Northern Nevada Real Estate A special publication brought to you by the
Volume 4, Issue 2
COMMERCIAL | INDUSTRIAL | RETAIL | LAND | OFFICE
Monday, July 24, 2017 | www.nnbw.com
Multifamily housing industry enters Q3 on a ride to glory By Sean M. Grady info@nnbw.biz The regional multifamily housing market has been on a growing surge in rents, renovations and new construction that will carry on into the near future. As a refresher, here is what happened in the market during the first quarter of this year, as related by local market watchers and building departments: The across-the-board average apartment rent reached $1,111, a 12.22 percent rise over its level in the first quarter of 2016.
The apartment vacancy rate dropped to 2.23 percent from the 2.93 percent mark it set in the previous quarter, a level just .07 percent lower than at the end of March 2016. And the number of apartment units both under construction and planned logged in at roughly 9,370, a 70-percent increase over the same time last year. Much of these figures, which are expected to increase once final Q2 figures come out, represent the multifamily industry’s attempt to catch up with where it would have been had it not been for the Great
Recession putting a halt to virtually all activity, leaving too few apartment units available for the area’s increasing population. “As a result of that, the increase in supply is not keeping up with the increase in demand, and the increase in demand is on both multifamily and single-family,” said Floyd Rowley, senior vice presidents for investments at the Johnson Group. An example of this demand: According to the most recent available Q2 figures, Reno and Sparks issued 34 new apartment permits for a unit total of 680
(including those in multi-purpose buildings that include office and retail space) and a combined valuation of $71,355,656. With the increased demand has come that rise in rental costs. Just as noteworthy as the $1,100 rent average is Reno’s placement among the top 10 cities for singlebedroom-unit rent increases in June – to an average of $780, an 8.8-percent hike from May’s $717 – as determined by apartment listing and research website Abodo. Tracking by local firms also shows how dramatically multifamily housing has changed. “We haven’t seen a market this strong in the history of our CBRE tracking for the past 20 years, from both how low the vacancy rate has stayed in the last six months or so, and from the exceptional rent growth that the market has experienced,” said Aiman Noursoultanova, senior vice president at CBRE’s Reno Investment Properties Group. All of which leads to the fact that multifamily has become a hotter area of investment. continued on page 11
Ryder Homes is building an apartment complex called The Village South along Wedge Parkway south from Arrowcreek Parkway. It is just one of the Class A apartments that are being built in the area to capitalize on the growing demand for multifamily housing. Photo by Sean M. Grady
Reno office market continues to be strong By Rob Varnon info@nnbw.biz Economic growth has put a squeeze on large Class A office space in the region while options for smaller space remain good. “We don’t have the inventory for larger spaces over 10,000 square feet,” Scott Shanks, a Dickson Commercial principal, said. Choices have dipped into the single digits for larger spaces, while companies looking for 2,000 square feet could probably find about 50 spaces available, he said. This has resulted in a continuing rise in lease rates and a drop in vacancies at the higher levels, which is prompting renovation of older buildings and some new continued on page 11 A rendering of the new speculative office building in the Mountain View Corporate Center. Photo courtesy McKenzie Properties
Overall Office Vacancy Rates - 1st Quarter • • • •
Downtown 11.58 percent South Meadows 12 percent Meadowood 9.53 percent Airport 10.66 percent
Source: Dickson Commercial Group
Office Vacancy Rates by Class Space 1st Quarter • Class A 11.5 percent • Class B 14 percent • Class C 16.3 percent Source: Colliers International
2 | Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com
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Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com | 3
Retail making a comeback in Reno-Sparks market By Whip Villarreal info@nnbw.biz Commercial real estate in the Reno-Sparks area is looking strong with former big box retail locations becoming repurposed, new businesses opening up across the city and plans for further development show that the market, which was hit hard by the Great Recession, is making a comeback. Currently, the total retail vacancy rate for commercial real estate in the area is at 9 percent, which shows that the market is relatively healthy. During the recession, the commercial real estate market was hit hard by the high vacancy rates of anchor and big box retailers that closed down. These vacant retail locations, usually measuring to about 60,000 square feet, are hard to fill. Businesses have been shrinking their bricks and mortar locations due to online retailing taking a larger portion of consumer spending, as well as a weak economy. However, some of these locations have been replaced with other retailers or repurposed for nontraditional uses. Hobby Lobby, near the Meadowood Mall, is operating at a closed JCPenny location, Nordstrom Rack took over the space once used by Barnes & Noble near Kietzke Lane and South Virginia Street, and Saint Mary’s Medical Group operates a clinic at a former Scolari’s grocery store on Sharlands Avenue in northwest Reno. “The market is not fully recovered but I think we are right on the
precipice of being at a full recovery,” said Shawn Smith, vice president of retail properties for CBRE. “The reason it is important to have a lower vacancy rate is because you start having more demand than there is supply, which leads to new construction taking place.” Currently, CBRE has new projects underway across Reno including an 80,000-square-foot Sprouts Farmers Market anchored shopping center that is set to open in September in South Reno, 50,000 square feet of retail space at The Village at Rancharrah, and 90,000 square feet of retail space at the old Park Lane mall site near the Midtown District. Along with retail space being developed at the various sites, residential and multifamily housing units are set to begin construction at both Rancharrah and the Park Lane Mall sites. The development of new housing is to keep up with demand of newly implanted residents in the region as the economic boom from companies like Tesla Motors and Panasonic continues to boost the local economy. With an influx of new businesses and residents moving into the northern Nevada region it has caused rents to increase because of limited supply.
