Northern Nevada Real Estate A special publication brought to you by the
Volume 3, Issue 2
COMMERCIAL | INDUSTRIAL | RETAIL | LAND | OFFICE
Monday, August 1, 2016 | www.nnbw.com
Multifamily market regains health By Sally Roberts sroberts@nnbw.biz The strong momentum in the sale of multifamily properties that started a couple years ago is not letting up. “The primary reason is that we’re seeing more inventory than we’ve seen hitting the market in the last two to three years,” said Aimon Noursoultanova, senior vice present of investment properties with CBRE. Adding fuel to the market fire are low vacancies and increasing rents that boost the value of the properties, plus low interest rates motivating buyers. “Prospective sellers that have been on the sidelines are becoming real sellers,” she said. Properties “began hitting the market this summer. Sellers don’t want to lose the value (by waiting).” Noursoultanova said adventurous investors entered the Reno-area market early and are reaping the rewards of low vacancies and rising rents. More and more buyers are being attracted to the Reno market. “Reno is becoming more mainstream,” she said. Investors see “positive headlines, especially those that say it’s a business friendly environment. It’s resonating. Investors are attracted by stability.” Compared to the global economy, the United States is one of the last safe havens for investors, she said, and in addition, the Reno market offers value for their dollars.
“It’s still a very affordable market. It’s putting people in the deal-making mode.” The word is reaching a wide audience. Kenneth Blomsterberg, first vice president investments with Marcus & Millichap, said his agents see a lot of multifamily-property investors from the Bay Area, Sacramento and San Diego looking for property in the Reno area. Recently, a buyer from Omaha, Neb., began looking for a first investment in this market. Another investor from Vancouver, BC is “rooting around Reno,” he said, and others from Connecticut and New York are inquiring about available multifamily property. While the number of sellers is increasing, the demand is too. “The market is just red hot,” Blomsterberg said. “Our biggest issue right now is having product out there to sell.” Some properties will have eight to 12 bidders, he said. “Investors in Reno don’t see the same value as investors from San Francisco or San Diego,” he said. “Ten years ago they wouldn’t have considered Reno.” As existing multi-family properties exchange hands, Noursoultanova sees a new aspect of the market gaining momentum: infill redevelopment. Historically, prices for urban lots are higher compared to the suburbs. The climb in rents is making it possible to purchase urban property and still make a prophet.
“The math has to work out,” she said. Two examples of the trend in infill development is the Fountain House apartments under construction in downtown Sparks by Silverwing Developers, and the recently announced development planned by Reno Urban Developers on the site of the demolished Park Lane Mall at South Virginia and Plumb
Lane. Both are planned as multiuse developments with a mixture of apartments, retail, restaurants and office space. Another change in the multifamily market in the region is the dwindling supply of real estate owned (REO) properties — generally, foreclosures that are now owned continued on page 11
The 184-unit Willowbrook apartment was recently purchased by The Apartment Company, based in Encinitas, Calif., one of many investors from outside of Nevada now interested in the Reno market. Photo Courtesy Marcus & Millichap
Industrial construction gaining momentum NNBW Staff A few years ago, Dermody Properties gambled when it constructed the first speculative industrial building in the Reno-Sparks market in five years. But rather than crapping out, Dermody came up the easy way, leasing the spec building to Internet retail giant Amazon and kickstarting a new wave of industrial development throughout Greater Reno-Sparks. Though industrial development in the Truckee Meadows restarted on somewhat shaky ground back in 2013, it’s built on bedrock today. Direct vacancy stood at 7.24 percent in the first quarter of 2016, and industrial brokers describe the CBRE leased 328,000 square feet at 700 Milan Dr., located in the Tahoe Reno Industrial Center, with Thrive Market. The other half of the 624,000-square-foot building is occupied by Chewy.com. Photo Courtesy CBRE
pace of leasing activity as “feverish.” Long gone are the days of brokers going golfing for lack of something better to do. The regional market is almost as frothy as before the crash. Case in point: Seattle-based developer Avenue 55 expects to complete construction this month on a 409,000-square-foot spec building at Spanish Springs Corporate Park. The building is almost entirely preleased prior to completion, says Eric Bennett, first vice president of Industrial Group at CBRE. “That is big in this market, to pre-lease a 409,000-square-foot facility,” Bennett says. “Everything is either leased or inked to lease.” continued on page 11
2 | Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com
BANKING MEANS SOLUTIONS You have ideas. Plans. Opportunities. Whether it’s retail, office, industrial, or multi-family, our Commercial Real Estate team is here, ready to help you turn your plans into reality. From competitive rates to quick decisions, put our experience and local know-how on your side. Together, we can make this happen. BRING YOUR BANKING HOME.
nsbank.com | 866.451.5018
Loans subject to credit approval. Terms and conditions apply. ZB, N.A. NMLS# 467014
Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com | 3
Retail centers getting fresh looks By Sally Roberts sroberts@nnbw.biz The busy pace of commercial real estate transactions in the region is energizing another boom: the remodeling of retail centers throughout the region. The Smithridge Center, which was purchased last year by Miamibased Altis Cardinal, LLC, is one of the centers getting a major façade upgrade. The center, which includes Trader Joe’s, Stein Mart, and the former Marinello beauty school, is trading in its 1980s color scheme for a modern look. “The new owner is investing a little more than half a million,” said Shawn Smith, vice president of CBRE, which is managing the center. Besides the new paint scheme, the columns are being wrapped in stone and the signage reframed. “They’re also raising the roofline of Trader Joe’s and adding a stone façade,” Smith said, “the same at Stein Mart.” CVS, which has a different owner, is also getting the update to maintain a uniform new look at the center. With the updated façade, come new tenants. Smith said the center has already attracted a pediatric dentist, Pet Station, plus Plato’s Closet and Clothes Mentor recently moved from Midtown to the Smithridge Center. “The remodel really helps to fill spaces,” he said. The remodel on the Marinello building, which has been empty since February when the beauty school closed most of its locations nationwide, is on hold until it has a new tenant, in order to accommodate style changes a new tenant might require, Smith said. In Sparks, work is beginning on significant upgrades to the look of the Iron Horse Center. Parking lot improvements, landscaping and painting are expected to continue through the summer.
