown Las Vegas. This was due to the massive amount of short sales and foreclosures during that time. There were about 7,876 condo units completed between 2006 and 2009. Shortly after the crash, these developments shifted to luxury rentals. During 2011, we tracked 785 condos that were rented with an average of $1.31 per square foot, or $1,838 per month. During that same time, we tracked sales prices of these high condos at an average of $154 per square foot, or $239,411 per unit. We also tracked 904 sales during 2011 that typically involved investors putting their inventory back into the “shadow inventory.” Fast forward to 2015, and resales of this same inventory were trading at an average of $238 per square foot. Rents of this inventory were at $1.45 per square foot, or $2,000 per month. The higher-end buildings like Mandarin Oriental (now Waldorf Astoria) were at $2.70 per square foot. The trend continues to today as sales prices continue to rise. Rents continue to go up and no new for-sale inventory is being delivered. Most of…

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What’s Happening in Las Vegas’ Retail Market?

Taylor Williams — Sat, 14 Dec 2019 13:20:41 +0000

There are no guarantees in commercial real estate. For commercial real estate owners, developers and investors, however, betting on the continued strength of the Las Vegas marketplace has been as close to a sure thing as it gets in recent years. The Vegas commercial market is as strong as it’s ever been as we head into 2020. Delivery on new projects is up 800,000 square feet over 2018. About 1.2 million square feet of retail space will have been added to the market by year’s end, while retail rental rates are up 4.6 percent in 2019. What’s really exciting isn’t just the top-line numbers, but the evolving nature of a market that is becoming more diverse. Las Vegas is preserving its gaming and entertainment dynamism while introducing more robust retail and mixed-use elements that expand well beyond the iconic Strip. Consequently, Vegas market performance isn’t just strong, it’s sustainable. A market overview reveals some of those reasons for optimism, as well as a deeper understanding of what’s driving that commercial real estate evolution. It never hurts to be the entertainment capital of the world, and there’s no doubt that gaming, hospitality and entertainment remain the foundation of the city’s appeal.…

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Las Vegas Office Market Turns to Downtown for Opportunities

Taylor Williams — Fri, 13 Dec 2019 13:24:58 +0000

The overall Las Vegas office market has seen steady positive absorption since 2012. Vacancy rates peaked in 2012 and have been declining year over year. The market vacancy rate is 11.7 percent, as of the third quarter. Occupiers are looking at higher-density options with outdoor collaborative areas and walkable amenities. There are projects planned in several submarkets that can accommodate these requirements, however, with those submarkets tightening, these new projects will be at the upper-end spectrum for rental rates. As Las Vegas has grown and continues to sprawl out, office users have moved to the suburbs to live and work within closer proximity to one another. This has made it increasingly difficult to find larger blocks of available space in the more popular suburban submarkets, thereby causing occupiers to look at other mature submarkets, including Downtown. Downtown serves as Las Vegas’ Central Business District for government, law and civic uses. At one point, it was home to Nevada’s oldest law firm. Downtown is evolving and, in true Vegas fashion, re-inventing itself. The city designed an Innovation District in the Downtown core with an emphasis on emerging technology in the areas of public safety, mobility and environmentally conscious solutions for the…

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Henderson Readies for an Even Larger Influx of California Companies

Taylor Williams — Sat, 07 Dec 2019 12:30:05 +0000

Once a bedroom community largely overshadowed by its Las Vegas neighbor, the City of Henderson is thriving. With a population of more than 300,000, Henderson recently surpassed Reno to become the second-largest city in Nevada. Henderson’s employment rates have been steadily rising, according to the city’s latest economic update. The city’s employment was at 144,000 last year and has risen to 153,800 in 2019. Henderson accounted for about 11 percent of all jobs in the Las Vegas Valley in 2018, according to labor market analytics company Emsi. Company leaders are also seeing the competitive advantage of growing a presence in Henderson. This has spurred relocations and start-ups in the area. Vinotemp, a leading wine storage solutions and appliance provider, recently relocated its Southern California headquarters to Henderson. The company’s new headquarters is more than 118,000 square feet, making Vinotemp the largest wine cabinet and cooling solutions provider in the nation. A major element in the high cost of doing business in California is the cost of operating in an office space. There is a stark contrast in the price per square foot for office spaces when comparing Southern California and Henderson. For example, the average per square foot for office…

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Tenants, Developers Remain Bullish on Northern Nevada Industrial Market