Patrick Riggs, commercial real estate agent for Dickson Commercial Group said that rents of existing residential properties have increased 12.6 percent from last year. As the current supply diminishes and demand continues to increase, he sees a rise in rents for all real estate categories moving forward. Though rents have been increasing, things are looking up for those looking to expand business in the northern Nevada region. “It’s definitely a good market right now,” Riggs said. “Industrial real estate is really hot right now. At the Tahoe Reno Industrial Center there is a lot of property getting picked up out there. Basically, it’s a sellers market and good property is getting picked up quick. We’re seeing a lot of activity from out of state investors that want to come in here and get a piece of the pie.” Besides construction of new real estate and redevelopment of existing
properties, there were some big transactions of retail property in the second quarter. The 335,981-squarefoot Sparks Crossing shopping center on Pyramid Highway, sold to RCG Ventures for $40,278,351. Though the retail real estate market has made gains and there are plans for further development down the road, one factor that may discourage businesses that have set up shop in the area from expanding to more brick and mortar locations is e-commerce. “The Internet is such a formidable force that I think brick and mortar retail has been patient to evolve and watchful to make sure they don’t make any mistakes,” Smith said. “They have adopted to omnichannel retailing where they are really incorporating their online presence with their brick and mortar presence to combat the Amazons of the world.” ●
Sprouts Farmers Market will be opening in a new 80,000-square-foot shopping center this September. Photo by Sally Roberts/NNBW
New retailers, multifamily and hotels for Sparks By Annie Conway aconway@nnbw.biz and Duane Johnson djohnson@nnbw.biz The Outlets at Legends announced that Burlington Coat Factory, Chick-fil-A, The Habit Burger Grill, Jersey Mike’s, Buckle and Charlotte Russe are set to join the shopping center. RED Development, the developers of The Outlets at Legends, announced the addition of the six new retailers in May along with 75,000 square feet of new retail space that is currently under construction. The revitalization of the RenoSparks economy is helping to spur this development. “With the large companies like Switch and Google and Tesla there is a definite buzz in the economy,” Claire Petrie, general manager for The Outlets at Legends, said in an
interview with NNBW. “…This center has also been reacting to what the local market has been requesting and that is these big retailers.” The additional 75,000 square feet of retail space is being built in a vacant lot adjacent to the Galaxy Sparks IMAX Luxury + Theater and behind the Nike store. Lepori Construction is the general contractor on the project. The Burlington Coat Factory will be the anchor tenant in the expanded space and is expected to open in spring of 2018. Habit Burger Grill and Jersey Mike’s are both scheduled to open later this year and will also reside in the expanded space. Buckle and Charlotte Russe will be located within the existing center and are scheduled to open this summer. Chick-fil-A will open its new standalone restaurant in fall 2017. These new retailers will add an estimated 200 new jobs, according to Petrie. There are currently 37 retailers at the Outlets at Legends. According to Petrie, the center has an 84 percent occupancy rate and an 86 percent leased rate with the addition of Buckle and Charlotte Russe. There is also room for further expansion within the outlets. “We have six other pads that are slated for future development,” Petrie said. H&M opened at The Outlets at Legends April 6. RED Development announced the addition of six other new restaurants and retailers that will join The Outlets. Photo by Annie Conway/NNBW
The Outlets at Legends is currently a 1 million-square-foot development. The Outlets will total 1.2 million square feet once it is fully built out. In addition to these new retailers, new multifamily apartments and hotels are emerging in the marina area. A five-story luxury apartment complex called Waterfront at the Marina Apartments is currently under construction along with a 102-room Hampton Inn & Suites By Hilton and a 104-room The Residence Inn by Marriott. The two hotels are expected to open by spring 2018. The hotels are being developed by Olympia, a commercial, residential and retail development firm headquartered in Las Vegas that acquired the 13.5-acre undeveloped land in 2007 with plans to build hotel and gaming entities. But as luck would have it, the Great Recession soon followed, and plans were shelved. However, the recent resurgent northern Nevada economy reopened the door for the developers. DeCoury Graham, chief marketing and development officer for Olympia, explained the company had been keeping close tabs on the local economy, particularly from another one of its affiliated hotel properties, Courtyard Carson City. “We monitored the region for quite some time and now see it as a stabilized market,” Graham said in a phone interview with NNBW. “The market conditions are all there for us to proceed.”
Once completed, The Hampton Inn & Suites will provide amenities such as complimentary breakfast, high-speed Internet, a 24-hour business center, an indoor pool and fitness facilities. The Residence Inn offers studio, one bedroom, or two bedroom suites. In-room amenities include kitchens outfitted with residential sized stainless steel appliances, grocery delivery service, 24-hour markets as well as complimentary breakfasts. Rafael Construction Inc., a fullservice general contractor based in Las Vegas, will oversee the Hampton Inn & Suites project while DC Building Group also of Las Vegas will handle the Residence Inn development. The combined construction cost of the hotels is estimated at $40 million. Once completed, Graham predicts the new properties will enhance business at the Outlets at Legends and vice versa. “We know the developers of the mall (RED Development LLC) very well, and have been coordinating this project with them for some time,” Graham said. “SCHEELS, for one, gets a lot of consumers from other regions and this may give them more of an incentive to stay for a longer period of time.” Petrie echoed Graham’s comments. “We have a lot of local population that visits us, but having hotels right here as our neighbors will be great for us,” Petrie said. ●
4 | Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com
High demand but low inventory for Carson City industrial market By Roger Diez info@nnbw.biz There’s good news and bad news about the industrial real estate market in Carson City and the Highway 50 corridor east to Dayton. The good news? Demand is high. The bad news is that there’s not much inventory to meet that demand. More good news for property owners – average rental costs are on the rise. From a low of 30 cents per square foot during the recent recession, prices have risen to the 40-50 cents level per square foot. The bad news? The breakeven point for spec building construction is around 65 cents per square foot, with 70-80 cents for profitability. NAI Alliance broker Andie Wilson does not see that level of increase for at least another 12 months, indicating it will be at least that long before industrial building construction will begin to ease the inventory problem. The size of the Carson City market doesn’t justify quarterly surveys to determine vacancy and absorption rates, but according to John Uhart and Sam Douglas of Uhart Commercial Properties, the vacancy rate in Carson City industrial properties is under five percent. Andie Wilson and Bruce Robertson of NAI Alliance concur, pegging it at under 4 percent.
