At the start of 2020, employment growth in Reno was among the highest in the nation. Due to COVID-19, the shutdown of many non-essential retailers has caused an impact on this growth. The Nevada Department of Employment, Training and Rehabilitation (DETR) says the state’s overall unemployment rate was at the highest in the nation in April, at 28.2 percent. The overall unemployment rate has since declined to 15 percent in June.
Retail had an extremely slow second quarter with only six total sales. The Q2 sales volume came in at $9,586,000. In comparison, Q1 2020 had a total sales volume of roughly $43 million and 2020 had an average of just over $48 million per quarter throughout 2019. The average price per square foot increased to $388.68 from $344.90 in Q1 of 2020. The main reason for this increase was the one outlier, 740 S Meadows, which sold for $1,382 per square foot. Leasing activity has been improving since hitting a rough patch in April, although activity still remains at half of the pre-pandemic trend.
Retail was hit hardest by the pandemic, due to shops, restaurants, bars and more being forced to close. A number of local operators will not have the capital to operate following the prolonged shutdown and continuation of social distancing, while some national retailers are shrinking store counts, or in other cases, declaring bankruptcy.
Retail vacancy, including subleases, increased 80 basis points, year-over-year, and 10 basis points from last quarter to 7.9 percent in the second quarter of 2020. Occupancy grew this quarter thanks to positive net absorption of 84,000 square feet in the southeast and 50,300 square feet in the central west submarkets.
Year-to-date, tenants returned 222,000 square feet across the market. All submarkets have lost tenants this year except for the southeast submarket. The average asking rent of $1.56 per square foot on a monthly triple net basis across all centers increased 1.3 percent from last quarter and 5.4 percent year-over-year. Strip centers continue to impress, with an 8.7 percent year-over-year increase to $1.75 per square foot. The market delivered 210,500 square feet of retail space since the beginning of 2020, 84 percent of which was added to inventory of strip centers.
The Las Vegas retail market recorded $112.2 million in sales volume across 21 centers and 733,000 square feet thus far in 2020, an 80 percent decrease in volume compared to the first half of 2019. Average price was $244 per square foot in the second quarter of 2020, compared to $253 in Q2 2019 (-3.4 percent, year-over-year). The average cap rate was 6.7 percent in Q2 2020 compared to 6.6 percent a year ago. The leading buyers of retail centers in the first half of 2020 were private investors (94 percent compared to 93 percent in 2019), followed by REITs (4 percent compared to 1 percent in 2019). Private sellers accounted for 98 percent of activity (compared to 45 percent in 2019).