By NAI Alliance
The Reno/Sparks retail market saw continued improvement in the third quarter. Two anchor tenants opened stores in the market this quarter. Grocery Outlet opened their fourth location in the Spanish Springs Shopping Center in a portion of the former Scolari’s grocery store site. Sprouts opened their first local store along with Starbuck’s in the South Meadows Promenade in south Reno.
There was a total gross absorption of 131,035 SF during the quarter, with a net absorption of 99,415 SF. The overall retail vacancy rate in the market is 12.8 percent. The anchor vacancy rate is 12.4 percent, down from 13 percent the previous quarter. The line shop space vacancy rate is 13.2 percent, down from 14.6 percent the previous quarter.
There were only 31,620 SF of space vacated during the quarter. Interestingly, the two largest tenants vacating their spaces were both bicycle shops: Reno Cycling & Fitness with 6,000 SF and Peloton Bicycles with 3,000 SF.
Retail investment sales continue at a healthy clip in Reno/Sparks with numerous transactions in the third quarter. Two of the more notable transactions include the sale of Whole Foods, Sierra Trading Post and Pier 1 buildings in the Del Monte Plaza to Kimco for approximately $24.1 million or $291.21/SF. The other sale was the Kohl’s building in northwest Reno that sold for $9.35 million or $99/SF.
The greater Las Vegas Valley consists of approximately 60.3 million SF of retail space. As the market improves, the current vacancy rate is 9.2 percent, which represents a drop by about 20 basis points from last quarter, mainly driven by community centers, while neighborhood centers experienced a vacancy increase of 60 basis points.
The average lease rate is approximately $1.34/SF, triple net. During the third quarter of 2017, Sportsman’s Warehouse relocated to 42,000 SF space in Sunmark Plaza, LVAC occupied 90,000 SF space in Union Village and At Home and Seafood City leased 92,000 SF in the K-Mart Center in Eastern Commons.
The current average sale price is about $180 PSF while cap rates are at 6.75 percent. The most recent notable transactions include Montecito Marketplace which sold at $63.5 million, or $334 PSF, at a cap rate of 5.95 percent. In addition, Flamingo Grand Parkway is a portfolio that sold at $16.6 million or $254 PSF and a single tenant asset at Boca Park Marketplace traded at $5 million or $541 PSF.
There are approximately 300,000 SF of projects under construction as of December. As the economy continues to recover, there are many multi-family developments along the 215 Beltway and I-515 freeway which will contribute to demand retail space in the foreseeable future.