Wilson said that 2017 sales have outpaced 2016 considerably, further reducing available inventory. From only five sales in 2016, the first half of 2017 saw eight total sales. The largest was a 35,000-square-foot building that sold for $1.4 million, with another sale of $1.05 million for 17,500 square feet. The bulk of the sales have occurred in two areas; the airport industrial park and Deer Run Road. Also, the 60,000-square-foot former Oakley building in Dayton has been purchased by Cosmetic Enterprises, Ltd., with an additional 18 acres for future development. Miles Construction performed an extensive refit to the building to bring it up to specifications for the cosmetic industry. Many of the properties still available for sale aren’t suitable for some clients. Most are smaller, and others have issues. For instance, a 50,000-square-foot building in the airport park needs environmental testing prior to occupancy. There are still 35,000 square feet
of rental space in an 80,000-squarefoot building at Roop and Fairview, according to Robertson, and smaller spaces in the istorage complex on Highway 50. Wilson expects the latter to be 100 percent occupied within six months. Uhart says that he has had recent inquiries from a machine shop and cabinet manufacturer looking to locate in the area, as well as several food manufacturers. There is still industrial-zoned land available in the market, with 496 acres yet to be built, according to Kris Holt of Nevada Business Connections. Uhart estimates about 80 acres remaining in the airport park, and 30 to 40 acres on Highway 50, another 38 acres at the site of the old National Guard armory, and infill in other areas. Wilson says that there are two large properties, one 46 acres and the other 131 acres, available for build to suit construction. Due to the gap between current rents and breakeven on spec construction, companies that want to build to suit may find that land
There are limited vacancies in the current Carson City Industrial market and what is available is leasing quickly. Pictured is a small industrial space on Arrowhead road near the Carson City airport. Photo courtesy NAI Alliance
attractive sooner than developers will. Wilson adds that after five years with no industrial land sales, she is now seeing activity in both Carson City and Mound House. Uhart states that industrial land prices in Carson City are currently at $2.50 to $4.00 per foot. The higher end pricing is for certified sites. The Northern Nevada Development Authority (NNDA) developed the Certified Site program to assist companies that are looking at building in Carson City and outlying areas. The program is intended to remove much of the uncertainty about a property in the minds of buyers. According to Andrew Haskin, Director of Business Development at NNDA, certified sites have a checklist of criteria, including property physical and zoning information, environmental, utility, transportation, grading, and visuals, all of which can be found at www. nevadacertifiedsites.com. To date there are two certified sites available in Carson City, with three more in process. So what does the future hold for industrial properties in Carson City, Mound House, and Dayton? In the short term, it’s more demand than supply. In the longer term, there is definitely reason for optimism. Uhart expects great things for the area as the Tesla effect gains momentum, with smaller suppliers to the large manufacturers in the Tahoe Reno Industrial Center moving into Carson City and the Highway 50 corridor. Robertson sees continued activity from companies that are seeking to escape California and will build to suit until more industrial rental space is available. ●
Industrial real estate in high demand in Douglas County By Roger Diez info@nnbw.biz Like much of northern Nevada’s industrial property market, Douglas County is faced with high demand and limited inventory. Dick Silvera, longtime realtor and owner of Silvera Commercial Real Estate in Gardnerville, says that he could sell or lease thousands of square feet of industrial buildings if they were available. He pegs the vacancy rate at under 5 percent in the Carson Valley. Companies relocating from California have been responsible for purchasing or leasing the bulk of industrial properties in the valley. Silvera has only two properties currently listed for sale, one of 51,000
square feet and the other much smaller at 5,700 square feet. Another 24,000-square-foot property is for lease. Rents for industrial buildings are at 60 cents per square foot, up from the 40 to 50 cent range three years ago. However, rents need to rise another 15 cents to make development of spec buildings attractive. According to Silvera, there is lots of acreage available for industrial development. He estimates that acreage in the neighborhood of 300 to 400 acres. A 12-acre development planned in the airport business park in Minden is currently on hold awaiting financing. In addition to the airport property and the nearby Meridian Business
Park, two other areas contain most of the industrial development in the Carson Valley. They are the Johnson Lane and Heybourne Road area in Minden, and the Industrial Way business park in Gardnerville. But in addition to rent levels still being too low to attract spec builders, a shortage of workers in the building trades is also seen as an impediment. Once the financial logjam breaks, there will be a scramble to find or train people to construct the buildings needed to fill the demand. One of the main reasons for the high demand is the quality of life in Carson Valley. “A lot of California business owners have summer homes or second homes at Lake Tahoe. They see what we have here, and many of them want to relocate or expand their businesses here,” Silvera said. “Unfortunately building to suit lead time is at least a year, and many companies are not willing to wait that long.” For those companies willing to wait, there’s hope on the horizon. There is a 31-acre parcel under development on Heybourne Road in Minden, with Sperry Van Ness Gold Dust Commercial behind it.
Pictured is a 24,000-square-foot building for lease in the Meridian Business Park. Photo courtesy Silvera Commercial Property
Jack Brower says that the geological work on the site is done, surveys complete, grading permits designed, and other preparations in progress. The plan is to have three buildings totaling 400,000 square feet – two buildings of 112,000 to 113,000 square feet and the third with 210,000 square feet. The buildings can be subdivided in 50,000-square-foot increments, so tenants will be fairly large manufacturing or distribution companies. All buildings are planned for 32-foot clear height, with truck courts. Brower stated that they have talked to a lot of companies, but no one has yet made a firm commitment. He said that as soon as they have a major tenant, preferably two or more, the project can move ahead. He estimates 12 months from start to completion and occupancy of the buildings. So what does the future hold for industrial properties in Douglas County? “The future is bright,” Silvera said. Demand remains strong, particularly among business owners who prefer the quality of life in Carson Valley to Reno/Sparks and the Tahoe Reno Industrial Park in Storey County. More projects like the Heybourne Road development are expected with the rise in lease rates for industrial buildings. A lot of moving parts have to mesh to balance supply and demand, but things seem to be moving in the right direction. ●
Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com | 5
Venture to bring industrial center to Churchill County on track By Steve Ranson sranson@lahontanvalleynews.com The development of a rail park and industrial center west of Fallon has taken a major step. Nathan Strong, executive director of the Churchill Economic Development Authority (CEDA), said his agency, the Truckee Carson Irrigation District (TCID), Omaha Track and the Highway 95 Rural Development Authority are all working together on the rail park adjacent to Hazen. “Omaha Track has partnered to build a rail center to serve Omaha Track and local businesses as part of Churchill County and northern Nevada’s growing rail-served industrial development,” Strong said. Strong said Omaha Track needed a yard and western presence. Rachel Dahl, CEDA’s former executive director, pitched the idea for a rail park two years ago. First, the Churchill County Commission had to change the parcel of land in the A10 district owned by TCID to industrial zoning. The commission supported the approval, and Chairman Pete Olsen said the rail park would bring significantly profitable development to Churchill County. In the infant stages of gaining interest for the rail park, Dahl said the land must be owned by a government agency. She also said a railroad design company was working on a conceptual design for the area. Strong said the future rail park is located at the beginning of the Mina Branch and the Fallon Industrial Lead north of U.S. Highway 50 alternate. Strong looks at the development as the next major step for Churchill County to grow as a logistics center strategically situated at or near the crossroads of major highways. “When completed, the development will be able to provide direct rail access to Omaha Track and other occupants as well as provide transloading services to regional businesses, allowing them to ship to and from locations across North America and access to the global market through west coast seaports,” Strong said. The senior manager of marketing and sales for Omaha Track lauds her firm’s expansion in Churchill County. “We look forward to working with TCID and CEDA as well as members of the community to build a multicommodity rail served industrial park in Hazen,” Lisa Roberts said. “It’s a great location, and we believe it will be a project that will have a positive impact on every member of Churchill County and the surrounding communities.”