The property “was foreclosed on a number of years ago,” said Robert LaChance, property manager director for Colliers International. “It’s really value-added for the new owners,” Irvine, Calif.-based Shopoff Realty Investments. LaChance said the work helps to attract new tenants. Among the empty spaces at Iron Horse is the 100,000 squarefoot former Target space, which has been empty since 2008 when the department store moved to the Outlets at Sparks Marina. Repainting has included covering up mismatched paint from years of graffiti cover-up on the Target building. “It needs revitalization because it’s been kind of a depressed property,” LaChance said. The former Save Mart grocery store, which is owned by that grocery chain is coordinating its own transformation into the company’s Food Mart label with the overall face lift for the center. Airport Square is also getting a fresh look along with new owners. LaChance said the retail center anchored by Costco Wholesale (which has a different owner) has had a 11.5 percent vacancy rate, which the owner hopes to improve upon. “Retail is very competitive,” LaChance said. “It’s hard to attract tenants. The best way is to upgrade the property.” He said that revitalizing a depressed property increases its value for the owner, helps to retain existing tenants and attract new ones. A change in ownership is often the driving force for property upgrades with the goal of driving new tenants and new customers. “A newer owner has a different vision for a property,” he said. South Virginia Commons — a Class A center that’s barely a decade old — is also receiving new detailing. “We did some directional signs
to help the flow of traffic,” said LaChance, about the center that includes Total Wine. They are also adding walkway signs to direct customers to other stores. In northwest Reno, Claude L Yacoel, principal of Newport Beach, Calif.-based Yacoel Properties, LLC., is planning upgrades to Ridgeview Plaza, which he purchased in January. Yacoel said his company typically buys centers anchored by a grocery store, which has regular traffic that helps drive business to neighboring stories. That’s true of Ridgeview. The center includes a Safeway store along with national retail stores, restaurants and other shops, making it a perfect fit for the investor, who mostly owns centers in California and Salt Lake City. Ridgeview represents his first foray into Reno investments. “Ridgeview has lots of really great tenants,” Yacoel said. Only two small spaces of 1,000 square feet each are vacant. “I think the tenants will do well and the enhancements we will make on the properties will add to that.” Yacoel expects to spend $400,000 to $500,000 on the first phase of improvements, which began in July. “We’re embarking on a number of renovations and trying to make the property look as good as it can; cosmetic renovations,” Yacoel said in a phone interview with NNBW. “It needs a lot of TLC after all these years.” Repainting is expected to be
complete in mid-August, Yacoel said. Landscaping improvements are also planned, such as new planters, upgrading existing planters, making sure the trees are healthy and removing those that aren’t. The landscaping improvements and signs are expected to improve the view along McCarran, he said. Other projects include deferred maintenance such as replacing roofs for a couple buildings at the center. Signage improvements are planned on the McCarran access, plus directional signs within the property and “blade signs” that hang down under the canopy to help shoppers identify the stores in the center. “It makes a nice difference to customers, to those who don’t frequent the property enough to know where everything is,” Yacoel said. These are just a few of the retail centers getting facelifts this summer. Fresh paint, new facades, refreshed landscaping and other improvements are getting applied to centers throughout the region. “From a property manager’s standpoint, it’s certainly exciting to see that type of revitalization,” Colliers’ LaChance said. “It’s exciting to see a property turned around and see it revitalized again. “As property managers, our job is to increase an owner’s net income.” A property will be more profitable if we can find ways to drive more customers and new tenants. “If we can find ways to do that, we will recommend it to owners.” ●
Dawn Mitton Broker/Manager 775-934-7263
info@dawnmitton.com
www.dawnmitton.com
Looking for Room to Roam in Northeastern Nevada?
LOOK NO FURTHER! Rare Gem in Lamoille, NV Picturesque Views! Gourmet Kitchen! Mother-in-Law Quarters! Water Rights! Dressage Arena! Native Grass Pastures! 49.23 acres with water rights. Home features 5 spacious bedrooms, 3½ baths, gourmet kitchen, wraparound deck and attached 3 car garage. Mother-in-law quarters has 2 bedrooms, 1 bath and a separate entrance. Property also includes a nice Barn with two stalls, tack room, and hay storage. On a good water year the hay yield has been 40 Ton and 15-20 Ton in dry year.
Lamoille View Ranch $872,000
Custom Authentic Timber Frame Home 10 Acres with Great Views of the City with Peaceful Starry Nights Custom 3,530 sq. ft. home, with 667 sq. ft. garage, plus heated 10x20 work shed. Cozy living room that walks out to a large covered deck. Kitchen has knotty pine cabinets. Wide staircase to a nice library area, master bedroom, half bath with large tiled shower. Located in a quiet area in the Adobe Heights area of Elko, Nevada. Property backs up to BLM.
6325 Ranchero Dr. $352,000
Howell Ranch 5900+ Deeded acres 1073.00 AUM’s BLM; USFS land 5 AUM’s Located in Elko County. Elevation 5,420 to 5,730ft. 1200 ton, average total hay production. Property includes concrete bunk feedlot (47 bunks, 8 feet long); 3 calving barns with stalls; corrals; 4 houses with lawns with established trees; 80 Acres of ditch irrigation meadows; 80’ x 40’ shop (1/3 heated); gazebo w/roasting pit; 2 railroad car storage sheds; 8’x40’ underground cellar.
