The first quarter of 2019 had many smaller retail lease deals, with the majority under 11,000 square feet. Village at Rancharrah, Tolles Development Company’s new development, has signed on nine tenants so far. Süp, Centro Due and Coffeebar are a few of the restaurants that have joined the project. Clothing retailers, Chez Vous & Rancharrah Clothing Co., have also joined.
Retail sales continued to have a very slow quarter for Northern Nevada, dropping from $26,410,600 in Q4 18, to an anemic $16,656,750 in Q1 2019. The market only saw 13 transactions and an average price-per-square-foot of $186 in Q1. The most notable transaction was the sale of the former Toys R Us building in the Smithridge Shopping Center which traded for $3.65 million or $85 per square foot (PSF).
Other transactions were comprised of mostly non-anchored inline and neighborhood centers in the first quarter. In South Meadows, a 9,980-square foot neighborhood center traded for $3.1 million ($306 PSF) with a 6.51 percent cap rate.
Downtown Reno had two notable retail transactions including the multi-tenant retail building at the corner of 188 California Avenue and Plumas Street. The fully-leased 7,000 square foot building traded for $1,925,000 ($275 PSF) with a 6.25 percent reported cap rate. Tenants include Monaciello restaurant, The Loving Cup, a salon and yoga studio.
In 2019, 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; 24.4 million square feet of neighborhood centers; and 9.9 million square feet of strip centers. As the market improves, the current vacancy rate is 6.6 percent, which represents a drop by about 30 basis points from last quarter.
The average lease rate is approximately $1.75 PSF, NNN. Concessions depend on multiple factors such as tenant’s strength and length of term. The current average sale price has risen to about $252 PSF (that number changes dramatically depending on submarket) while cap rates are 6.6 percent. In Q1 2019, 2.5 million SF has traded.
There were 421,000 square feet of projects delivered in Q1, 2019 with 930,000 square feet still under construction. As the economy continues to recover, in addition to many multi-family developments along the 215 Beltway and I-515 Freeway, Amazon acquisition on various sectors will be a catalyst to propel demand for more retail space. As larger tenants continue to close or downsize, a new breed of retail businesses backed by unusual capital such as Amazon or Google and new quick service restaurants from other states will continue to search for the best spaces.