Commissioner Bus Scharmann attended a meeting in October 2016 that discussed the Tahoe Reno Industrial Center’s (TRIC) impact to the area, especially with the number of firms expanding there. He said transportation is crucial to both the Fallon and Fernley markets. TCID District Manager Rusty Jardine said the agency is pleased to be working with Omaha Track to make the rail park a reality. “Long ago, the leaders of our nation envisioned for us a community developed and growing as a result of our taming the desert with reliable water supplies,” Jardine said. “This rail park, located at the very portal to this nation’s centers of commerce, will serve to launch economic development in our region and will further serve in supporting irrigated agriculture and other industry into the next century.” At a prior CEDA Business Council breakfast, Eric Kreuzberg, Union Pacific’s regional manager for marketing and sales, said rail opportunities continue to increase in the area for hauling grain and for serving mining interests. He also said the Tesla plant between Reno and Fernley at TRIC may have an effect of rail growth and opportunity for Churchill County and the surrounding area.
Looking east from Hazen toward land that will be used for a new rail park. Photo by Steve Ranson/LVN
Kreuzberg said UP also improved five crossings on the Fallon Industrial Lead and has been working with local agencies such as CEDA for new development. Now, with Omaha Track on board, Strong said the plan to move ahead is what he calls “groundbreaking.” “Not only will this project provide a stable revenue stream for TCID, it will directly contribute to the success of Omaha Track who will be an incredible partner for Fallon, Churchill County and the northern Nevada community,” Strong said. “Having them on site with their expertise in rail development will immediately impact the region’s current and future rail served industries.”
Strong said representatives from Omaha Track will speak at CEDA’s Oct. 11 Business Council breakfast to discuss the development of the project, its role in the local economy and the future of rail transportation. For information on the project, visit http://www.cedaattracts.com. ●
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The railpark is proposed east of Hazen and north of U.S. Highway 50. Photo by Steve Ranson/LVN
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6 | Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com
Midtown lofts near completion By Rob Sabo info@nnbw.biz The completion of Midtown Lofts at Sinclair and Stewart streets in July brought a welcome sigh of relief for developer Blake Smith, president of S3 Development Company. S3 Development purchased two 1940s-era buildings and a vacant field at the site a few years ago with the goal of adding modern housing in the Midtown area that would appeal to Millennials and other young professionals. The half-acre site now houses 11 single-family homes. In addition to renovating the existing two buildings, S3 Development erected nine new structures. “That is dense — but if you look at architecture and the layouts, we designed that product for what the market is looking for,” Smith said. “They are low-maintenance, highly stylish, and the location is A-plus. People can walk to work, to entertainment. “That product is designed to satisfy that need in the Midtown area,” Smith added. “It is dense, but it is really open due to smart architecture and layout. The interior design opened up a lot of stuff, such as openings between the second and third floor, and there are rooftop decks with views of the Sierra for entertaining. They also have small yards — you have a place to get out but don’t have to spend a lot of time maintaining it.” Mike McGonagle of Mac Associates was the architect on the project, which was built by Troy and Travis Means of Homecrafters. Developers often liken urban
redevelopment projects to peeling an onion — you just don’t know what’s really inside until you start digging in. In this case, there were three or four big challenges that had to be overcome to bring the project to fruition. When workmen began removing earth to tie into the City of Reno sewage system, they found that the existing waste pipeline was a 1920s-era clay pipe and not a steel pipe. That was a major setback and financial blow. “You cannot connect to clay, so we had to rip out half of a street block and replace the pipe to tap into it,” Smith said. “You just don’t know that until you dig down. You are assuming it is regular steel or concrete, but the pipe we found was made of clay.” The party was only just beginning, Smith added. S3 Development also incurred large expenses with NV Energy to bury all power lines in the area. “We had to underground all power,” Smith said. “As we were building, we thought that when the power went down, so did AT&T and Charter, but now we are going back in with them and taking more poles down and undergrounding more utilities for both serviceability and aesthetics of the property and also for the safety of the units.” It was the same scenario as when S3 Development renovated the old Heritage Bank building at 1401 S. Virginia St. “You never know what you are going to run into, that is why it becomes more expensive,” Smith said. “There are all these hidden costs you need to plan for, but you just don’t know what you will run into.”
