Market Status & Forecast – Reno – Sparks, Nevada and surrounding markets
Current Market: The good news is that Industrial is outperforming Office and Retail in our market. The bad news is that the industrial market vacancy jumped to 10.5% in Q1, 2008, with a gross size of 68,500,000 sf. Some submarkets have extremely high vacancies such as the I-80 east corridor at over 20% and Stead at over 13%. These markets provide excellent buying oppor-tunities for tenants. The market balance is now tipped toward a very tenant friendly market for big box users and a well balanced market for most other sizes. Although vacancy rates in some smaller sized properties remains slightly tight. Reno’s overnight/next day distribution to the 11 western states remains a strong factor for relocations with tax advantages, friendly business cli-mate, favorable weather, high availability of trucking and reasonable workmen’s comp rates closely following. Tho the economy is a bit dull now, the continually escalating cost and burdens of doing business in California continues to funnel a steady stream of business to Nevada. Mid-west and Eastern firms seeking western distribution hubs is also a strong market for growth.
Lease Rates: Due to market climbing vacancy rates through Q1, 2008, asking lease rates have maintained, with softening of concessions by developers for larger users to help fill these new and existing, big box properties. Overall availability is currently excellent with new and second generation product coming on line and should be adequate across size ranges. We anticipate competition between landlords will sustain lease pricing at their current levels but only until the vacancies start to fall again; then we anticipate price escalations, as the market finds better balance. Average Pricing: 5-15ksf: $.72, 15-40ksf: $.38, 40-60ksf: $.35, 60-100ksf: $.34, 100ksf+: $.335/sf/mo./nnn. Taxes, Insurance and maintenance charges on new space are about $.075/sf/mo. Expect rents to maintain until vacancy drops; then increase in 2008.
Land Prices: Demand for land continues to be slow in 2008. Lenders increased scrutiny of loans and the a dull economy has slowed interest in smaller parcels. Truckee Meadows land saw over $9/sf. Larger tracts had very slow sales totals as well with the exception of TRIC on I-80 west of Reno. Pricing has maintained in this sector as well at $3.00-$4.00+/sf.. We anticipate further rising land costs due to supply and demand and increasing water rights values in 2009 and beyond. 2008 forecast: The Northern Nevada region experienced a dull absorption in early 2008, with developers putting up record new construction. We are anticipating an uptick in activity as the year progresses.