Tom Miller
RENO, Nev. — History has shown that when times are good, Nevada is booming. And when times are bad, the state suffers terribly. Right now, we have only good news. Because once again, as broader markets experience steady growth, Nevada is experiencing significant local growth upswings.
The health of the world economy is important to Reno, as many internationally-based suppliers are likely to choose this region as a site for expansion. Global growth in 2017 was reported at 3.6 percent, with expectations to grow to 3.7 percent in 2018. Many factors could upset this balanced projection, including the ongoing situation with North Korea, our complicated relationships with China and Russia, the administration’s plan to renegotiate several unfavorable trade agreements, terrorism activity and its impact on consumer confidence, and other political situations. Nonetheless, economic gains should be substantial globally in 2018. It’s a good indicator for continued local growth.
In the U.S., our gross domestic product rose by 2.5 percent, the best rate of growth in three years, with an estimate to repeat this growth in 2018. While that rate may seem light, it’s what is referred to as the “Goldilocks rate” — not high enough to create high inflation and not so low that it will create recession. It’s just right to pave the way for continued growth without any destabilizing impacts on the economy from lower or higher rates of growth.
Nationally, job growth continues to increase. The stock market posted huge gains in 2017 with the broad market gaining about 20 percent overall. This echoes the national economic health and growth trends. Once again, what’s good for our nation tends to be good for Northern Nevada. We’re watching as companies either expand here to better serve their growing western market customers, or relocate entire facilities into our area to cut costs and enjoy the benefits of operating from our business friendly environment.
In 2017, almost every facet of Northern Nevada showed positive signs: low unemployment, rising wages, high retail sales, rising student populations, local businesses are hiring and expanding, new companies are moving into northern Nevada at a high pace, and both commercial and residential construction is underway all over the area.
In the 1980s, UPS chose Northern Nevada to build a new regional hub. A side effect was the influx of other distributors, and you could almost hear the thought process. “If UPS spent all the time and money to determine that Reno/Sparks is the place to be, that’s good enough for me!” We’re seeing this again with Tesla, and with the addition of Panasonic, Apple, Rackspace, Switch and many others, we’re creating a mini Silicon Valley demographic for Reno/Sparks.
The local economy has responded to the growing hipster presence with a downtown in the process of a significant rejuvenation — shuttered casinos repositioned as cool hotels, obsolete commercial buildings repositioned as apartments/condos, and even a downtown grocery store.
Reno’s midtown area is likewise evolving at an increasing pace. In upper midtown, any commercial building has either been repurposed to target the new young demographic, is in the process of being redeveloped, or is on someone’s radar for their next project. At the southern end of the district, the long vacant Park Lane project is coming out of the ground with retail, commercial and residential elements.
The University of Nevada’s student population growth spurred a student housing building boom around campus with several new projects opening this year. The university itself is building real estate with the plan to expand its campus toward the downtown area to create better integration.
Commercial real estate also is feeling the strong growth. Across all areas of commercial real estate, vacancy is either low or very low and rents are up and rising. Apartment rents also are way up, with limited availability. It’s a good time to be any kind of a landlord. But in all booms, there are winners and there are losers.
Reno’s downtown/midtown revival has expanded to the point that gentrification’s impacts can be seen. When we hear gentrification, we think of Boston, New York, San Francisco — large metro areas with the inherent wealth to support this type of process. But as Reno’s demographic evolves, an affordable housing alternative has to stay a high priority for the city to address. Reno’s housing issues also impact new home developments. Median home pricing is up 18 percent in two years. Availability is low enough that buying a home in our area has become a challenging chess game.
With such low unemployment, employers are faced with raising wages and increasing employment packages to attract labor. Still, temporary staffing agencies cannot keep pace with demand. Building contractors are experiencing such a labor shortage they are raising their prices and still have stockpiled enough work to keep them busy for months. Increased employment has created longer rush hour traffic snarls. And how is our health system doing? Have you checked into an urgent care facility lately or tried visiting your doctor?
In a sense, Northern Nevada is like the dog that caught the bus. Now that we have it, what do we do with it? The region has been highly successful in its attempts to diversify and grow our economy. As we enter another year of projected growth, solving the shortcomings of our success will remain our challenge for 2018 and beyond.
Tom Miller is the president of the Northern Nevada industrial real estate firm Miller Industrial Properties. Reach him via email at tom@mipnv.com.
