Reno-Sparks apartment rents soaring; monthly average tops $1,300 in Q2
Special to the NNBV
READ MORE: NORTHERN NEVADA REAL ESTATE JOURNAL, JULY 2018
This is the first in a four-part series of stories scheduled to be published in the July 2018 edition of the Northern Nevada Real Estate Journal, which the Northern Nevada Business View publishes on a quarterly basis to provide various real estate market updates across the region.Part 2, published July 19, is here: Despite Northern NV’s tech boom, office market development laggingPart 3, published July 25, is here: Rental rates rising as industrial inventory dwindles in Northern NevadaPart 4, published July 26, is here: Reno’s retail market heating up as interest soars for space in planned projects
By the numbers
Reno-Sparks apartment vacancy rates for second quarter 2018 (April-June):
One bed/one bath: 1.86%
Two bed/one bath: 1.25%
Two bed/two bath: 1.46%
Three bed/two bath: 1.40%
Reno-Sparks average apartment rental rates:
$1,230: First quarter 2018
$1,318: Second quarter 2018
7.15 percent: Increase from Q1 to Q2
$836: First quarter 2012
$1,318: Second quarter 2018
58 percent: Increase over past 6 years
Source: Johnson Perkins Griffin
RENO, Nev. — To get an idea of how hard it is to find an apartment in Reno or Sparks, just take a look at concessions.
Apartment communities historically offer concessions, such as a free month’s rent, to lure in new tenants. In the first quarter of 2012, for example, more than 71 percent of apartment communities in the region offered concessions for new tenants.
In the first quarter of 2018, however, just 4 percent of apartment communities in the greater Reno-Sparks area still offered concessions. According to apartment market data compiled by Johnson Perkins Griffin Real Esate Appraisers & Consultants, zero properties offered concessions in the northwest/northeast/southwest and west Reno submarkets, as well as the Brinkby/Grove and airport submarkets.
Only 10 apartment properties in Sparks, Lakeridge, southeast Reno and downtown still offered concessions.
It’s just one modern reality of the current state of the multifamily real estate market across Northern Nevada, in which apartment rents continue to soar as vacancy drops.
Nearly 60 percent increase in 6 years
Six years ago, the average apartment rental rate across the region was $836. Now, for the second quarter of 2018 (April-June), according to the Johnson Perkins Griffin report, average rents in the second quarter in Greater Reno-Sparks were $1,318, up $88 (or, 7.15 percent) from the previous quarter.
That’s a 58 percent increase in just 72 months.
Apartment rents continue to escalate due to incredibly low vacancy – 1.58 percent overall at the end of the second quarter, Johnson Perkins Griffin reports.
Apartment developers are capitalizing on the strong market demographics that make penciling out new construction a no-brainer. There currently are more than 3,000 apartment units under construction in the region, with twice as many new doors waiting in the wings. The largest projects in Reno-Sparks include:
Vida in northwest Reno at 312 units
Lumina Phase 1 at Pioneer Meadows at 330 units
Summit Club at Mt. Rose Highway at 581 units
North Peak Apartments in Lemmon Valley at 328 units
Sierra Vista at Arrowcreek Parkway at 336 units
Harvest Phase 2 in Damonte Ranch at 182 units
There are more than 6,000 additional apartment units planned, Johnson Perkins Griffin reports, and there are multiple landowners preparing to sell additional parcels to developers. Planned projects include new apartment communities at Park Lane (1,619 units), the Lakes at Sky Vista in Lemmon Valley (768 units), Vista Rafael Apartments (416 units) and Oakmont Properties’ project at Double R Boulevard and Technology Way (440 units).
More units on the way, priced above average
The Lewis Group of Companies is the developer of Harvest at Damonte Ranch. Lewis Homes was active in Northern Nevada from 1972 to 1999, when the company was sold to KB Home.
It was one of the original development partners in Damonte Ranch along with Perry Diloretto, Bailey & Dutton Homes and the Damonte family. The Lewis Group of Companies now focuses on income-generating properties in Nevada and California, and along with Harvest, it’s also constructed Latitude 39 at South Meadows.
Gigi Chisel, vice president of Lewis Management Corp., says Phase 1 of Harvest at Damonte Ranch is 100 percent leased, and Phase 2 is expected to wrap up in October.
At the time of groundbreaking, the 40-acre Harvest site was the only multi-family zoned property in Damonte Ranch. Phase 1 included 278 units, with an additional 182 units in the second phase. The entire Harvest project is expected to add a total of 720 new apartment doors to the regional multifamily market.
While the boutique community Latitude 39 at South Meadows is a traditional 148-unit, three-story apartment community, Harvest offers much more spacious surroundings and reduced density per acre, Chisel says.
Density for the six-plex and duplex buildings are just under 18 units to the acre, which is lighter than other projects going up in Reno and Sparks, Chisel notes.
Most new apartments are traditional three-story buildings with between 20 and 25 units to the acre. Every apartment at Harvest includes a garage, and some have two-car garages.
Units range in size from 820 to 1,504 square feet, with rents averaging between $1,500 and $2,500 a month — higher than the market average. According to the latest second-quarter market report by Johnson Perkins Griffin, average rents in South Reno in the second quarter were $1,353, and average rental rates for a three-bedroom, two-bathroom apartment were $1,754. (By way of comparison, that same 3/2 unit rented for an average of $1,132 a decade earlier.)
Battling back from the downturn
Part of the game plan at Harvest is to create a long-term environment for renters, Chisel says.
“We try to find renters for life. We like to provide an experience where they have no need to move. That includes dog parks, outdoor gathering spaces and fire pits, and a grow-to-grill garden. We really try to focus on livability for the long term. We are building second clubhouse at and another pool; it’s about lifestyle with some of our residents.”
Chisel says that multifamily developers aren’t just capitalizing on the region’s pressing need for new apartments — they still trying to catch up from several years of little or no growth.
“We clearly had a significant trough during the downturn, coupled with very high unemployment and economic distress, but we still had population growth and we didn’t have any apartment construction,” she says. “When the market started to improve and the economy started to get better, we were already in a hole because of the downturn.
“It has taken some time to ramp up construction in our area, but it is my belief that we just right now have completed filling the backlog we should have built if we had not had the economic downturn.”
Demolition will be completed in three phases: asbestos abatement, interior demolition and exterior demolition. The first two phases have already begun inside the 150,000-square-foot retail location formerly known as Shoppers Square; the first visual of outside demolition will be in early October on the northwest corner of the project.