Taylor Williams — Fri, 15 Nov 2019 23:07:57 +0000

Northern Nevada’s industrial market remains strong with more than 3.2 million square feet of new speculative space under construction and slated for delivery in 2020. These new projects will push the market well above the 90-million-square-footmark. The vacancy rate is a low 5.56 percent and continues to trend slightly upward. There have been some significant lease transactions in the market. Prologis is building a 598,901-square-foot facility for Makita Tools; Scannell just finished a 200,200-square-foot built-to-suit facility for OnTrac; and 1A Auto recently leased 149,196 square feet at 9175 Moya Blvd. All of these transactions occurred in the North Valleys submarket. The new 270,975-square-foot Longley Commerce Center by Panattoni leased up a majority of its space in the third quarter. This project is a mix of flex and bulk spaces, and is the last viable industrial development in the South Meadows submarket. Polaris completed its 514,555-square-foot BTS in Fernley in the second quarter, while a confidential user just leased 266,000 square feet in the I-80 East submarket. There have also been some significant portfolio sales to institutional buyers. The 1.4-million-square-foot Lear Industrial Center is slated to trade hands in the fourth quarter. Northwestern Mutual sold its 1,776,805-square-foot portfolio to Link Industrial…

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Reno’s Multifamily Market Continues to Rise on Employment, Relocation

Taylor Williams — Fri, 08 Nov 2019 13:14:20 +0000

If you try to find an apartment in Reno you’ll quickly realize this isn’t necessarily an easy task. Reno has experienced more than 8 percent rent growth year over year for the past four years. Average rents in the third quarter were $1,174 per month with vacancy at 4.5 percent, according to CoStar. These escalating numbers are due to employment. The Reno-Sparks MSA has grown by 59,700 jobs in the past 10 years, according to the Bureau of Labor Statistics. The Tesla Gigafactory was just the beginning. Google, Apple and Switch are among others that have moved in, bringing thousands of jobs with them. Businesses still like the friendly tax environment, clean air and high quality of life. But while we were adding all those jobs, the number of apartment units added during that time was just 3,802, CoStar notes. Look around and you will see apartment construction everywhere in Reno. Most is on the outskirts of town where larger land parcels are still available. This includes Sparks, Lemmon Valley, Spanish Springs and South Reno. A few more central infill sites are making headlines. Park Lane by Reno Land Inc. is in the process of adding 1,700 units in the…

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Reno’s Industrial Market Continues to Attract Attention

Taylor Williams — Tue, 04 Dec 2018 13:33:14 +0000

The industrial market’s direct vacancy in greater Reno increased by 80 basis points to 4.53 percent at the end of the third quarter of 2018. It was carried by 715,821 square feet of positive net absorption, a relatively below average figure, as well as by an increase in new deliveries. Notwithstanding, pending transactions currently underway in the fourth quarter should mitigate the increase in the market’s overall vacancy. Tenant demand in the third quarter was robust for spaces with less than 50,000 square feet. Transactions that involved Class A space accounted for 84 percent of the total gross absorption. The North Valley was the best performer of all the submarkets, resulting in a 35 percent decrease in availability. The I-80/East submarket, however, recorded a substantially negative quarter due to deliveries/new availability pushing the vacancy to 12 percent. Sublease availability was static for yet another quarter, which demonstrates stability in the market. The average transaction size in Reno decreased slightly to 53,195 square feet. Heading into the fourth quarter, the market witnessed an increase in inquiries and tours involving more than 200,000 square feet. This gave existing landlords confidence that vacancies and new deliveries will be leased in the short term.…

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Record Occupancy, Job Growth Bolster Reno Multifamily Market

Taylor Williams — Tue, 27 Nov 2018 13:29:10 +0000

It’s starting to feel like the 1970s all over again in Reno’s multifamily market. This is particularly true in terms of occupancy. A recent report from RealPage noted the current market’s eye-popping 97.3 percent multifamily occupancy level. This figure was only eclipsed once, nearly four decades ago, at a double eye-popping 97.9 percent when the region experienced a spike in new jobs. Reno’s total job count continues to grow at a record pace, fueling a nearly full apartment market. But, of course, the housing and job markets in Reno are both much larger than they were in the ‘70s, though there are similarities. In fact, current market conditions bring to mind the ages-old adage, “Those who fail to heed the lessons of the past are condemned to repeat them.” Developers cannot build multifamily units fast enough to sate demand. New residents arriving for new jobs cannot easily find an apartment, and those who do may have to pay a higher-than-expected rental rate. Consider this from the U.S. Bureau of Labor Statistics: Reno’s economy expanded during the four years ending in May 2018 (the latest statistics available from the Bureau) by a steady 4.2 percent. This was an enviable gain for…

