Brokers: Retail rebounding in big way across Northern Nevada
Five Below — which offers trendy products for tweens and teens — plans to open its third Northern Nevada retail location this fall in a 9,964-square-foot space at the Outlets and Legends in Sparks.
Courtesy Photo
What a difference a year makes. Twelve months ago, the Northern Nevada retail market was murkier than Virginia Lake. State-mandated closures and reduced occupancy limits had retailers reeling, with no relief in sight. Fast forward to the third quarter of 2021, however, and it’s clear there’s been more than just a soft rebound as retailers and consumers alike adjusted to pandemic-related restrictions. While staffing continues to be a pressing concern for many regional businesses — especially among restaurateurs and quick-serve eateries — and nagging supply chain issues are also proving troublesome, Northern Nevada’s retail industry has clawed back from those challenging times. It’s not just a regional phenomenon, either. Roxanne Stevenson, senior vice president of retail services at Colliers International, said nationwide retail rental collections plummeted 60% in April 2020. But by August 2021, they had rebounded to about 92% of pre-pandemic levels, with strong retail sales driving those positive gains. “We thought so many more businesses would be closing — and it did affect a lot of people,” Stevenson said. “We thought there would be a lot of space to lease — especially restaurant space — but it was not what we expected. We also had a lot of people waiting to take advantage of restaurants closing so they could step in and benefit from all those expensive improvements.” According to the state’s Department of Taxation, taxable sales in Washoe County for July totaled just over $1 billion, a 23% increase from a year earlier. Taxable sales for June, meanwhile, were up 30% year-over-year at $1.16 billion. Taxable sales for couriers and messengers, which includes home-delivery businesses such as Postmates, DoorDash and Instacart, rose nearly 1,600% in June and 1,200% in July. STABILITY AND RESILIENCY Shawn Smith, executive vice president with the retail team at Kidder Mathews, said the Northern Nevada retail sector has been buoyed by the strong influx of new residents that continue to plant roots in the Truckee Meadows. “A lot of people from Northern California and the Bay Area are moving here, and they are either bringing over existing businesses or buying into new franchise concepts,” Smith said. “There also are a lot more buyers in the market now, which is driving retail sales. Business owners also are expanding into multiple locations. “The retail market is very strong — we are actually below pre-pandemic lows for vacancy. A lot of that can be attributed to the residential growth we have seen during the pandemic.”
According to Colliers International’s quarterly retail market report, overall retail vacancy stood at 7.4% in the second quarter. Dwindling vacancy, coupled with slight gains in average rental rates ($1.71 square foot, triple-net leased), has investors taking a closer look at Northern Nevada. The pandemic proved the regional retail sector’s stability and resiliency, Stevenson added. “It became something investors were interested in again,” she said. “In 2020 it was hard to even come up with net operating income (to provide a business valuation) because so many tenants were on work-out deals or had rents deferred or forgiven. It was hard to get a pulse on actual (operating) income with all the different provisions in place. “Now, because collections are up and vacancies didn’t really happen, it showed the stability of the asset type, especially for centers that had essential businesses like grocery and home improvement stores.” LEASING ACTIVITY KEEPS MOVING Meanwhile, leasing at new retail centers remains brisk — for example, the boutique-retail concept Village at Rancharrah is now 100% full. That bodes well for upcoming boutique projects, such as The Oddie District in Sparks, as well as Reno Public Market and the retail component of Reno Experience District, which are at opposing corners of Plumb Lane and Virginia Street. RED plans to construct about 60,000 square feet of retail that is centered on a 1.5-acre park near the existing Century Park Lane movie theater, Smith said. Boutique retail concepts at RED will be located on the ground floors of the Emory, Basecamp and Atwood multifamily projects, added Sean Retzloff, associate vice president with the retail group at Kidder Mathews. There also will be some standalone product that’s expected to come online in the third or fourth quarters of 2022. “There was definitely a lull in leasing activity and a ton of uncertainty in the market whether it was from landlords, tenants or anyone looking to get into retail last year, but as we came out of COVID, it has been stronger than ever,” Retzloff said. “Retail has rebounded nicely.” Despite positive gains, businesses in the retail sector are struggling to find employees — and it’s beginning to impact brokers’ ability to land new tenants, Stevenson said. “The conversation about staffing comes up with many of our negotiations on new activity,” she said. Other challenges facing the industry include the high cost of construction, and the inability of contractors and subs to take on any new work due to fully booked schedules, Stevenson added. “We had a huge bid on subdividing two anchor spaces, and we got turned down by two contractors because they just did not have the time to even give us a bid,” she said. “It is part of the conversation.” KEY TRANSACTIONS FROM Q3
The portion of Smithridge Plaza that housed the former Toys ‘R Us store (now Goodwill location) sold for $10.1 million. Just over 48,346 square feet of line space was included in the deal, excluding the Goodwill store.
960 Ambassador Drive in Northwest Reno, which houses Jada Loft and Kelly-Moore Paints, sold for $3.1 million.
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