Call for more Great B uys! Residential
The Smithridge Center on South McCarran Boulevard is receiving a new look that includes updated paint palette and stone details. Photo by Sally Roberts/NNBW
Ranch
3711 Sundance Dr., Elko
Horse Property
775-738-8535
Commercial
Acreage
www.ARanchBroker.com
4 | Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com
The commercial landscape of Midtown rents By Brook Bentley bbentley@nnbw.biz As Midtown continues to be the ‘it’ place to be, supply and demand is certainly a variable for developers, landlords and tenants. However, it is not the only factor for commercial real estate in Midtown. Ian Cochran, CCIM Senior Advisor for Sperry Van Ness shared his insight during a phone interview with NNBW in June. Sperry Van Ness does commercial leasing for properties, including 777 Center Street, as well as 1039 South Virginia Street in Midtown. “I have seen rents slowly increasing in the Midtown area. A lot of that is based on the property, the
build out, the location, co-tenants, things of that nature,” Cochran explained. There may be extenuating circumstances for rent increases based on what the ownership has put in to build out a space. The extra cost may push their asking rate up because they want to see a good return on their investment. “There is definitely a correlation between money in from a landlord and a rent back from a tenant,” Cochran explained. “A lot of these projects are redevelopment projects and they are demanding higher rents. “Every investor sets their own returns and based on those returns they adjust their rent accordingly. It
Sperry Van Ness does commercial leasing for properties, including the newly renovated mixed use development at 777 Center Street. Photo by Brook Bentley/NNBW
(rent) has to be within market and market states that between 3 and 4 percent annual increase is what rent should do over time.” Midtown’s commercial landscape is a mix between redevelopment projects being done by a handful of owners and second or third generation ownership of properties. “You can drive down the street and see which ones have not been redeveloped,” Cochran added. “Those are second and third generation ownerships.” While a lot of landlords want to treat their property as an investment, there are some that are hoping to cash in during Midtown’s growth. Assessing and increasing rents within market range is to be expected. Market standard rent increases are typically between 3 and 4 percent yearover-year and rents increasing as occupancy rate increases is also common. However, 70 percent rent increases, like Mandala Massage Supply experienced, according to their website, force tenants to move locations. If all the landlords implemented exponential rent increases, Midtown would likely experience a mass vacating. Mandala Massage Supply has moved locations as a result of the rent increase they faced. “The other part of the equation that is proving difficult for these developers trying to come into the Midtown area is that the existing landlords or sellers have sort of caught on that Midtown is the new ‘it’ spot. So, any property that is not on the market is essentially demanding a 30 percent higher sales price than
a market sales price would be and an investor has to calculate for that on their return on rent,” Cochran explained. He added that often the increased price doesn’t pencil out a satisfactory return on a property for a developer, which results in the sale likely not happening. “The cost to benefit just doesn’t add up,” he said. Some second or third generation property owners either don’t owe anything on the property, have their livelihood attached to it, or in some cases, they only have to perform minimal repairs in order to keep the property lucrative. “A lot of these properties, especially the motels, are reaching the end of their useful life and there will need to be considerable capital improvement put back into the buildings to even remain viable and I think that when that time comes those second and third generation ownerships will come to terms with market rates and market sales prices and just get what they can for it. “I couldn’t tell you when that is going to happen,” Cochran explained. “Over the next two to three years I can see a lot more properties changing hands for reasons like that.” Like other areas, if people try to outpace the market in Midtown they might miss it altogether. Rent stability at market price in Midtown seems inevitable, but there is a lot of transition occurring currently that may cause fluctuation still. Thus, lease rates that are being completed continue to hold the benchmark in Midtown right now. ●
Park Lane redevelopment, new plans in the works By Annie Conway aconway@nnbw.biz New plans are underway for the blighted site once occupied by Park Lane Mall. Chip Bowlby, managing partner of Reno Urban Developers, is working to redevelop the 45.6-acre lot into a mixed-use development that will include 1,200 residential units, 100,000 square feet of retail and 100,000 square feet of office and professional space. Bowlby envisions the development as a hub for Millennials (and other Reno residents) to live, work and play. He described the location of Park Lane as a “bookend” to Midtown. “Midtown is cool because it has all of these small little eclectic bars and restaurants,” Bowlby said. “This gives us the opportunity to take a 46-acre property and really plan it as one development that has all of the elements.” The residential units will be built first and will be comprised of three different multifamily complexes. One will be an urban-garden style complex and the second will be an urbanwrap development, which is very high density housing with approximately 85 units to the acre. The third type of multifamily complex is to be determined. Bowlby said the project has already received a tremendous amount of followers and interest. He
wants to get the right mix of retail tenants in the space and envisions it with boutique grocery stores, fitness centers and restaurants. He compared the project to other mixeduse developments such as Santana Row in San Jose, Calif., and Kierland Commons in Scottsdale, Ariz. “When you have this much land to work with … you really have a canvas,” he said. The property is still in escrow and they are finishing their due diligence and feasibility studies. The parcel of land does not include the 1.7 acres that the Century Park Lane 16 movie theater sits on, but it does include the parking in front of the theater. They currently have several planning and architectural firms bidding for the project. Bowlby plans to start putting in the major backbone infrastructure in the end of the first quarter or the beginning of the second quarter of 2017 and to start building in the second quarter of 2017. He anticipates that residents will be able to start moving into units by the end of 2017. Bowlby started looking at Park Lane back in 2013. Park Lane Mall opened in 1967. Over the years there have been several redevelopment plans for the property that never came to fruition. M&H Realty Partners, now Merlone Geier Partners, was the last to purchase the land back in 2006. However, their plans to redevelop the property
withered in the recession and it has remained a mostly empty lot since it was razed from 2007 to 2009. “Obviously it is an eyesore right now,” Bowlby said about the vacant, weed filled lot. “I think people are just super excited about something happening there and I think they are somewhat excited that we are going to do it because we like to do things right.” Bowlby has a lot of experience in master planned mixed-use development projects and has developed in California, Nevada and Idaho. He is also the developer for the 141-acre master planned Rancharrah development. “When we were looking at Park Lane, we felt there was a tremendous opportunity to deliver a lot of housing, which is needed,” Bowlby said. He pointed out that the impact of Tesla, Switch and Panasonic hasn’t even started and northern Nevada is already feeling a demand for more housing. The need will only increase as more companies come to the area. According to Bowlby, who sits on the board of Economic Development Authority of Western Nevada (EDAWN), there are at least 12 companies that have solidly committed to move to northern Nevada that have not been announced yet and many more that
are looking at Reno. “We think that the biggest impact to this market on jobs is going to be late 2017 and for sure 2018 and 2019,” he said. “We want to have at least two of the three residential developments going simultaneously.” Bowlby also identified some of the challenges that come with redeveloping the space including the increase of building costs, the future of the economy and making sure they deliver what is promised. He estimates that the redevelopment will be a half-billion to a billion dollar project and that it will take five to 10 years to totally build out the development. “This deserves a lot of attention,” Bowlby said. ●
Chip Bowlby, managing partners of Reno Urban Developers, stands in front of the 45.6-acre blighted lot with redevelopment plans in hand. Photo courtesy The Abbi Agency
Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com | 5
Reno office market vacancy rate down slightly in second quarter By Annie Conway aconway@nnbw.biz The office market in Reno continued to hold steady throughout the first half of 2016. Colliers International is reporting a 14.2 percent overall office vacancy rate for the second quarter of 2016 with positive absorption of 8,327 feet. The vacancy rate decreased slightly as Colliers reported a 14.4 percent vacancy rate for the first quarter of 2016. “The activity in the market place continues to be pretty active,” Melissa Molyneaux, senior vice president and executive managing director at Colliers International, said. While there was a fair amount of activity during the quarter, much of the activity was from tenants who were already in the market and who either renewed or expanded to a new location. “We basically had eight or nine significant transactions worth almost 93,000 square feet in Q2,” Dominic Brunetti, principal with Dickson Commercial Group (DCG), said. Four of the transactions were expansions within the Reno market.
