By Jordan Lehamn, Colliers | Reno
Northern Nevada’s office market fundamentals displayed their strength in 2021 with declining vacancy rates, steady rent growth, and robust demand. Though many U.S. office markets experienced occupancy losses in 2021, the Reno/Sparks region saw a flurry of leasing activity as annual net absorption remained positive throughout the year. With nearly 133,000 square feet of net absorption pushing vacancy down to 11.6 percent, the market’s occupancy gains in 2021 more than overshadowed occupancy losses in the prior year.
Investor demand continued to heat up as annual sales volume reached nearly $223 million. With limited assets on the market, pricing grew 20 percent year-over-year to about $228 PSF. Average direct asking rents have also rebounded, growing 4.2 percent in 2021 to $1.84 per square foot on a full-service basis.
Reno’s economy remained flexible and resilient this year despite the uncertainty surrounding the impact of COVID variants. Continued population growth paired with the influx of new companies point to a bright future for the Reno office market.
By John Stater, Colliers | Las Vegas
Southern Nevada’s office market completed its recovery from the 2020 lockdowns in the fourth quarter of 2021, with vacancy decreasing to 13.3 percent, which was not only lower than its pre-lockdown rate of 13.6 percent, but also the market’s lowest vacancy rate since before the Great Recession. Asking rental rates increased to $2.27 PSF on a full-service basis.
While there is still room for recovery from the Great Recession, the completion of recovery from the lockdowns was good to see. Recovery in Class A office product continued to lag, with vacancy still above 25 percent, Class B and C office in the suburban submarkets were in especially good shape. Net absorption of suburban class B office product was 711,177 square feet in 2021, and suburban Class C had 323,261 square feet of net absorption. This performance was not entirely a surprise.
Long-term trends, perhaps accelerated by COVID fears and the impact of technology, have favored suburban office product, and smaller office footprints. These trends are expected to continue, although the completion of several new Class A office buildings in 2022 could draw tenants from older Class B product. If the national economy cooperates, and that is by no means a certainty, southern Nevada’s office market should continue to improve and expand in 2022.