S3 Development is less than two months away from taking the same concept used at Midtown Lofts and developing eight additional units at Tonopah Lofts behind 1401 S. Virginia St. Lots are recorded and permits are ready to be pulled, Smith said. He’s waiting for the Midtown Lofts project to wrap up. Smith hasn’t yet decided to sell or rent the homes once they are completed. He wants to walk through the completed project before making a determination. “They are going to be really cool,” he said. “Until they get finished and I can walk through them, I won’t price them for sale or for rent. They will be really special, and I just want to walk through them before I decide what to do with them.” Smith said the Midtown District will see more projects such as Midtown Lofts and Tonopah Lofts as the area continues to be redeveloped. But urban redevelopment projects are
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S3 Development’s Midtown Lofts project, located at Sinclair and Stewart streets, included the renovation of two existing buildings and the construction of nine new structures. Photo by Annie Conway/NNBW
much more difficult than working with bare ground, Smith noted — and he certainly would know. In 1991 Smith started purchasing land that would eventually become the Somersett community in northwest Reno. The first home built in Somersett sold in 2002, and today there are more than 3,700 homes in the community, with more being completed each month. “I think you will see more and more (urban redevelopment projects) as the market gets tighter,” Smith says. “But it is very expensive and complicated to accomplish. It was not an easy task to go in and build urban redevelopment. It is much easier to start with a piece of sagebrush than what we did over there (at Midtown Lofts).”●
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Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com | 7
Tight housing market spurs construction NNBW Staff info@nnbw.biz Increasing rental rates, housing pricings and a lack of inventory are creating a need for additional housing in northern Nevada. In response to the market, the region experienced a flurry of groundbreakings for both residential and multifamily housing developments in Q2. New apartments in northwest Reno come to life A 312-unit luxury apartment community named “Vida” — Life — is under construction in northwest Reno. Guardian Capital and LandCap Investment Partners broke ground for Vida on May 9 at the corner of Sharlands and Mae Anne avenues in Reno, a site previously slated for development that was halted due to the recession. The 20-acre development includes many luxury features and amenities, such as a private dog park, bocce court, a tot lot, gated entry and attached garage parking for some units. The luxury apartment community will feature one, two, and threebedroom homes in a country club-like community environment. Amenities will include large open park areas, satellite barbeques, pool and spa with cabanas, a clubhouse with a tech connect lounge, valet door-todoor trash service, 24-hour package pickup, and a fitness facility with state-of-the-art gym equipment as well as yoga and MyRide studio. Luxury apartments break ground near Sparks Marina A 280-unit luxury apartment complex near the Sparks Marina is currently under construction. S3 Development Company and officials from the City of Sparks broke ground on the new development May 25. The apartments will be called “Lyfe at the Marina” and are located on a 10-acre lot on the corner of Marina Gateway Drive and Lincoln Way.
The luxury apartments will feature one-, two- and three-bedroom units that will include high-end finishes, 11-foot ceilings, kitchen islands and home-style touches along with a clubhouse and a resort-style pool. Other amenities include bocce courts, a dog park and even a dog spa. Blake Smith, chairman and chief executive officer of S3 Development, said that the market will dictate the prices of the apartments at the time of completion but the units will be priced in the mid- to high-range end of the market. “We do want to make it reasonable but the market will dictate that,” Smith said. The project is expected to be complete by May 2018. New apartments to replace the former Wildflower Village S3 Development is also developing another multifamily housing complex in northwest Reno. The Wildflower Village property was razed in May to make way for a new multifamily housing complex. From the rubble will come a 164-unit yet-to-be-named apartment complex to be built on the eight-acre site, located near the South McCarran Boulevard and Fourth Street intersection. Blake Smith said the new community will feature one- two- and three-bedroom units. Other amenities are still in the planning stages and have yet to be finalized. The size of each apartment will range around 1,000 square feet per unit.
City of Sparks Council Member Ron Smith, Chairman and Chief Executive Officer of S3 Development Blake Smith and city of Sparks Council Member Donald Abbott break ground on a new 280-unit luxury apartment complex in Sparks this past May. Photo by Annie Conway/NNBW
S3 Development purchased the property from Pat Campbell-Cozzi, who had developed Wildflower Village into a once lively cultural center that included an art gallery, gift shop, hotel and hostel. The old motel property has been completely vacant for about six months. Smith explained it has taken a few months just to gut the property and a few more weeks to demolish the old structure. The next step is to go through the permitting process. He is anticipating getting construction under way by November or December. Development continues in Somersett Ryder Homes began construction of The Pointe at Somersett, a 64home development in northwest Reno, on May 26, one of last new developments in the master planned community of Somersett in northwest Reno. The Pointe at Somersett will feature three homes designs including Modern Farmhouse, Contemporary Desert and Progressive Prairie. There will be three different floor plans ranging in size from a single story, 2,386 sq. ft. house to a two story, 3,057 sq. ft. house. With property lots ranging in size from 9,000 to 14,000 sq. ft., the spacious floor plans include three-car garages, interior courtyards and casitas for the larger homes. Somersett began as a masterplanned community in the early 2000s. Ryder Homes had planned on developing the land where The Pointe will reside, but the recession set development back. “We’ve owned this land for some time, and had to ride out the recession,” said Jay Ryder, president of Ryder Homes. “Now is the right time to begin construction.”
Jay Ryder of Ryder Homes speaks at the groundbreaking event of The Pointe at Somersett May 19. Photo courtesy Paul Klein/Argentum
Homes will be on sale starting August 2017, with construction to be completed by January 2018. Apartments added to Carson City housing development Ryder Homes also announced that they will add apartments to its construction plans at Lompa Ranch in Carson City. The home builder received approval earlier this year for 189 single-family homes on 44.5 acres on the former 251-acre ranch located south of Robinson Street, east of Saliman Road, and north of 5th Street. Now, the company says it has purchased an adjacent 17.5 acres zoned for multifamily development where it plans to build 350 apartment units, according to Steve Thomsen, general manager. Ryder Homes plans to begin construction on both the houses and apartments early next year. The complex will consist of threestory buildings each with 12 units. The apartments will include attached garages and be similar to apartments the company built in Reno at Village at Arrowcreek. ●
Officials from the City of Reno, Guardian Capital developers and others involved in the project, break ground on Vida luxury apartments at the intersection of Mae Ann and Sharlands in northwest Reno. Photo by Sally Roberts/NNBW
8 | Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com
Industrial continues to be a strong market By Tom Miller, CCIM Industrial real estate activity levels were high in the second quarter of 2017, with a noticeable uptick in activity from the first part of the year. In the I-80 east corridor, Scannell Properties is completing the new FedEx freight terminal, which should be fully operational by late summer. And in other news, northern Nevada continues to attract data centers. Apple is expanding its presence in the Patrick area, and Rack Space recently announced its new data center in the same area. At the Tahoe Reno Industrial Center, Google made its announcement in April about the purchase of 1,210 acres, and the suspicion is that it’s for a new, and enormous, data center. Meanwhile, Switch just finished the world’s largest data center, and USA Parkway is on schedule to complete the linkup of I-80 and US 50 this year as well. The Reno/Sparks industrial market continues to experience a high demand for big box tenants with a steady absorption of the newest Class A warehousing as the location of choice for many tenants. The bonus features of the newest inventory allows logistics operations in these locations to employ the latest technology available while also saving on lower building operating costs. New speculative buildings are not sitting vacant very long, and there is currently actually a slight shortage in the largest sized big box inventory.