As companies are finding more efficient ways to work, they do not have to lease as much space, Brunetti explained. “With advances in technology people need less space to work,” he said. This can save companies money as rents for Class A office space continue to increase in the Reno area due to decreasing vacancies and
Notable office leases for Q2 included: • ITS Logistics, a third party logistics company, leased 9,000 square feet of office space on the fourth floor of 50 W. Liberty St. The company moved from their prior location on the second floor of 50 W. Liberty in order to expand their freight brokerage operation. • Prime Lending leased 6,845 square feet at 50 W. Liberty St. The company relocated from their prior location at 100 W. Liberty. • Sierra Nevada Corporation, an advanced technology company, renewed their lease of 7,507 square feet of office space at 175 Salomon Cir., in Sparks. • Klondex Mines leased 12,629 square feet of office space at 6110 Plumas St. • Bally Technologies, a slot machine and gaming technology manufacturer, renewed their lease for 42,129 square feet of office space at 950 Sandhill Rd. • KOCH Business Solutions leased 8,2035 square feet of office space at 887 Trademark. The company relocated their office from their prior location on 5250 S. Virginia St. • Skin Cancer & Dermatology Institute leased 5,108 square feet at 3640 Warren Way. • CBRE renewed their lease of 7,032 square feet of office space at 6900 S. McCarran Blvd. • Washoe County School District leased 9,792 square feet at 5450 Riggins Court. There were also several new smaller tenants to the market leasing office space under 5,000 square feet. Companies include: Bremer, Whyte, Brown & O’Meara LLP, Terrain Pharmaceuticals LLC, Sierra Mountain Mortgage LLC and Bombora, Inc. “A lot has to be attributed to those small companies that don’t make the headlines,” Brunetti said.
He highlighted 50 W. Liberty owned by Basin Street Properties. Renovations to the building were completed in Q1. They added a fitness center, a concierge and renovated the lobby, amenities that are desirable to both local companies and companies relocating to the area. While there was not any new office construction in Q2, office brokers anticipate that it is not far
off. Typically, once vacancy rates fall below 10 percent it is an indicator to build new office spaces. “We know it is on deck,” Brunetti said. He said that developers are waiting for less speculative projects and thinks that they will see new office construction within the next 12 months, particularly on the Kietzke corridor in the Rancharrah development and Mountainview Corporate Center. After a strong office market in 2015, brokers expected to see more activity in the office market in 2016. “I think after last year, everyone had a big surge of confidence and we expected things to be happening a little bit quicker,” Molyneaux said. “Someone moving from another state (will take a little longer to enter the market). It doesn’t happen overnight.” According to Molyneaux and Brunetti, there are some large transactions that are expected to close in Q3. “There are pending transactions that would double our net absorption,” Brunetti said. Brunetti said that while Q2 may have been flat, it is a far cry from the days of the recession when the overall vacancy rate was 18 percent. “All in all it was a good quarter,” Brunetti said. ● The freight brokerage operations of ITS Logistics, a third party logistics company, moved from their pervious location on the second floor of the four-story office tower at 50 West Liberty Street to their newly leased 9,000 square feet of office space which occupies the entire top floor of the building. Photo courtesy ITS Logistics
strong demand. Colliers reported an 18.1 percent vacancy rate for Class A office buildings in South Meadows, a 9.7 percent vacancy rate for Class A office buildings in downtown and a 8.5 percent vacancy rate for Class A office buildings in the Meadowood submarket. According to Molyneaux, average Class A office rental rate saw a 1 cent increase for Class A offices in the past quarter and 5 cent yearover-year increase. Molyneaux explained that the central airport and West Reno submarkets currently have the most vacancies. “(Central Airport) is a smaller submarkets with more B & C class buildings a little bit older,” she said. Brunetti said that Class A offices are leasing around an average of $2.25 to $2.50 per square foot while Class B offices are leasing around an average of $1.75 to $2.00 per square foot. The increase of rent and the lack of Class A office space are causing companies to look for offices outside of the desired Kietzke Lane corridor and Downtown to more cost efficient spaces. Brunetti said, that Class B offices that have been renovated on Plumas, Lakeside and Moana are starting to attract new tenants. “One of our main challenges is in the recruitment and retention of new companies,” Brunetti said. DCG works closely with Economic Development Authority of Western Nevada (EDAWN) to help companies who want to settle in northern Nevada find office space. However, companies who are coming from places like the Bay Area are used to a certain standard of office space. Companies want to have a similar workspace and culture for their employees if they are going to relocate.