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Reno Office Market Tightens With Lack of New Supply

Taylor Williams — Tue, 13 Nov 2018 13:25:15 +0000

The northern Nevada office market is picking up steam, despite still lagging behind the robust growth taking place in the industrial and multifamily sectors. Year-to-date net absorption of 136,607 square feet has brought overall market vacancy rates down to 10.1 percent. Rates are well below that in the more desirable office submarkets. South Reno, once plagued with vacancy rates exceeding 30 percent during the downturn, now hovers at a rate of 6.3 percent. Downtown vacancy rates currently sit at 7.9 percent with no new supply on the horizon. In fact, no significant office property has been built in downtown Reno since 1981. Reno is a market in need of new office supply; however, new office construction is challenging to build on a speculative basis except in the most amenity-rich locations that offer visibility and accessibility. The lack of incoming supply and rising demand has caused office lease rates to increase. Rates have generally remained stable over the past few years with the exception of Class A office lease rates, which have climbed steadily over the past 12 months. There is a gap between existing Class A office lease rates, which range from $2 per square foot to $2.50 per square…

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Big Box Absorption Leads to Market Stabilization in Reno

Taylor Williams — Tue, 06 Nov 2018 13:16:15 +0000

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…

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Best Practices for Structuring Nevada Hotel, Casino Deals

Taylor Williams — Tue, 09 Oct 2018 12:25:07 +0000

One of the first questions clients ask when considering a hotel casino acquisition or the development of a new hotel casino project in Nevada is whether they have to obtain a gaming license. Since applying for a gaming license requires the disclosure of extensive, private personal information — and obtaining a gaming license can take several months — buyers and developers often want to learn about alternatives to the license. Those alternatives are briefly summarized below. Sale-Leaseback: The sale-leaseback structure involves the current hotel casino owner and/or operator selling substantially all of the assets to the buyer. The buyer, in turn, then leases all of such assets back to the seller. The seller retains the gaming assets and liabilities, utilizes the other assets per the lease and continues to operate the hotel casino for the lease term. The advantage of this structure is that the sale transaction can be closed quickly since the parties do not have to wait for the buyer to obtain its gaming license. A potential disadvantage to the seller is that it still has to operate the property. Possible disadvantages to the buyer are that the buyer assumes the future licensing risk and, generally speaking, cannot…

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Opportunity, Demand Define Las Vegas Industrial Market

Taylor Williams — Tue, 02 Oct 2018 12:19:51 +0000

The Las Vegas industrial sector set records in 2017, with more new construction and higher net absorption than any other time in the market’s history. New construction was dominated by pre-leased space primarily driven by transportation and logistics companies, namely ecommerce and retail-related businesses. As a result, the overall vacancy rate decreased to the second lowest level in market history. As a percentage of overall market size, Las Vegas led the country in both new construction and net absorption. The significant momentum of 2017 did carry over to the first quarter of 2018, albeit at a relatively slower rate. New construction totaled 1.3 million square feet and net absorption lagged deliveries at a positive 1 million square feet, marking the 22nd consecutive quarter of positive net absorption. The overall direct vacancy rate in the first quarter of 2018 was 4 percent, an increase of 50 basis points over the previous quarter. This provided much-needed inventory for tenants looking to enter or expand into the Las Vegas market. While the North Las Vegas submarket dominated 2017, accounting for nearly 70 percent of total net absorption, it is the Southwest submarket that is surging in 2018 with 53 percent of net absorption…

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Office Trends Toward Creative, Collaborative in Las Vegas

Taylor Williams — Tue, 25 Sep 2018 12:12:08 +0000

Some of the larger companies with long-term growth forecasts are focusing on expansion and amenity-rich office environments for recruiting purposes. However, more people in less space continues to be the trend for companies with slower growth opportunities that are focused on efficiencies and overhead costs. The average standard amount of office space per employee dropped from 225 square feet per person to between 150 square feet and 175 square feet per person in the past couple years. That being said, occupancy cost is not always the main driver in choosing an office location. There seems to be much more emphasis now on quality, functionality and conveniences. In many cases, this is based more on how we work rather than just cost savings. Open work spaces, perks like on-site dining and retail, and providing collaborative environments that foster employee interaction have proven to increase employee productivity significantly. Design is a critical component of this type of work space. Companies are looking for workplace designs and furniture systems that offer flexibility and adaptability as technology evolves. Technological infrastructure enhances the culture and efficiency of a business and protects the security of a company’s trade information. It also saves resources like…