The speculative new construction market is still active, with developers remaining mindful of the last building boom when demand quickly dried up and buildings sat vacant for years on end. Panattoni, Dermody Properties and Prologis are all starting new speculative projects soon in the North Valleys. Tenants, however, find themselves negotiating leases in a landlord-favored market. While rents have escalated, area rents are still held in check with adequate competition in most size ranges. Lease terms are definitely tightening. Landlords across the board are becoming more selective as the demand level for space gives them room to pick tenants with excellent, investment grade credit, longer lease terms and minimal tenant improvements. Renewing tenants are being offered longer-term renewals, with most short-term lease renewals not even being considered. Even expanding tenants within the landlord’s portfolio are experiencing termination fees on the unused term of their leases. These types of landlord-friendly terms are becoming more prevalent as the leasing boom continues and will be the norm so long as demand and supply remain at their current levels. Northern Nevada has been on industrial real estate investors’
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radars for a few years now, as our market affords better yields than may be available in capital markets. The prices investors have been willing to pay for occupied buildings have been very strong in the past few years. You might even say our investor sales have been slightly overheated. There does seem to be a slight shift in the investment sales market to one of deeper, more cautious evaluation of the quality of the assets offered for sale. We are experiencing some lenders and equity partners becoming less agreeable to accepting tenants with less than investment grade credit without additional financial guarantees. This is
in line with landlords becoming more choosy with whom they are doing business to fill their vacancies. Overall, the northern Nevada industrial real estate market remains very active and highly competitive against alternative locations. Add in Nevada’s favorable business climate, northern Nevada’s superior logistical advantage to quickly and efficiently serve the 11 western states, our sizeable industrial real estate market and extensive logistics support services, and you have a highly attractive location that continues to be considered the go-to location for firms expanding into West Coast markets. All indicators point to a continued strong industrial market into 2018. ● — Tom Miller, CCIM, is the president of Miller Industrial Properties
Downtown office flirts with 10% vacancy By Scott Stranzl The Downtown Reno office market continues to tighten in Q3 of 2017. Basin Street Properties is right at or above 90 percent occupancy across all of our downtown buildings. This high occupancy number speaks to Reno’s strong economic growth and what we believe is long term momentum. Basin Street has signed 12 new or expanding tenants in 2017, totaling over 41,000 square feet in absorption. Seven of these tenants are new to the Reno market. What we see aligns with the recent national press about Reno: Businesses want to be here. Downtown Renaissance Comes to Fruition A steady flow of new and redeveloped downtown projects have made downtown a desirable place to be for businesses and urban professionals. Downtown Reno has delivered new choices in dining, retail, hospitality and multifamily, which makes working and living downtown an inviting choice. CreaZian, The Eddy, See See Motor Coffee and Bab Café bring added variety to the already strong list of delicious restaurants. National retail brands West Elm and Patagonia recaptured long vacant downtown spaces. Courtyard by Marriott and The Renaissance deliver new non-smoking, non-gaming options for business and leisure travelers. And finally, 3rd Street Flats and the soon to open Center + Pine Apartments deliver additional housing and provide a walk to work opportunity for urban professionals. Business Diversity Supports Strong Downtown Recovery A significant difference between the current expansion and the last expansion is the diversity of tenants. Our new tenants span a variety of industries including finance, legal, technology, staffing, media and mining. Tenants like Mineman USA, KNPR and Hall Capital are new companies to the Reno market and help to diversify our employment base. The diversity of
businesses minimizes Reno’s exposure to a single vertical and should help cushion the impact of a market correction. Tenants Investing In Their Spaces Another positive trend we see is tenants investing in their spaces. Not only are they choosing downtown, they are partnering with us to build out modern and productive spaces. Clear Capital, Noble Studios, Allrise Direct and Sierra Co-Working are forward thinking in design and functionality of their spaces. Standard cubicle layouts with traditional finishes no longer satisfy the contemporary tenant. They want open flexible workspaces, convenient breakout rooms, easy bike parking and nearby fitness and food options. Our tenants’ investment of their time and money in their office spaces indicates a long-term commitment to their location. These modern spaces help to raise the perception and appeal of the entire market. Property Improvements and Tenant Amenities As demand and occupancy increase, we are making property improvements and expanding our tenant services to stay ahead of the competition and keep our tenants productive and happy. At 50 West Liberty we remodeled the lobby in 2016, added Artisans Café, built out a fitness center and implemented a lobby ambassador program to raise the appeal of the building. Marty and Michael, our lobby ambassadors, bring a welcoming and knowledgeable attitude to the building, and are a valuable differentiator. This fall Anytime Fitness will open on the ground floor, further expanding the nearby amenities. At 200 South Virginia, we implemented an on-call parking shuttle for our tenants’ convenience. Office requirements continue to evolve, and we look forward to providing innovative and creative solutions to satisfy them. ● — Scott Stranzl is the vice president of leasing for Basin Street Properties
Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com | 9
In his own words:
NAI Alliance’s Mark Keyzers
Name/Title/Company: Mark Keyzers, Senior Vice President & Principal – NAI Alliance Commercial Real Estate Services Number of years with company: Since its inception in 2005 Number of years in the profession: 23 Education: Bachelor of Business Administration – Finance and Real Estate, Business Law Last book read: Power vs. Force – David Hawkins Favorite movie: Kingdom of Heaven Favorite musical groups or genre: Rock Spouse, kids or pets: Divorced, two children Kimberly and Ryan, dogs Sophie and Blu Northern Nevada Business Weekly: Tell us about your company and the duties of your position. Mark Keyzers: NAI Alliance is a full-service Commercial Real Estate Brokerage Firm. Our office serves clients both owners and sellers, developers, builders, landlords and tenants ranging from site selection, land acquisition, project entitlements and design, property marketing, to purchase and lease contract negotiation. NNBW: How did you get into this profession? Keyzers: I began my real estate career with the Macerich Company and large publicly traded New York Stock Exchange Real Estate Investment Trust Shopping Center Mall Developer based in Santa Monica California in the management and leasing program.