6 | Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com
Downtown Sparks transformation underway By Sally Roberts sroberts@nnbw.biz The Bridges mixed use development will be constructed just south of the parking garage next to the Century Sparks theater, adding 198 apartment units and 13,000 square feet of retail to Victorian Square. Groundbreaking for the Silverwing Development project is expected in October. The Bridges will be constructed in Victorian Square just south of the Sparks Century Theatres. Victorian Square in Sparks is undergoing a dramatic transformation. With more than 500 apartments under construction, remodel, or approved for future construction, the square is on track to becoming a bustling location instead of open, often nearly empty, parking lots. The latest addition to the square is The Bridges development approved by the Sparks City Council June 14. J Carter Witt, president of Silverwing Development, expects to break ground on The Bridges in October. “We’re working very hard on (details of the) plan,” Witt said in a phone interview with the NNBW. “There are a lot of bells and whistles.” The Bridges projects includes 198 apartment units, secure parking structures and 13,000 square feet of retail space, in two buildings. The south building includes a four-story atrium and covered outdoor area on the second floor where residents can gather with a fire pit, fountains and a “super-large” television screen. In addition, each apartment has its own outdoor deck, modern décor and environmental amenities such as LED lighting.
Silverwings’ subsidiary SWDQuarry Bridges is purchasing the lots from the Sparks Redevelopment Agency for the appraised price of $750,000, or $12.64 per square foot. Silverwings’ Fountainhouse apartment complex is under construction nearby, giving the development company a pretty big stake in the future of Victorian Square. “Sparks is a great place to work in,” Witt said. “Staff are very professional problem solvers, as we are. Nobody is rolling over for us. We sit down and work out issues. “They’ve got a vision and we’re all pretty much on the same page.” The Bridges development will replace surface parking just south of the parking garage at the Century Sparks Theatre in Victorian Square. Fountainhouse, to the west and southwest of the theater, also replaces parking lots. The space was never intended to be a parking lot, Witt said. Years ago the city demolished a building at the site. When a planned development fell through, the city installed temporary parking to fill the space until another plan came along. The parking spaces, along with the two parking garages in Victorian Square, stand nearly empty most of the year except during special events such as Hot August Nights, and the Best In The West Nugget Rib Cookoff. Armando Ornelas Jr., Sparks assistant community service director – development, confirmed the status of the parking areas. “The parking lots were always intended to be developed to bring life back to downtown,” Ornelas said. “The council is quite supportive of the (Bridges) project. The project is consistent with the adopted redevelopment plan.”
Silverwings’ Fountainhouse apartment complex is under construction. The complex next to the Century Sparks Theater will include 236 multifamily units and 8,400 square feet of retail space. Photo by Sally Roberts/NNBW
He noted that even during events, the parking areas were staging areas, not parking. “We’ll continue to host events. Events evolve (and adapt),” he said. “Virginia Square is a great place to host events.” To handle parking and traffic issues, shuttle services are increasingly an essential part of special events in the region. The city of Sparks already provides free shuttles from Reed High School and downtown Sparks during special events and plans on enhancing that service. “It’s actually quite easy to use and doesn’t cost anything,” Witt said of shuttle services. Replacing empty parking lots with apartments and retail space will substantially change downtown
Sparks, creating a new urban development where everything is in walking distance. “It’s very walkable, more planned,” Witt said, noting the apartments’ close proximity to the theater, Nugget Casino and various dining and shopping options, as well as the special events venue. “You walk out your door and you’re there,” he said. “It’s unsurpassed.” Ornelas noted the new developments will increase activity in downtown Sparks 365 days a year instead of just during special events. “It’s going to be different and it’s going to be better,” he said. ●
A quick look at developments in Victorian Square • Fountainhouse Phase 1, a multi-use project by Silverwing Development, is in full construction gear. The clubhouse was completed in May. The first apartment building was completed and ready for residents the end of July, according to J Carter Witt, president of Silverwing. • Fountainhouse Phase 2 is waiting for neighboring Sparks Century Theatres to complete its plans for a major remodel before Silverwing schedules groundbreaking on its project. Witt said the company is coordinating with the theater owners to make sure they don’t interfere with each other. The Fountainhouse Phase 1 and 2 are mixed use projects. Once both are completed the development will have 236 apartment units and 8,400 square feet of retail space. • Residents began moving into Square 1 apartments, formerly called the 3rd Street Lofts, in mid-July, according to Dan Hillyard, a partner in GreenStreet, which developed the project with LandCap Investments. Square 1 represents the transformation of the former Silver Club Hotel on the east side of Victorian Square into 100 urban loft-style apartments. The developers are planning a grand opening celebration in August. • GreenStreet and LandCap are also remodeling the former Bourbon Street Casino — originally the Silver Club — into a retail, dining and office center, to be known as The Yard. Interior demolition, which took extra time due to the age of the building, is now complete. Design plans have not yet been finalized, so the developers are not yet pushing hard to market the building, Hillyard said. The earliest work could start would be after the summer event season is over, he said.
The Bridges mixed use development will be constructed just south of the parking garage next to the Century Sparks theater, adding 198 apartment units and 13,000 square feet of retail to Victorian Square. Photo courtesy City of Sparks
• The Bridges multiuse complex is expected to break ground in October in the spaces south of the Sparks Century Theaters parking structure. The two-building complex will have 198 units and 13,000 square feet of retail space.
Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com | 7
Owners of Lake Tahoe’s famed Cal Neva resort file for bankruptcy By Kaleb M. Roedel kroedel@sierrasun.com Built in 1926, the Cal Neva Lodge & Casino, once owned by Frank Sinatra and frequented by the likes of the Rat Pack, Marilyn Monroe and members of the Kennedy family, is undoubtedly the most historic resort at North Lake Tahoe. In more recent years, however, that history has been forgettable, as efforts to restore and reopen the famed resort hugging the North Shore’s California-Nevada state line have continually fallen by the wayside. This infamous history is repeating itself once again, as CriswellRadovan, the owner of the property since 2013, filed for bankruptcy on June 10, 2016, putting the multimilliondollar redevelopment the company started in 2014 back in deep waters. According to legal documents obtained by the North Lake Tahoe Bonanza, Criswell-Radovan owes more than $27 million to creditors affiliated with the project, including $7 million to lead contractor The Penta Building Group, which is based in Las Vegas and has an office in Reno. Documents also reveal Ladera Development, the secured creditor of the project that’s also owed $7 million, had set a foreclosure sale initially for April 20, 2016, before extending the sale date through June 10, 2016, which prompted the developers to file for bankruptcy on that date.
