Despite Sears, Toys ‘R’ Us closures, Northern NV retail market forges ahead
Read more: Northern Nevada Real Estate Journal, April 2018This is among a series of stories included in the April 2018 edition of the Northern Nevada Real Estate Journal (NNREJ), which the NNBW publishes on a quarterly basis to provide various real estate market updates across the region. To read more from the April 2018 series of NNREJ stories, click the links below:• Reno’s Melissa Molyneaux: ‘I have always loved learning about people’• Reno’s Shoppers Square: Summer 2018 modernization plans were decades in the making• Reno-Sparks area sets record at $375,000 for median home prices• Need for Reno-area big box space key focus in tightening industrial market
RENO, Nev. — The bloodletting in the national retail landscape hasn’t left Northern Nevada unscathed, but despite the industry-wide bludgeoning, there are still many highlights to be found throughout the Reno-Sparks retail market.
Last week, real estate investment trust Seritage Growth Properties announced it would close the Sears location that’s long been an anchor tenant of Meadowood Mall.
Other notable store closures nationwide and in Reno-Sparks include Toy “R” Us (and Babies “R” Us), art and framing retailer Aaron Brothers, and Styles for Less.
Big-name retailers that have filed for bankruptcy protection include Gymboree, Payless Shoes and Rue 21, and floundering home furnishing merchandiser Bed Bath & Beyond is in a death spiral.
It may seem gloomy, but this rocky retail landscape is simply part of an ever-changing and evolving retail business model. The death of catalogue shopping, indoor enclosed malls like Park Lane (and let’s not forget the failed outlet mall that once stood on Sparks Boulevard near the Legends shopping complex), and small mom-n-pop stores are all casualties of such changes.
The decline of several of the retailers noted above was hastened by the growing importance of online shopping and in many cases, their lack of nimbleness to adapt to changing times.
Evolving with the times
Roxanne Stevenson, retail broker for Collier’s International in Reno, has seen much in her 30-year career. The one constant is retail is change, Stevenson says.
“One new concept kind of derails something else,” she says. “That is how we have evolved over the years. It has been continually changing as long as I have been in this business.”
One example of an evolving concept is Costco’s Instacart program, where online shoppers order their favorite Costco products and have them delivered to their homes or businesses for a minimal fee. It’s similar to the Uber Eats food ordering and delivery program.
However, it’s yet to be seen if the Costco Instacart program will impact overall sales at the retail giant, since so many in-store shoppers fill their carts with impulse buys and other items that catch their fancy.
There’s still a lot of reason to feel positive about retail, Stevenson notes. Although anchor tenants such as Toys “R” Us and Babies “R” Us will leave holes in their respective retail centers, Stevenson expects them to backfill quickly due to their prime location.
And in some cases, the Reno-Sparks retail market was oversaturated, she adds. Take Aaron Brothers for example – the company is owned by Michael’s, which offers the same goods and services. Michael’s operates stores in Reno, Sparks and Carson City.
“As painful as it is with the bankruptcies and closings, we are finally kind of right-sizing,” Stevenson says. “We were over-retailed in our market and in the U.S. in general.
“Some of these closings also are because of the debt levels some of these retailers got into, so we also are reducing debt levels. It always creates new innovations when these things happen.”
Omni channel marketing is one such innovation. Successful retailers today are engaging consumers across a variety of fronts and touch points, from their brick-and-mortar storefronts to online sales, catalogue mailers to social media.
Online shopping has scavenged the traditional retail model, Stevenson says there are few companies whose growth plans don’t include developing online shopping and other channels.
Another innovation is the concept of stores functioning as fulfillment centers. Kohl’s has begun fulfilling customer orders directly from its sister stores rather than a giant central warehouse, which allows the retailer to increase sales volumes from stores and also turn its merchandise over more quickly, Stevenson says.
It also decreases the emphasis for large warehouse space. Kohl’s also is looking at smaller footprints with less inventory in a downsizing effort.
Shawn Smith, first vice president for the retail services group at CBRE, says there’s still a bright future for Reno-Sparks, however. Retail may be at war with the likes of Amazon and Jet.com, but the regional market still has many bright spots.
Take the development of more than 70,000 square feet of new retail at Rancharrah — the site still is under construction, yet CBRE has 15 letters of intent from retailers who plan to lease space there.
The new retail at Rancharrah will be a village concept much like the popular South Creek Plaza or Mayberry Landing centers.
There’s also great demand for daily needs retailers such as Sprouts, which opened to much success in South Meadows and has another location soon to open at Sparks Galleria. The Grocery Outlet on Disc Drive also is doing well, Smith notes.
Small food tenants also have been hot. Raising Cane’s and Chick-fil-A both have multiple locations in the region, and Mod Pizza and Blaze Pizza both expanded to this market as well.
Overall, Smith says retail vacancies should drop in 2018, with junior and anchor boxes backfilling with tenants.
“We’ll also see more projects like Sprouts pop up in high-demand and underserved areas,” he adds. “There’s still a lot of health in our market with infill sites like Rancharrah and in South Reno.”
The $625,000 deal included a low-interest SBA 504 loan facilitated by Nevada State Development Corp., the state’s largest SBA 504 loan provider. City National Bank partnered in the financing package.