RENO – A report released this week by the Nevada State Apartment Association (NVSAA) shows local apartment rents growing at a slower rate during the second quarter of 2020.
Record low vacancy rates in the Reno area allowed landlords to charge some of the nation’s most rapidly rising rents. From 2016 to 2018, rents increased by an average of more than 8% per year, including an all-time high of 11% in 2017.
The report, issued by the NVSAA based on data provided by CoStar, shows local rents rising more slowly amid the region’s apartment-building boom, with a subsequent increase in vacancies. Local apartment rents increased by less than 2% in 2019, and that trend has continued so far in 2020. Local rent growth during the second quarter was about 2.6%. Asking rents during the second quarter of 2020 averaged $1,274 per month, up from $1,242 one year earlier.
Despite the outsized demand in recent years, supply growth was slow to arrive, and vacancies consequently fell to just over 3% in 2017. But since then, more than 5,500 units have been delivered, and supply-driven pressure, coupled with unprecedented job losses, have now pushed availabilities well above the national average. The recent supply wave and recently rising unemployment rates have limited rent growth. Annual gains ranked near the top of the U.S. from 2015 to 2018, but were nearly flat by the end of June 2020.
For the second quarter of 2020, the average vacancy rate for local apartments was 8.9%. That’s up from 6.3% one year earlier, but down from nearly 11% during the height of the Great Recession.
“Fortunately, about 90% of Nevada renters have been able to make their monthly rent payments during this crisis,” NVSAA Executive Director Susy Vasquez said. “But with the enhanced unemployment benefits at a standstill and the pending expiration of the eviction moratorium, we expect these numbers will change during the third and fourth quarters of this year, even with apartment owners and operators doing a good job of working with their residents.”
Reno’s current construction pipeline is massive by local standards, with 3,170 apartment units in the works. In fact, that’s more than the number of units being built in the much larger Las Vegas metro area. This will increase the Reno area apartment inventory by roughly 10%. The local apartment inventory has increased by roughly 17% since 2016.
Vasquez said this is in stark contrast to most of the past decade. In the first half of the 2010s, Northern Nevada’s apartment inventory increased by only about 1% cumulatively, with very few new units delivered from 2010 to 2013.
Reno’s business-friendly environment, proximity to Silicon Valley and relatively low cost of living made the area an attractive destination for new residents and companies in recent years and helped the local economy become increasingly diversified. Still, the report noted that the leisure, hospitality and retail trade sectors continue to account for an outsized portion of the workforce. Most activity in these sectors came to a halt in March and April, as the state implemented stay-at-home orders and other measures to protect against the coronavirus.
Before the pandemic, Reno ranked among the nation’s leaders in job growth for several years. From 2015 to 2019, local job growth topped 4%. Since the downturn sparked by COVID-19, Reno shed nearly 35,000 jobs through April, or about 14% of its workforce. The area’s unemployment rate in April, which is likely to represent the peak, was 20.4%, or 600 basis points higher than the U.S. average.
This report is provided by the NVSAA based on data from CoStar, a leading provider of commercial real estate information.
About the NVSAA
The Nevada State Apartment Association is the voice of the multifamily housing industry in Nevada. The nonprofit organization provides a variety of services to its 894 community, property management and business partner members statewide, including legislative support, education and community outreach. NVSAA is committed to promoting and supporting the diversity, integrity and success of its members and their industry. For more information, visit www.NVSAA.org.