Neither officials with CriswellRadovan, or the company’s legal counsel, Jeffer Mangels Butler & Mitchell, could be reached for comment on this story. Kristina Hill, an Incline Villagebased planner who helped the Napa Valley-based development company acquire the necessary permits from Tahoe Regional Planning Agency and Washoe County to begin construction on the property, said Penta Construction stopped working on the project in December 2015. “They’re not going to work for free — they have other clients who will pay,” Hill said in a June interview,
noting that workers deserted the project site after it became clear they would not be paid. “It’s disappointing that they (Criswell-Radovan) only took it so far, and now it’s not even open to the public.” In fact, since closing the resort and casino in September 2013, developers have canceled numerous grand openings. Most recently, developers reportedly had their sights set on opening the Cal Neva this summer. Though the prospect of opening this year is no longer on the horizon, Criswell Radovan still holds a construction schedule agreement with TRPA that they must meet to
A look at the famed Cal Neva from Lake Tahoe. The owner of the property filed for bankruptcy this past June. Photo courtesy Cathy Gillespie
keep their permit active, said Tom Lotshaw, TRPA public information officer. “TRPA code requires diligent pursuit of project completion,” Lotshaw said in a June phone interview, “so we will keep an eye on this schedule and see how the season goes.” For instance, according to TRPA’s schedule, construction of Cal Neva’s southwest old pool area and northwest port cochere area is to be completed by Oct. 15, 2016. Further, the construction schedule for the entire project includes dozens of similar benchmarks and runs until Oct. 15, 2018. When asked about whether the project site was winterized before work was halted in December, Lotshaw said a TRPA official examined the area and — to the best of his knowledge — everything was “in good standing,” noting that a bulk of the stormwater infrastructure is already in place. However, if the developers completely pull out, TRPA has security deposits and bonds for the redevelopment totaling about $92,500, Lotshaw said. “At the end of the day, we support the project — we think it’s a good project,” he said. “We’re hopeful and optimistic that the project will able to continue in some way.” “I am very disappointed,” Hill reiterated. “I think the whole community is very disappointed, because it was a great project; nobody was opposed to it. Everybody was keen on having it renovated to bring it back to its former glory and bring it up to code. Unfortunately, that didn’t happen.” ●
Ground broken on Carson City’s first mixed-use project By Anne Knowles aknowles@nevadaappeal.com Construction starts soon on downtown Carson City’s first major mixed-use project. The trustees of the Hop & Mae Adams Foundation held a groundbreaking ceremony July 6 at 308 North Curry St., the tentative name of the foundation’s retail, commercial and residential project expected to be completed in October 2017. “This is a wonderful way to kick off solid mixed-use development. We couldn’t do all of this without the Hop & Mae Adams Foundation,” said Mayor Bob Crowell who attended the groundbreaking. “This will move us forward without losing our history.”
The project, designed by Carson City architect Robert Darney, will include 10,300 square feet of retail and restaurant space on the ground floor, 11,400 square feet of Class A office space on the second floor, and eight 1,000-2,100 square foot apartments on the third floor. Another two apartments and 10 garages for the residents will be located in two smaller buildings on site. The project replaces the Citibank building, which was torn down because it was unsafe to remodel.
That 1960s-era structure replaced what was called the Governor’s house, built in 1862 for J. Neely Johnson, a former governor of California. A plaque commemorating the original home was taken from the Citibank building before it was demolished and will be placed on the new building. Also remaining from the bank building is a basement, which will be left intact and likely used for storage by a restaurant tenant expected to anchor the south end of the project located in the square block of Curry, Nevada, Proctor and Telegraph streets.
Metcalf Builders Inc. was expected to start work by the end of July and begin a two- to three-week excavation of the site, said Steve Neighbors, who is one of the foundation’s trustees along with Ed Ahrens and Chris MacKenzie. “If we were doing this from purely a financial perspective, we would do all apartments,” said Neighbors, when asked about the need for housing downtown. But he said a goal of the project is to demonstrate the mixed-use project concept. “We want to test that out and show the community the way to do it right,” said Neighbors. ●
A conceptual drawing of what the Curry Street building will look like when completed. Photo courtesy Hop & Mae Adams Foundation
8 | Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com
NNBW: What do you enjoy most about working in your field?
In his own words: Name/Title/Company: Tom Fennell, Partner/Broker Dickson Commercial Group (DCG)
Fennell: The diversity of what you get to work on and what companies and people you get to work with. Throughout the course of a transaction you may get to work with professionals from all aspects of the economic spectrum including finance and capital partners, legal teams, construction and development, and marketing groups all focused on completing a real estate transaction for a client.
Number of years with company: 10
NNBW: What is the most challenging part about your job?
Number of years in the profession: 10
Fennell: When times are really busy, you have to be great at juggling projects and duties. So trying to multitask and stay on top of everything can be challenging.
Tom Fennell
Education: B.A. in Business Administration, majors in Finance and Accounting Last book read: Shoe Dog by Phil Knight Favorite movie: Tie between Bull Durham and Caddyshack Favorite musical group or genre: Country Music Spouse, kids or pets: Brittany Spaniel named Winny Northern Nevada Business Weekly: Tell us about your company and the duties of your position. Tom Fennell: Dickson Commercial Group (DCG) is a locally owned and managed, full service commercial real estate firm with ties to northern Nevada spanning 40 years. We are an industry leader in leasing, sales, and management for the northern Nevada commercial market Our real estate advisors serve all sectors of commercial real estate, including industrial, office, investment, retail, multifamily, and land. Dickson Commercial Group also offers the full spectrum of commercial services from property management and construction management to investment underwriting and feasibility studies. My role at the company is split between being a transactional broker and helping manage the firm with my other partners. NNBW: How did you get into this profession? Fennell: It’s a family business for me and almost all of my family works in different aspects of the real estate industry, so it’s in my blood.
Teamwork Two of the best One focus — your business. Commercial Title & Escrow Services Rabecca Rich & Luann Barnes Senior Escrow Officers Congratulations to Rabecca and Luann for winning the 2015 Summit Award for going the “Extra Mile”– Commercial Market.