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Labor, Population Growth Drives Las Vegas Multifamily Market

Taylor Williams — Tue, 18 Sep 2018 12:04:45 +0000

Las Vegas continues to benefit from a strong labor market, which is driving demand and strong fundamentals in the multifamily sector. Employment in Southern Nevada increased by 3.4 percent over the past year, reaching one million workers, while the total population in Southern Nevada increased 2.2 percent, surpassing more than 2.2 million people. With a well-documented shortage in housing, developers added more than 3,200 new apartment units during the year and still saw vacancies decrease 30 basis points to 5.2 percent. Part of what is driving the tremendous growth in Las Vegas is the billions of dollars in commercial developments. This includes several major resort renovations (Palms, Monte Carlo, Caesars), several new resort developments (Paradise Park, The Drew, Resorts World), and the $1 billion expansion of the Las Vegas Convention Center. There is also the $1.9 billion football stadium that is helping usher the city into a new era of professional sports. On the capital side, multifamily properties continue to be highly sought after by both private and institutional buyers. Although transaction volume slowed in the first quarter of 2018 compared to the same period a year ago, total volume was more than $350 million in the first quarter, marking…

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Vegas’ Retail Market Supports Economy Beyond Gaming, Hospitality

Taylor Williams — Tue, 11 Sep 2018 11:54:36 +0000

There is a lot of buzz in the Las Vegas market a full 10 years after the Great Recession. Much of this buzz surrounds sports with the new Golden Knights hockey team; the Las Vegas Lights professional United Soccer League team; Las Vegas Aces WNBA team; and the NFL Raiders team. The new Raiders stadium is under construction now and is widely considered the most talked-about major development happening in Vegas. In a city that offers unmatched access to world-class gaming, shopping, tradeshows and conventions, the NFL coming to town creates yet another reason for people to visit Las Vegas. As you can imagine, many retailers and investors are trying to position themselves to take advantage of this entry. The overall vacancy rate for retail in the Las Vegas metro area was 8.7 percent. Rents for new developments range from $2.50 per square foot, triple-net to $4 per square foot, triple-net. Existing neighborhood centers, power centers and strip centers average $1.75 per square foot to $2.25 per square foot. Anchor and mid-box leases average $0.75 per square foot to $1.25 per square foot for both gross and triple-net-structured leases. Ground lease and build-to-suit are averaging $120,000 to $225,000 in annual…

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Reno Multifamily Rent Growth Among Nation’s Highest as Vacancy Remains Low

Taylor Williams — Tue, 19 Jun 2018 11:54:16 +0000

Reno’s proximity to the Bay Area is supporting an economy beyond the gaming industry. The area’s lower cost of living is also attractive for Bay Area transplants attempting to further stretch their income. Tesla is the most notable utilizer of the metro’s favorable location and business-friendly environment. The company pulled 112 permits last year to build out internal areas of the factory. The introduction of Tesla’s electric semitruck necessitates a further expansion of production in the coming years. On the supply side, development is ramping up quickly as builders finally move away from primary markets to relieve housing pressure in tertiary metros. Inventory will expand by more than 4 percent this year, representing the largest increase on record. The South Reno submarket contains a majority of the completions slated this year. More than 1,400 units are underway in the submarket, including nearly 1,000 scheduled for delivery in 2019. Builders are also active in the Sparks submarket, where 600 units are underway and scheduled for completion. The introduction of new units has pushed up the percentage of properties offering leasing incentives to 16 percent. Still-tight conditions are limiting the average incentive to just nine days of free rent. An influx of…

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E-Commerce, Advanced Manufacturing Attract Capital to Reno

