Mia Quinn counts herself lucky to have
been able to find a seemingly ideal, 1,500-
square-foot retail space in Reno in which
to relocate her stationery, gift and invitations
store, Name Droppers.
Quinn's small business had leased space
for 20 years in a little retail plaza on West
Plumb Lane and Arlington Avenue.
Wishing to capitalize on the rapidly growing
south Reno area and situate her business
nearer to more retailers and major
traffic, Quinn jumped at the opportunity
to rent space in Magnolia Village, a newly
constructed plaza at the intersection of
Lakeside Drive and South McCarran
Boulevard.
A friend who opened a salon in
Magnolia Village tipped off Quinn about a
space that was available. "It was just the
luckiest, flukiest thing in the world," says
Quinn, who intends to reopen for business
by the end of September, weathering a
two-month hiatus after her lease at the
former site expired.
"There aren't a lot of spaces open for
independent retail," Quinn says of the
Truckee Meadows' commercial real
estate market.
Indeed, the local vacancy rate for
"line-shop space," areas for small businesses
(typically from 1,000 to 2,000
square feet), sits at 6.4 percent.
For landlords who lease space, such a
vacancy rate "is considered to be a very
healthy retail market," says Roxanne
Stevenson, vice president of Grubb &
Ellis Nevada Commercial Group.
But for family-owned mom-and-pop
businesses as well as national chain tenants
(such as Starbucks Coffee or
Subway Sandwiches) that traditionally
occupy line-shop spaces, the three cardinal
rules of retail success location,
location, location have gotten more
difficult to follow in the Reno area.
"There has been a trend downward in
the vacancy rate over the past few years,"
says Kelly Bland, vice president, retail
properties, for the Reno office of Colliers
International, a commercial real estate
brokerage. "Small spaces in good locations
are in tight supply," he says of the hot
commercial strips around Meadowood Mall
in burgeoning south Reno.
One reason for the dearth of space by
Meadowood and in other local hot
zones in new retail centers or along busy
traffic routes is that shopping-center
developers have not been building as
much line-shop space as in the past,
Bland says.
"Grocery-anchored projects being
constructed today may have 20,000 to
28,000 square feet of combined lineshop
space. Some centers in the past
had as much as 40,000 square feet of
combined line-shop space. This is a wise
decision, since there are not as many
small business users as there were in the
past. Now you see a lot of the services
inside a grocery store that used to be
outside banking, dry cleaning, video
rental, pharmacy, deli, bakery, photo
developing, et cetera."
Developers also are shying away from
building new centers in the Truckee
Meadows, due in part to leaps in land
prices, Stevenson says. Acreage suitable
for shopping centers rose from $4 to $5
per square foot five years ago to $7 to
$12 today, she says. Impact fees and
time-consuming governmental approval
processes also dissuade developers from
building shopping centers, she says.
"Additionally, even developers of traditional
grocery-anchored shopping centers
construct a much smaller amount of
'in-line' or 'shop space' now compared to
the development styles of 10 years ago,"
Stevenson says.
Reasonably priced smaller spaces do
remain in good supply in unanchored
strip centers, locations outside retail
hubs and older properties such as
Moana West Shopping Center and
Shopper's Square, Stevenson says. But a
shortage of moderately priced, small
retail spaces exist in class 'A' anchored
shopping centers and new developments
in the booming south Truckee
Meadows, such as Redfield Promenade,
Firecreek Crossing and Southtowne
Crossing, she says.
Colliers tracks the local market for
line-shop space spaces smaller than
20,000 square feet. At the end of June,
the Reno area had about 307,000 square
feet of line-shop space available for rent,
of the area's approximately 4.8 million
square feet.
Bland says the low vacancy rate
means higher monthly lease prices
$1.27 a square foot in shopping centers
anchored by major retail businesses
(such as supermarkets); $1.18 in unanchored
areas; $1.50 for new centers. The
rates don't include the so-called "triple
net" costs taxes, insurance and common-
area expenses that can add 25
to 30 cents per square foot, and about 50
cents for new centers.
Rates for small-shop space in some
newer, class "A" developments can be
as high as $2.75 per square foot,
Stevenson says.
"It can make it challenging to find
good locations, and in retail, it's all
about your location," Bland says. "It is
forcing many businesses to look at the
new growth areas of town where the
new centers are being constructed.
However, the business must be able to
survive off of a neighborhood-type location.
Some businesses need a larger
draw and need to be patient for a location
to open up in a central, what we call
'in-fill,' location."
Bland counsels startup businesses,
small retailers and would-be franchise
owners to heed the "location" rule for
business success.
"Unfortunately, it appears that the
costs will continue to go up for tenants
as prices try to keep pace with the
increased cost to construct new centers,"
he says. "However, it is more important
that retailers find good locations and
pay the price that is required. It is much
more important that they consider that
volume they can generate, and calculate
their rent as a percentage of sales generated,
as they compare locations."
Even with a low vacancy rate, there
always will be turnover in the line-space
market, Bland adds. "People need to
have a good broker who is aware of the
spaces coming to market before the general
market knows of them."
Stevenson emphasizes that small business
owners must thoroughly understand
their customers. Some businesses need to
be situated near their customers' homes,
while other businesses require heavy foot
traffic and proximity to complementary
businesses that provide cross traffic, she
says. Some businesses are "destination-oriented"
and don't need to be set at busy
intersections or bustling shopping centers,
Stevenson says, but some businesses need
to be set amid large populations of daytime
workers, or in dense residential developments,
or among specific demographic
groups to which the businesses cater.
"Sometimes, rent is one of the smallest
overhead costs for a small business
and making a decision based on rent
alone can be fatal," Stevenson says. "I
have seen businesses locate in an inferior
location because the occupancy costs
(rent, common area) were only $200 per
month less overall and ended up having
to close."
Even with a smaller space and slightly
higher rent, Mia Quinn is happy her
friend in Magnolia Village told her
about the chance to move into the new
retail center so she could position her
business amid the population growth of
south Reno.
"After 20 years on Arlington I never
thought I'd move," Quinn says. "I went
to see the new spot and it seemed like a
win-win situation. The exposure there
on that corner will be so much better
than on Plumb Lane. Think of how
many people drive down McCarran."
Quinn worries what effect the
address change could have on some
longtime customers. Also, the store will
have about 500 square feet less room
and slightly higher rent. But the new
location's advantages outweigh concerns,
she says.
"It was just time for a change," Quinn
says of relocating Name Droppers. "It's
a changing city, and retail is a constantly
changing entity. It just was time for
something different."