NNBW: What trends do you foresee coming down the pike in commercial real estate? Fennell: Locally I think we are going to have a more diversified economy that will hopefully create a rising tide for new development and overall health of all the different asset types. Nationally, I think we will continue to see buildings become more efficient and the way we utilize space, whether office, industrial or retail, continuing to be utilized and built more efficiently. For brokers our value proposition as an advisor will continue to evolve, and to be a valuable asset to a real estate transaction. We have to be sure to evolve and learn our discipline so we can deliver the best client results for our landlords, tenants, buyers, and sellers. NNBW: What advice would give someone who wants to get into your profession? Fennell: It’s a great industry and career if you are disciplined and willing to work hard, especially at the beginning. NNBW: What was the best advice anyone ever gave you either professionally or personally? Fennell: Work hard and always be humble. 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? Fennell: All of my partners and the agents I’ve come up working with have been extremely influential for my career and professional development. We are a pretty collaborative company, so I’m constantly trying to tap people for help or insight into something that they may be more experienced at than myself. That approach of seeking help from experienced people within our organization has always been very beneficial for me. NNBW: Do you belong to any professional or networking organizations? How has membership benefitted your career? Fennell: I think that membership in both professional and civic organizations is extremely important for a career, especially a sales oriented career. I belong to the commercial real estate development organization NAOIP, the Economic Development of Western Nevada (EDAWN), and other organizations like Rotary and the Chamber of Commerce. Also, I try and serve on some non-profit boards for things that I’m interested in or passionate about. NNBW: Is there any educational advancement that is essential for someone in your career field? Fennell: Getting your CCIM designation is a great education that is specific to commercial real estate. Also, organizations like SIOR (Society of Industrial and Office Realtors) and NAOIP provide great educational and professional development opportunities. NNBW: How do you manage your time between the responsibilities of your profession and your personal life? Fennell: It’s easier said than done, but I try to minimize distractions and be as efficient as I can while I’m at work. NNBW: What was your first job? Fennell: Busboy for Sam Francovich at the Grille NNBW: What are your hobbies? How do you spend your time away from work? Fennell: Mostly outdoor activities, hunting is definitely my favorite past time, so I like to spend fall and winter either big game hunting or chukar hunting in northern Nevada. Also, I like to golf and mountain bike during the spring and summer.
5441 Kietzke Lane Suite 100 | Reno, Nevada 89511 775.324.7400 Underwritten by Chicago Title Insurance Company Member of IREM, NAIOP, CCIM, and CREW
NNBW: Last concert or sporting event attended? Fennell: Giants v. Dodgers game in San Francisco. NNBW: Why did you choose a career in northern Nevada? What do you like about living/working here? Fennell: I’m born and raised here and wouldn’t want to live anywhere else. Our community and lifestyle are pretty hard to beat, and everything I love to do is in northern Nevada.
Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com | 9
Mark Krueger enjoys distinguished career in real estate By Duane Johnson djohnson@nnbw.biz While Mark Krueger was attending graduate school at California State University-Sacramento in the late 1970s, he landed an internship at the Department of Real Estate. There he learned the nuances of commercial real estate while fostering a career that has now lasted more than three and a half decades. “I did it for two summers and it got me really focused in on how real estate worked and how you make money at it,” Krueger said. “I got enthusiastic about it and had an opportunity to join a commercial real estate firm right out of grad school and jumped on it.” The national commercial real estate firm, Grubb/Ellis wanted to open a new branch in Sacramento. Although the company typically preferred to hire experienced brokers, they were impressed with Krueger’s enthusiasm and decided to take a chance on the novice broker. Krueger proved that the firm made a wise choice, working for Grubb & Ellis for 16 years in the Sacramento area. He admits that building and maintaining clients relationships is key since commercial real estate is a commissioned-based industry, and there’s no guarantee of a paycheck. “If you aren’t making deals, there’s no money to pay the bills,” Krueger said. “The anxiety is difficult for some people to deal with. You have to have the right personality to work in this business and have to work hard to maintain it.” After the commercial real estate market nosedived in the early 1990s, Krueger got involved with a residential real estate group that was developing the new Double Diamond Ranch project in south Reno. So Krueger ended up moving his family to the Truckee Meadows and worked for Grubb/Ellis’s Reno office.
Krueger indicated that working on the development side of real estate has given him a new perspective on the industry and benefitted his role as a broker. “Being on the development side for 18 months, it put a great spin on it for me,” Krueger said. “A lot of brokers don’t have the opportunity to understand what it’s like for a developer to get a project going, from the licensing and permitting process and things like that,” Krueger said. As a broker, I’m able to put together a nice information package when meeting with clients.” Kruger said many clients he works with are already sophisticated and have done their homework on a project, so any new information he can bring to the table, is an added value to his customers. “There’s a lot of new things and new players coming into the market,” Krueger said. “You have to be able to sell yourself.” Kruger has continued his primary focus of specializing in land sales for residential, investment and commercial purposes. He feels concentrating on one aspect of industry is essential to a broker’s growth, rather than brokering deals for different areas such as office or industrial properties. “I’ve been a believer since I got into this business in 1979, especially in a market like Reno, you have to specialize; to focus on one thing and be good at it,” Krueger said. “When I came up through the Grubb/Ellis environment, you had to specialize in one aspect. I believe in that because you can become an expert in that one field.”
