Reno-Sparks retail market steady heading into 2017
The retail market in the Reno-Sparks area experienced steadily decreasing vacancy rates, positive net absorption along with increasing lease rates in the fourth quarter of 2016.
Dickson Commercial Group’s retail specialist Gary Tremaine said that the activity in the Reno-Sparks retail market has been steady.
“(The market) has definitely improved,” he said.
Dickson Commercial Group reported a 9 percent overall vacancy rate in their 4th quarter retail report, down slightly from 9.4 percent in the 3rd quarter of 2016.
Tremaine is seeing rents increase slightly due to the lower vacancy rates with an average increase of 5 to 10 cents per square-foot. South Reno, Central/Airport, Spanish Springs and the Sparks submarkets are the areas with the most vacancies while the North Valleys and Northwest Reno submarkets have the lowest vacancy rates.
One of the most anticipated new tenants is Sprouts Farmers Market grocery store which leased 29,896 square feet in the South Meadows Promenade in the fourth quarter. South Meadows Promenade is currently under construction and according to CBRE’s Reno Retail Q4 Report, the new center is expected to be completed by the end of 2017.
While there were fewer large transactions completed in the fourth quarter of 2016, Tremaine said that many of the retailers who leased earlier in the year opened this past quarter including The Patagonia Outlet in downtown Reno.
Burger Me signed a lease at the Summit Mall in the 4th quarter of 2016 and construction is well underway on the building for the new Chick-fil-A located on McCarran Boulevard near Kietzke Lane.
“Restaurants are the hottest use in the market,” Tremaine said.
Tremaine pointed out that the increase of e-commerce is impacting brick and mortar stores.
“This is a trend that is happening nationally,” Tremaine said. “Online sales are just the way it is going.”
“Most of the larger retailers are downsizing,” Roxanne Stevenson, senior vice president at Colliers International, said in a phone interview.
Earlier this year, large department stores such as Macy’s, Sears and Kmart announced plans to close a large number of their locations across the nation. While stores in northern Nevada were not on these lists, Stevenson expects the Reno market will be affected in time.
“I do anticipate there will be closures, we just don’t know when they will hit,” Stevenson said.
Many retail centers in the Reno-Sparks market are continuing to receive facelifts and repairs to retain and attract tenants.
“Now that vacancy rates are lower, shop space is filling up and the economy is better in general, we are seeing numerous shopping centers being updated and renovated,” Stevenson said.
She explained that new owners of retail properties are also renovating the centers after they purchase them. There was a large number of shopping center sales in 2016 including Firecreek Crossing Shopping Center, Iron Horse Shopping Center, Ridgeview Plaza Shopping Center and Airport Square Shopping Center to name a few.
According to Stevenson, the bigger sales are typically from investors outside the market. She explained that Reno-Sparks is a desirable market because it is seen as a good value compared with some of the other markets. Additionally, the economic growth and new companies settling into northern Nevada are drawing attention to the region.
“We weren’t on the radar for a very long time,” she said.
Now when she talks to potential retailers, they are aware of the city. However, she explained that Reno is still a small market and certain retailers do not enter the market simply because of its population size.
Nevertheless, high consumer confidence, low unemployment and job growth in the region are all positive aspects for the Reno-Sparks retail market in 2017.
“The fundamentals are good,” Stevenson said. “We are seeing vacancy rates go down slowly over the last two or three years.”
Tremaine was also optimistic heading into 2017.
“All in all we had a really good 2016 and 2017 is shaping up to be pretty steady,” he said.