Taylor Williams — Tue, 12 Jun 2018 11:37:54 +0000

Industrial sales and leasing in the Reno-Sparks area remains one of the best performing sectors in the marketplace, just as it did in 2017. With a record vacancy percentage below 4 percent, combined with new buildings being occupied upon completion, the strong demand for new and existing industrial product is a welcome normality from previous years. The North Valley’s submarket has been the dominant center point for speculative development. It is currently the fastest-growing submarket in Reno, as nearly 50 percent of the transactions containing more than 50,000 square feet were concentrated in this submarket. This is primarily attributed to the abundance of skilled labor in the area and proximity to Interstate 80. Developers continue their hunt for buildable land in the area, though the availability of readily developable parcels is dwindling. Driven by consumer shifts toward internet goods, along with burgeoning advanced manufacturing, capital from institutional and regional investors alike have entered Reno’s industrial market. This has led to the industrial market posting the largest volume and most competitive assets. Last year’s investment volume was up 90 percent year over year, with a 14 percent increase in the total number of sales. The most recent eye-opener was Blockchains’ acquisition…

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Reno’s Office Market Successfully Rebounds From The Great Recession

Taylor Williams — Tue, 05 Jun 2018 12:16:57 +0000

I have had the pleasure of selling commercial office space in Northern Nevada for nearly 15 years. During this time, I saw the peak of the market from 2003 to 2008 wherein construction was at an all-time high, lease rates were reaching unseen heights and absorption was setting records. Then we all got to experience the Great Recession from 2008 through 2012. This saw nearly half of the buildings that were constructed during the previous peak become empty. Vacancy rates hit 20 percent, lease rates dropped to levels well below where they were in 2003, and construction came to a screeching halt. Then, magically, at the beginning of 2013 the economy took a turn and the Northern Nevada office market began its recovery. This was expedited in 2014 with Tesla making its announcement of the Gigafactory in the Tahoe Reno Industrial Center and the Tesla Effect created a national buzz that hasn’t slowed. Unfortunately, this has created a new problem. The Reno office market sits at 10.1 percent vacancy, down from 20.7 percent during the recession, as net absorption has been positive year over year since 2012. The absorption has been primarily in second-generation space as there has been relatively…

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BKM Capital Partners Buys 13-Building Industrial Complex in Las Vegas for $92M

Nellie Day — Wed, 14 Feb 2018 13:00:47 +0000

LAS VEGAS — BKM Capital Partners has purchased Hughes Airport Center, a 13-building, multi-tenant industrial complex in Las Vegas, for $92 million. The properties are situated in the industrial pocket between McCarran International Airport and interstates 15 and 215. Hughes Airport Center contains 3.3 million square feet of Class A industrial space and Class B office space. The 420-acre, master-planned business park has access to nearby retail and entertainment amenities like Town Square shopping center, Las Vegas Premium Outlets South, Tahiti Village, Callaway Golf Center, Bali Hai Golf Club and Sunset Park. The business park has recently undergone a slew of improvements, including new paint to building exteriors, asphalt and parking lot repairs, roof repair, and upgraded landscaping, monument signage and tenant signage. Rents at Hughes Airport Center typically range between $0.90 per square foot and $1.30 per square foot. Notable tenants at the center include Geotab, CanvasPop, Medical Transportation Management, Climatec, Credit One Bank, North American Video, LabCorp of America and Harman International. Hughes Airport Center marks BKM’s fifth industrial park acquisition in the Las Vegas Valley. “This is a best-in-class asset, the largest of its scale in the Las Vegas airport submarket and our firm’s biggest transaction to…

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Office Vacancy Declines As Product Dries Up

Camren Skelton — Tue, 09 May 2017 11:45:19 +0000

Last year was a relatively flat year for the Northern Nevada office market. Reno/Sparks had negative absorption in the first and third quarters of 2016, and positive absorption in the second and fourth quarters. The year ended up at 10,153 square feet of net absorption, according to the DCG internal database, essentially nullifying any real gains or losses. However, the Reno office market is much healthier at a 12 percent vacancy rate as compared to the nearly 20 percent recession highs. Each quarter also recognized more gross absorption than the previous quarter in 2016. Class A office continued to be in demand with rents increasing to north of $2 per square foot, per month, full service. Large spaces ideal for company relocations are difficult to find. Reno currently has a small supply of vacant, Class A spaces with more than 10,000 square feet available. However, we should see our first speculative construction take place in the Meadowood submarket as Mckenzie Properties plans a 40,000-square-foot building in Mountain View Corporate Center. New corporate relocations for office tenants were relatively quiet in 2016. In comparison to 2015, we saw large tenants relocate to our region, including Grand Rounds in South Meadows and…

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