Reno’s retail market heating up as interest soars for space in planned projects
READ MORE: NORTHERN NEVADA REAL ESTATE JOURNAL, JULY 2018
This is the fourth 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 1, published July 18, is here: Reno-Sparks apartment rents soaring; monthly average tops $1,300 in Q2 Part 2, published July 19, is here: Despite Northern NV’s tech boom, office market development lagging Part 3, published July 25, is here: Rental rates rising as industrial inventory dwindles in Northern Nevada
RENO, Nev. — Tolles Development Company’s push into the retail sector continues to grow with the planned development of the Village at Rancharrah, a mixed-use project of boutique retail and new office space.
TDC entered the market with a splash in early 2017 when it acquired a six-building office portfolio of 140,000 square feet from AMH Properties.
The company later partnered with Marmot Properties to purchase 72,000 square feet of retail scattered among seven properties in Midtown.
TDC’s principal, Par Tolles, has deep roots in Northern Nevada after spending years in key leadership positions at Dermody Properties and Basin Street Properties.
Tolles latest venture at Rancharrah is his first ground-up retail project. The Village at Rancharrah includes about 60,000-square-feet of boutique retail and 40,000-square-feet of office space. The success of South Creek Center, developed by McKenzie Properties beginning in 2008, was a strong factor in TDC’s plans to create a unique shopping experience at Rancharrah. South Creek Center sold in 2016 for $25 million.
“South Creek was kind of the tipping point for us,” Tolles said during a mid-July interview at his offices at 241 Ridge St. “Todd McKenzie did a great job with the architecture, and with the ingredients in the center, putting the right mix of tenants next to each other. They also have a mixture of office to provide some daytime activity; they did a great job.
“We really took what we think are the best parts of South Creek and added that splash to the Village at Rancharrah,” Tolles adds. “If you were to put together Midtown and South Creek together with a Napa-style motif, you would have the Village at Rancharrah.”
Looking out for locals
TDC is avoiding interest from national retails and instead is positioning spaces at the Village for local businesses seeking to expand their footprint in the region.
“We don’t have any national companies on the retail side,” he says. “We could have brought them in but we decided not to because we thought that they would be too dominant and cripple the ability of (local businesses) to succeed. A lot of the names you see at Midtown and around might have a second or third location.”
The 60,000-square-feet of retail is expected to be a mix of food and beverage, health and beauty and boutique clothiers. Spaces are divisible to about 1,200-square-feet to 7,000-square-feet. The retail team of Shawn Smith and Sean Retzloff at CBRE is handling leasing for Tolles Development Company — and early interest has been strong.
Although there’s not been a spade of dirt yet turned, there are letters of intent in place for about 60 percent of the available retail and office space. Tolles expects the Village at Rancharrah to be as much as 75 preleased before construction begins in earnest.
TDC expects to begin grading this month and start construction in October. Buildings should be ready for occupancy in late 2019. Devcon Construction, builder of Greater Nevada Field in Reno, as well as Levi Stadium in Santa Clara and corporate campuses for Adobe, Cisco, Yahoo and BroadCom, is the general contractor on the Village project.
“They have got a lot of horsepower,” Tolles says.
Tolles decided to purchase the 13-acre site after spending more than a year consulting with Reno Land on potential commercial development plans for both Rancharrah and Park Lane. The high-traffic area, prime location and new residential development at Rancharrah were deciding factors in the purchase.
“You have 700 new homes, the (Harrah) mansion, the pond, our village, the commuter route of Kietzke (Lane), and we are sandwiched between all that,” Tolles says.
Retail market stronger than ever
Overall, retail in Reno continues to heat up — the village site is far from the only large retail project expected to hit the market within the next year or two. Additional projects include new retail at Park Lane, a repositioning and rebranding of Shoppers Square into Reno Public Market, and a proposed 48,000-square-foot development at the corners of Double R and Damonte Ranch boulevards, among others.
Gary Tremaine, senior retail specialist for Dickson Commercial Group, will market the south Reno retail project for developer Roger Norman Jr. The center is expected to include a big box retailer along with fast food and inline space.
These new retail locations are needed throughout town as Reno-Sparks continues to grow, Tremaine says.
“We need it — northwest Reno has nothing available, and the southwest really has nothing available either,” he says. “Sparks doesn’t have a lot. North Valleys is the biggest hole in the retail market — there’s just nothing available for retail. There is property, but it’s pricey and it’s big, 10 to 12 acres.”
Overall, Reno-Sparks retail vacancy in the second quarter stood at 6.9 percent, a sharp drop from well above 9 percent just a few years ago, Tremaine notes.
Vacancy was 7.1 in the first quarter of 2018. Rents in the second quarter ticked up 2.8 percent over the first quarter to $14.12 a square foot and should hold fairly steady over the rest of the year, Tremaine says.
While the new retail product isn’t expected to impact overall vacancy — especially with the high level of preleasing — it is expected to cause an uptick in overall rents as developers seek to recoup their initial investments.
“The price per square foot will go up,” Tremaine says. “It has to. Construction costs are 30 percent higher, and landlords are going to have to recoup those costs by raising rents.”
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