By NAI Alliance
The overall Northern Nevada economy continues to remain strong through the fourth quarter of 2018. However, there were some small setbacks in the overall and anchor space vacancy rates. The overall vacancy in the Reno/Sparks area increased to 12.33 percent from the previous quarter of 11.90 percent. There was a total gross absorption of 120,705 square feet during the quarter, with a net absorption of -32,121 square feet.
The most notable sale transactions this quarter included Sharlands Square, a 36,254 square foot neighborhood center that sold for $6,475,700. The second sale was at Canyon Center, a 14,490 square Walgreens building that sold for $5,009,000. The third sale was at Coit Plaza, a 5,308 square foot community center that sold for $3.2 million.
Thirty-six tenants moved into spaces consisting of 115,9712 square feet during the quarter. The largest new tenant moving in this quarter was Lee’s Discount Liquor with 30,187 square feet at Northtowne Plaza in Reno. There were thirty-five tenants moving out of space totaling 151,276 square feet. The largest tenants who vacated space this quarter were Fallas Discount leaving two locations, 28,000 square feet at Sierra Town Center in Reno and 25,105 square feet at Silver State Plaza in Sparks, and Big Lots leaving 18,945 square feet at McCarran Plaza in Sparks.
Looking to the future, expect to see retail gross absorption remain at subdued levels as new construction will be limited until more existing space is absorbed and lease rates increase to justify new construction.
In 2018, the Las Vegas Valley retail market is shifting towards expansion mode and consists of approximately 113 million square feet, which includes 13.5 million square feet of power centers, 17.3 million square feet of community centers, 25.2 million square feet of neighborhood centers and 9.5 million square feet of strip center. As the market improves, the current vacancy rate is 6.3 percent, which represents a drop by about 40 basis points from last quarter.
The average lease rate is approximately $1.72 per square foot. The lease rate for power centers is $1.99 per square foot, community centers is $1.80 per square foot, neighborhood centers is $1.60 per square foot and strip center is $1.50 per square foot. Concessions depend on multiple factors such as tenant’s strength and length of term. The current average sale price has risen to about $267 per square foot (that number changes dramatically depending on submarket) while cap rates are 6.80 percent. In Q4 2018, 2.5 million square feet have traded.
There are 85,662 square feet of projects delivered in Q4 2018 with 1 million square feet still under construction. Projects such as the Raider’s 55-acre practice facility charged the growth. As larger tenants close or downsize, a new breed of retail businesses, backed by capital such as Amazon or Google, and quick service restaurants from other states will continue to search for the best spaces.