Construction of new industrial and distribution
space in northern Nevada ground
nearly to a halt this year as the national
economy softened.
The market for office space, which isn't
as closely linked to the national economy,
had one of its best years ever.
Expect more of the same on both sides
of the commercial real estate business this
year.
At the start of 2002, developers planned
11 big industrial and distribution projects
totaling 1.6 million square feet in the Reno-
Sparks area.
By the end of the year, however, they'd
built only seven buildings totaling just over
500,000 square feet, noted Dave Simonsen,
a vice president at Colliers International.
DP Partners, a key player in the Reno
industrial market, hasn't developed any new
buildings in northern Nevada for two years,
and this year cancelled or delayed three
projects totaling 900,000 square feet.
"DP Partners as well as other developers
made a wise decision freezing new projects.
Otherwise, vacancy would be about 12 percent.
Thankfully, the vacancy rate increased
only slightly to 9.8 percent," Simonsen said.
The biggest single project launched in
the market this year was the 385,000-
square-foot General Motors warehouse in
Stead.
For all the weakness in the market, however,
Reno was one of the handful of cities
in the nation where new industrial space
was absorbed. In most, more space stands
vacant today than at the start of the year.
As the national economy improves, however,
so will the demand for industrial and
distribution space in Reno.
European and Asian markets are showing
signs of economic recovery, said a recent
analysis of the market by Grubb & Ellis
Nevada Commercial Group, and the
increased amount of shipping from the Port
of Oakland to those markets promises to
benefit Reno.
Despite the slow growth in the market
for industrial spaces, Simonsen said purchasers
hoping to buy investment-grade
properties have a difficult time finding quality
buildings for reasonable prices.
That, he said, reflects the continued outflow
of money from the stock market by
investors seeking higher returns in real
estate.
In the office market, meanwhile, Reno
was one of the few cities in the West Coast
region to post gains its office market has
grown by 35 percent to more than 7.4 million
square feet in the past five years.
Still, vacancy rates vary widely from
neighborhood to neighborhood.
Downtown Reno's vacancy rate is estimated
by Grubb & Ellis to stand at 7.7
percent at year end. The company projected
that demand will remain high for downtown
space through 2003 with no significant
amounts of new space coming into the
market.
In the South Meadows area, however,
Colliers International estimates that the
current vacancy rate of nearly 20 percent
won't move much through 2003.
"This lack of activity clearly reflects the
impact of a slow national economy," said
Tim Ruffin, a Colliers vice president.
"South Meadows has traditionally attracted
the basic industries of our area."
Things in South Meadows are sufficiently
weak, Ruffin said, that Employers
Insurance recently renewed its lease in the
Thomas Creek Office Park at 9790
Gateway Drive at a 25 percent discount to
the previous rent.
"Luckily, other landlords have not followed
suit," Ruffin said.
The hottest office in Reno continues to
be the Meadowood area along McCarran
Boulevard and Kietzke Lane. In fact, the
only major office project now under construction
the 60,000-square-foot Sun
West Bank building in the Mountain View
Corporate Centre is at the southern
edge of that office market.
