Northern Nevada Real Estate A special publication brought to you by the
Volume 3, Issue 1
COMMERCIAL | INDUSTRIAL | RETAIL | LAND | OFFICE
Monday, May 2, 2016 | www.nnbw.com
Multifamily properties are hot commodity By Sally Roberts sroberts@nnbw.biz After a hectic 2015, sales of large multifamily properties decreased sharply for the first quarter of 2016 with the sale of only one large apartment complex recording compared to four last quarter. That reflects a decrease in apartments for sale, not decreased demand. Multifamily properties are a hot commodity. “We’re witnessing one of the strongest apartment markets in history,” said Aiman Noursoultanova, senior vice president investment properties for CBRE Capital Markets. “When I talk to owners, they say it’s a good time to be the owner of a rental community,” Noursoultanova said. “There’s not a whole lot of motivation to sell.” The only large apartment complex that sold in the first quarter was the 264-unit Bristol Bay apartments off Los Altos in Sparks. It sold in February for $35.5 million in an off-market deal. “$134,000 per door is pretty high and a pretty good price,” said Trevor Richardson, multi-family specialist with Dickson Commercial Group. “For those large properties, there’s a heck of a lot of demand in the last couple years.” Richardson said out-oftown investors see ownership of multifamily units, both large and small, in the Truckee Meadows as an “incredibly stable investment.” The vacancy rate has stayed below 3 percent for months, recently
as low as 2.3 percent, which is as low as it can go and still allow for vacancies between tenants. Interest rates are still low and the capitalization rate here is better than in coastal cities, Richardson said. “Large institutional (investment) firms find Reno/Sparks attractive,” he said. According to the Johnson Perkins Griffin report, apartment rents in large complexes throughout the Truckee Meadows, are going for an average of $950 per month. Rents have been climbing at about 6 percent year over year for several years. “That’s a huge increase in rent prices,” Richardson said. “Renters are not happy about that. “It’s hard for me to see that moving a whole lot higher. $1,000 per month is a big threshold.” As the second quarter of 2016 began, only two large apartment complexes were on the market. Lakeridge East, which was foreclosed on by CW Capital, is in the middle of a two-step auction process being conducted by TEN-X. It has 310 units. “It’s likely to attract fairly vigorous bidding,” said Floyd Rowley, senior vice president of investments, Johnson Group. Alder Creek Village, a 213-unit garden-style complex on Neil Road, went on the market in early April. For properties with fewer than 99 units, Midtown and Downtown are the hot spots with Sparks starting to pick up, Richardson said.
“We’re starting to see those in really high demand.” Recently, a duplex in Midtown sold for $168,000 per unit, recording less than two weeks after it hit the market. Each unit is 612 square feet plus a garage and very clean. “It was ready to go and I really think those types of properties appeal to investors from out of town,” Richardson said. They just want to get an investment in the market. Local investors would consider that price inflated. But for someone coming from California or out of state somewhere, that investment makes sense, he said.
“You get two tenants in and it’s a very stable investment.” With a tight sales market in both existing apartments and single-family homes, developers are beginning to see multifamily complexes as attractive projects. “Low inventory is driving multifamily development,” Richardson said. Approximately 1,000 multifamily units are currently under construction in the Reno/Sparks metro area. Another 5,000 or so are in different stages of planning. continued on page 11
The only large apartment complex that sold in the first quarter was the 264-unit Bristol Bay apartments off Los Altos in Sparks. It sold in February for $35.5 million. Photo by Sally Roberts.
Area industrial development charges ahead NNBW Staff Nevada may have lagged behind other parts of the country in coming out of the recession, but when it comes to industrial development, it’s clear the Silver State has firmly shaken the yoke of the economic downturn. With 1 million square feet of new inventory filled in the first quarter of 2016, and more than 1.4 million square feet of new construction ready to hit the market, industrial development is easily the hottest sector of the regional commercial real estate market. Two familiar northern Nevada players — Dermody Properties and Panattoni Development Company — are leading the development charge. Panattoni is putting the finishing touches on a 707,000-square foot-building at North Valleys Commerce Center, a 1.4 million-square-foot project being developed in partnership with the California State Teachers Retirement System. Photo courtesy Panattoni Development Company.
Doug Roberts, partner with Panattoni Development, says that industrial real estate in Nevada really started moving forward in 2013 after years of stagnation. “Nevada was at least two to three years behind most of the major East Coast markets coming out of recession,” Roberts says. “We didn’t really get going until late 2013 — that’s when we felt like we could pursue stuff with our capital partners who want to put money into Nevada.” Dermody Properties was the first to put the ball in play, Roberts notes. Dermody’s speculative development at Lemmon Drive was the first new continued on page 11