NNBW: Do you belong to any professional/networking organizations? How has membership benefitted your career? Keyzers: I am currently a member of the International Council of Shopping Centers, NAIOP and CCIM of Northern Nevada. These organizations provide an outstanding platform for networking, business collaboration, networking and personal development with the industries top professionals. NNBW: How do you manage your time between the responsibilities of your profession and your personal life? Keyzers: In our current world of 24-hour connectivity and business relationships worldwide the demand and expectation for responsiveness can be daunting. In order to satisfy this need, I segment my days, weeks and months into portions where I conduct these functions in specific slots to meet those needs. This allows for taking the necessary personal time to experience whatever you want. NNBW: What did you dream of becoming as a kid? Keyzers: An ocean explorer. I so wanted to be like Jacques Cousteau! NNBW: If you had the chance to have dinner with someone, who would that be and why? Keyzers: Socrates to learn and understand the inception, expansion and expression of human thought and philosophy, and also Albert Einstein to have insight into unlimited scientific possibilities. And then to listen to what conversation they have to say and share with each other on the aspects and possible interrelationship of both! NNBW: Why did you choose a career in northern Nevada? What do you like about living/working here? Keyzers: I was transferred here with the Macerich Company. After relocating here I immediately realized that the area has so many attributes that fit my lifestyle with a limitless multitude of outdoor activity as well as urban cultural and special events.
NNBW: What do you enjoy most about working in your field? Keyzers: The ability to help my clients fulfill their dreams and vision with their businesses and assist in making them a success! NNBW: What is the most challenging part about your job? Keyzers: The extreme variation and changes with requirements from each client to the next are never the same and presents daily challenges to accomplish the goals that can take a great deal of time and patience to manage. NNBW: What do you foresee in the future of your profession? Keyzers: A continued evolution of commercial real estate business development metrics and services modulating between the advancements of technology and the need for individualized personal business consultation.
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NNBW: What advice would you give someone who wants to get into your profession? Keyzers: After you get your real estate license, find a mentor successfully doing exactly what you want to do and do whatever it takes to learn and expand your knowledge and capability from that point on. NNBW: What was the best advice anyone ever gave you either professionally or personally? Keyzers: Logic and reasoning do not run businesses, economies and the world… egos do. If you learn to appeal to and manage the egos you will get a lot more accomplished.
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NNBW: Has there been someone who was especially influential in helping you establish your career or in reaching your higher goals? If so, who and how? Keyzers: Two mentors in my life have provided me with the best tools and vision to continue to accomplish my goals. Scott Burchard of the Macerich Company guided me to exceptional detail orientation and analysis. Carlos Vasquez of CAV Strategies guides me to envision and create extraordinary possibilities of quantifying and delivering through conceptualizing and creating solutions with discipline, responsiveness and integrity.
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Commercial Real Estate BY THE NUMBERS Industrial
Retail CONSTRUCTION ACTIVITY
LEASE RATES
LEASE RATES
2017 YTD RETAIL LEASES BY TENANT TYPE
Source: Kidder Mathews
Source: CBRE Research, Q2 2017
Office
Multifamily
VACANCY AND AVAILABILTY
Source: CBRE Research, Q2 2017 Source: CBRE Research, Q2 2017
Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com | 11
Multifamily
continued from p1
“That really has a lot to do with exceptional market fundamentals: employment and job growth, the number of industries that are being developed in the market, and strong migration,” Noursoultanova said. “If you drive around the community, you see a lot more license plates from virtually all 50 states.” Of course, many of those new residents come from areas with rental costs even higher than those here, a circumstance that can make even a $1,800-per-month price tag seem affordable. Noursoultanova, Rowley and Trevor Richardson – a multifamily property specialist with the Dickson Commercial Group – all said that, for the most part, investors are coming into the area from California, Sacramento and Seattle, with one or two others from outside that region. These incoming investors range from individuals and smaller groups – many who seek older apartments they can refurbish and lease for higher rates – to large institutional investors wanting to set up luxurious, 80-unit-plus Class A complexes. And the investors who want to bring in these high-end projects are bringing in the cash to back them up. “The dollar amount, if you look
Office
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construction. Commercial realtors estimated there has been a 10 percent increase in asking rental prices from the first quarter, but data for the second quarter had not been fully compiled and vetted as of press time. Overall, anecdotal evidence indicates the trends from the first quarter are holding for the northern Nevada office market, with overall vacancy rates between 10.4 percent to 13.1 percent, depending on which report you use. Reports from Dickson Commercial and Colliers international show Class A space lease rates have climbed and now range from $1.81 per square foot to $2.30 per square foot. Pricing is hard to gauge until the final reports are published, but asking rental rates were lowest for Class A in the first quarter in the Central/ Airport market and were highest in
just at the aggregate, is going to range from $9 million to $70 million,” Noursoultanova said. “You can see, it’s a significant investment in Reno.” Not that it’s easy for anyone to bring in their money. Another big factor contributing to the increase of rents and the rise in construction costs is the lack of land for development. “As far as new apartments are concerned, rents have to be high because land costs are very high, and all of the permitting fees and hookup fees and other fees are very high. Construction costs are now high
again; labor is creeping back up,” Rowley said. “I often tell people who are just getting into the market that we are living in a bowl, and we just don’t have a lot of land, at least close to the market,” Richardson said. “Certainly there’s large chunks of land north of the city; some east if you go as far as Fernley; and some south, but that’s it. “We live in a bowl, and we don’t have a lot of sprawl area.” “We are at a point now where land prices are over $20,000 per unit,” Rowley said. “And that, combined with all the fees and construction
Downtown and Meadowood. The lowest rental rates for Class B were found in Meadowood with the highest rates in Downtown. The lowest rate in Class C was in Sparks and the highest in Downtown. “There are a couple of products coming up in the next year,” Shanks said of construction and renovation, adding that builders are taking a measured approach, so leasing prices will likely continue to climb. One example of the market response is the US Bank Building at 1 E. Liberty, downtown. Dickson brokered the $18.3 million sale of the six-story, 89,000-square-foot office building to C2K Advisors from S3 Development. S3 acquired the 1 E. Liberty in 2013 and finished a $4.2 million renovation while seeing occupancy climb from 51 percent to 98 percent. “They did a good rehab job, put a Starbucks on the lot,” Shanks said, highlighting the property as
