RENO – A report released this week by the Nevada State Apartment Association (NVSAA) shows local apartment rents surpassing their pre-pandemic peak and growing faster than the national average during the third quarter of 2020.
The report, issued by the NVSAA based on data provided by CoStar, shows apartment rents in the Reno-Sparks area increasing by 5.0% from the same time last year, passing their pre-pandemic peak. Asking rents during the third quarter of 2020 averaged $1,303 per month, up from $1,240 one year earlier.
That compares to the national average apartment rent of $1,364 per month during the third quarter, which is down 0.1% from one year ago.
Despite the strong demand for housing in recent years, the report notes that supply growth was slow to arrive to Northern Nevada, leading to vacancy rates falling to just over 3% as recently as 2017. But since then, more than 5,500 local units have been delivered. Supply-driven pressure, coupled with unprecedented economic disruption, have now pushed apartment availabilities well above the national average. The recent supply wave and recently rising unemployment rates have also limited local rent growth this year.
“Rent growth, however, is easily outdistancing the tepid U.S. norm, even if it is below that of recent years,” the report stated. “From 2015-2018, annual rent gains ranked near the top of the U.S., and achieved a double-digit peak in 2017.”
For the third quarter of 2020, the average vacancy rate for local apartments was 6.8%. That’s up from 5.8% one year earlier, but down from nearly 11% during the height of the Great Recession. The increase in vacancy is attributed primarily to the release of newly constructed units.
“The Northern Nevada rental market, like basically all of the local economy, took a hit from COVID-19 shutdowns,” said NVSAA Executive Director Susy Vasquez. “But now that stay-at-home orders have lifted and the economy is starting to rebound, the apartment market, like the overall housing market, is surpassing expectations. It remains to be seen if this will continue once federal eviction moratoriums expire at the end of this year.”
The report added that Reno’s “construction pipeline is massive” by local standards, with 3,027 apartment units in the works during the third quarter that will increase the overall apartment inventory by nearly 10%. The local apartment supply has increased by roughly 18% 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.
The number of apartment properties being sold in the Reno-Sparks area in 2020 easily surpassed the area’s annual historical average. However, the report noted that “deal flow has notably slowed since the start of the pandemic. In fact, from the middle of April to July 1, only three metro properties changed hands, and sales volume in (the second quarter of 2020) was almost nonexistent.”
According to Vasquez, buyers, sellers and lenders are likely struggling to agree on underwriting projections, given the economic uncertainty and the area’s large development pipeline. Still, investment volume during the third quarter surpassed the annual long-term norm, thanks in part to two sizable multifamily sales, with one in Sparks and one in West Reno.
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.