an example of what’s going right in downtown. “There’s been a bit of a rubber band effect with people, the reinvention of downtown Reno,” he said, noting they like to come down there for the craft breweries, restaurants and the walkability. “You can go meet a client and not have to drive,” he said. While there is more construction activity downtown, a completely new build, large office has not gone up since 1987 when the 11-story building at 100 West Liberty went up. The Meadowood corridor and South Meadows join downtown as the submarkets leading this market. In June, McKenzie Properties broke ground on the region’s first spec office building project in nearly a decade with the start of construction of a 40,000-square-foot building at 5520 Kietzke Lane in the Mountainview Corporate Center. The firm acquired the property
Celebrating the start of construction of the Waterfront at the Marina Apartments with a ceremonial groundbreaking are officials from developer LandCap Investment Partners and Guardian Investment Capital with Sparks City officials on Thursday, March 23. A big factor contributing to the increase of rents and the rise in construction costs in the Reno-Sparks are is the lack of land for development. Photo by Sally Roberts/NNBW
costs, we’re kind of reaching the upper limit of what people think is rent affordable.” ●
in 2015 and while it started as a speculative venture, it has already signed clients for the space. The company is working on other deals that should have it 50 percent leased very soon. It’s expected to be completed in spring 2018. Todd McKenzie, a principal with the firm, said it will take more than just their 40,000-square-foot building to satisfy the growth in the market. The makeup of the office market is more well rounded than in the past, he said. “The influx of new companies is exciting,” adding that established firms in gaming and the accounting, legal and health professions are expanding as well. Add in population growth and the region is set for continued steady growth. Both McKenzie and Shanks said interest is coming from a broad base across the economy and both see a catalytic effect possible as the tech industry plugs into the Reno office market. To date, the majority of new action from the tech sector has been in the industrial space, like Tesla’s factory, but call centers and other operations are starting to move in as well. “It’s a pretty broad sector the most exciting and most needed to our economy,” McKenzie said of the lift from technology. Healthcare has also been a bright spot and all of this leads to an expansion in business services, he noted. The Reno market is also attractive to a wide swath of businesses because not only does it offer a downtown market, but also a suburban one, with better parking options, McKenzie said. Ultimately, the market here will continue to prosper as the population grows along with the diversification of the economy. ● McKenzie Properties’ lot for a new 40,000-square-foot office building is prepared for construction to start. Courtesy photo
12 | Northern Nevada Real Estate Journal | Monday, July 24, 2017 | www.nnbw.com
Starbucks expands operation in Carson Valley NNBW News Service info@nnbw.biz MINDEN — Starbucks operations in Nevada’s Carson Valley plans to grow substantially over the next year with the addition of 700,000 square feet to the distribution portion of the Starbucks Carson Valley Roasting Plant and Distribution Center in Minden. The expansion will bring nearly 100 new jobs to the location in the first year after completion, bringing the distribution workforce to nearly 350. A June 7 ceremonial groundbreaking kicked off the $50 million project, which will wrap up in summer 2018. Only the distribution portion of the 341,000-square-foot building will be enlarged, allowing Starbucks to increase capacity and streamline regional sourcing. The roasting side of the operation will be unchanged. “This is a significant project for our company,” Starbucks Executive Vice President Hans Melotte said during the groundbreaking ceremony. “Support from the local community has been tremendous, so there’s no reason not to invest here … This further anchors our distribution in this part of the country.” Starbucks’ original Douglas County roasting facility opened in 2003 as a 360,000-square-foot plant before expanding in 2005. It is located on a 100-acre site that Starbucks purchased for $4.6 million. Construction of the original facility cost about $40 million.
About 100 million pounds of beans are roasted in the current Minden facility each year. The processed beans are then shipped throughout the U.S., Canada and China. The expansion will be built on the south side of the current 415,000-square-foot roasting plant and distribution center, located at 2525 Starbucks Way between Johnson Lane and the Minden-Tahoe Airport. Reno-based CORE Construction is the general contractor for the project. “Starbucks has made an impact from a community involvement perspective, volunteering thousands of hours and making other sizable donations to local nonprofits,” said Douglas County Manager Lawrence Werner. “It is safe to say other businesses that are considering locating in the county take note of Starbucks decision to be here.”
The new warehouse will bring the company’s Western Nevada operations under one roof. Currently, Starbucks’ warehouses are located in Reno and Sparks, according to Chris Baker, spokesman from Manhard Consulting. The new warehouse will consolidate Starbuck’s Western Nevada operations under one roof and reduce the amount of truck traffic to the plant. Currently, product is shifted to and from warehouse sites in Reno and Sparks, which will be eliminated. “The Starbucks Carson Valley Roasting Plant and Distribution Center has made a huge impact on the Douglas County economy since it was first opened,” Economic Vitality Director Lisa Granaham said in an email. “The Fortune 500 Company is one of the larger employers in the county.”
“We serve all of California, Nevada and Utah, as well as parts of Arizona and Asia Pacific,” Todd McCullough, director of distribution at the facility, said in a press release. “We do everything here from coffee to syrups to behind the bar supplies.” McCullough, who has worked at the Carson Valley Roasting Center and Distribution Center since it opened in 2003, said the expansion will create a range of new jobs for managers, supervisors, coordinators and distribution partners. Lisa Granahan, economic vitality manager for Douglas Country, where the distribution center is located, said Starbucks provides vital balance in a local economy where a third of the workforce holds lower-paying tourism and leisure positions. “It’s been a target of the county and our Economic Vitality Program to grow more of the industrial sector,” said Granahan. “We’re just extremely pleased to see Starbucks expansion and the additional jobs, and further diversification of our community. I also believe this could bolster the number of working families in our community. We have seen a decline in our school system over the years. We’d just really love to see our school numbers rise again.” ●
Members of the Core Construction team break ground on a new building site with Starbucks representatives June 7 at the plant in Minden. Photo by Brad Coman
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