For his work and experience, Krueger has earned many accomplishments and assumed a few leadership roles in the industry. He is an eight-time recipient of the Summit Award for Top Land Broker and in 2014 was awarded Top Overall Broker of the Year and in 2015 was awarded Top Land Broker of the Decade. He’s been involved in transactions totaling $545 million in revenues and been involved in some of the major residential/ commercial developments in the region including Somersett, D’Andrea Ranch and Kiley Ranch. He has also served as board member to the Builders Association of Northern Nevada (BANN) and has served as keynote speaker at mid-year and annual forecast presentations since 2003. When Grubb/Ellis filed for bankruptcy in 2012, putting the fate of its’ Reno branch in jeopardy, Krueger left the firm to start his own company. He partnered with some of his long-time colleagues in the industry, Kevin Annis and Mike Van Blaricom to start a new brokerage, ArchCrest Commercial
Partners, LLC. Krueger serves as a principal of the firm. The company has seen steady growth since its inception and recently moved to a new location at 5560 Longley Lane in Reno. It has six other people on staff and looking to add more in the future. Even with all of his accomplishments, one of Krueger’s most satisfying achievements is mentoring the younger brokers at ArchCrest, including his son, Ryan, and his daughter, Erin KruegerSeipel. The trio comprises the firm’s Krueger land team. Krueger-Seipel also serves as marketing and office manager. “One thing I try to do is help them accomplish those little things and steer them away from obvious pitfalls,” Krueger said. Krueger has also developed a fondness for living and working in the Reno-Sparks region. Although he says commercial real estate is always a competitive market, the Reno-Sparks market has become a collaborative effort. “The really good brokers recognize that you have to work together, especially in a relatively small market like this,” Krueger said. That passion for real estate that he developed as a graduate student still burns bright for Krueger. While he may scale back his workload in the future, it’s not an industry he wants to leave anytime soon. “The best part about this industry is the opportunity to see something new every day,” he said. “It’s fun to see something you’re working on turn into a subdivision or office building or something else. Most of the people are pretty dynamic and a real fun group to deal with. It doesn’t hurt to have unlimited income, too (laughs).” ●
Mark Krueger (center) with two of his children, Erin Seipel (left) and Ryan Krueger (right). They make up the Krueger Land Team division with ArchCrest Commercial. Photo courtesy ArchCrest Commercial
Protecting Owners: Commercial Property Management By Corry Castaneda Crawling out of bed at 2 a.m. to go deal with a fire or burglar alarm is one of the less than glamorous parts of the job. However, it spares the owner or client the same inconvenience. Property managers are the 24/7, always on call solution for handling the daily headaches of a building and its tenants. With real estate continuing to rebound and the economy bolstered by low interest rates and a risk-on environment driving more investors into the marketplace, the importance of having a good commercial property manager has become more critical than ever. It’s no secret that real estate in northern Nevada is white hot again. Portfolios are actively growing once more, and while a few short years ago the tenant’s had all the power, the recovery has put landlords back in control. This market lift has created an influx of institutional investors, private equity firms, and high net worth local individuals all simultaneously chasing the four major classes of commercial real estate: office, retail, industrial (which includes warehouse facilities and “flex”), and multifamily (apartments and condos). This is where commercial property managers play an important role. Not only are managers licensed
Nevada real estate agents, they must also hold a property management permit issued by the Nevada Real Estate Division. They are the ambassadors between owners and tenants. While owners may be your clients, the tenants are still your customers and this is an important distinction of tenant relations. The manager’s role is to maximize net operating income (NOI) for the owner, increase value of the asset, and minimize overall expenses of the building. Commercial property managers know who to call, what prices should generally run for most repairs, and how best to quarterback the building. Using live diplomacy, managers deal with all the problems that can arise at a property in real time. It’s not just collecting a rent check and making sure a few light bulbs get changed out periodically. They have to be available for emergencies involving fire, safety, or security (“fire, flood, or blood” is the industry catchphrase). They also have to protect owners by guaranteeing vendors are licensed and adequately insured. Also, handling tricky situations like tenants behind on rent, eviction processes, or bankruptcies can present a potential minefield of liabilities. This can prove especially challenging when average tenant leases for
these buildings run over 40 pages and vary significantly. A manager must have knowledge of tenant/landlord laws, deposit rents into trust accounts, administer contracts, manage vendors and payables, ensure tenant and vendor insurance compliance, disburse owner payments and issue monthly reports, create budgets, recover common area maintenance annually (CAM’s), pay property taxes, bid capital projects, and issue 1099s. They can help facilitate tenant improvements (TI’s) and “white-box” vacant spaces for quicker leasing turnarounds. They can also help save money on building utility bills by auditing water, lighting, and HVAC systems or applying for NV Energy rebate programs. There are many important questions to consider when selecting a commercial property management firm. For example, what kind of software do they use, how much insurance does the company carry, how often will they visit the property, what staff member will actually handle the account, do they outsource maintenance to 3rd party vendors or utilize in-house staff, and can they furnish samples of the management agreement and the reports owners would receive monthly? Other good qualities to look for in managers include being generally observant, are they organized, are they hands-on, and will they go the extra mile? Will the property manager think like an asset manager and always consider the buildings overall investment
goals? How will they incorporate forecasted budgets against needed repairs and long-term capital items? Another factor is what style of commercial property management best suits the ownership’s needs. The portfolio management style has one person functioning as the single point of contact and handling most of the day-to-day operations of the property. Alternatively, the departmental management approach is more segmented with different people handling accounting, maintenance, and management. Each has its advantages, however portfolio management is widely held to be the most efficient and preferred by larger institutions. Understanding the owner’s investment goals is the last major consideration. Some owners are either Income-Driven which is all about maximizing monthly revenue or Value-Driven which seeks to improve the overall value of the building. Most owners are some combination of both concepts. While it’s common knowledge that management of residential housing fees usually fetch an average of around 10 percent of rents, managing a commercial property is generally in the 3 percent to 5 percent range. Consider using a licensed property manager to help maintain your building’s performance, it will pay for itself in the long and short term. ● — Corry Castaneda is the Director of Property Management for Dickson Commercial Group.
Commercial Real Estate BY THE NUMBERS Retail
Industrial NET ABSORPTION - QUARTERLY
NET ABSORPTION-HISTORICAL
VACANCY RATE VS. NET ABSORPTION
2016 YTD RETAIL SALES BY TYPE
2016 YTD RETAIL LEASES BY TENANT TYPE
SUBMARKET STATISTICS
Source: Kidder Mathews
Source: CBRE
Office
Multifamily
PRICE PER SQUARE FOOT
ABSORPTION RATES
NUMBER OF UNITS SOLD
AVERAGE RENTAL RATE
VACANCY RATES
CURRENT VACANCY/RENT PER TYPE
Source: Colliers International
Source: CBRE
Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com | 11
Multifamily
continued from p1
by the lender. The last few years, foreclosed properties brought a lot of new investors to the Reno market taking advantage of the bargains. Noursoultanova said that currently only one REO remains in the Reno market. After renovations by the lender, it’s expected to go on the market in the fourth quarter of 2016 or first quarter of 2017. “The market is gaining equilibrium again,” she said. “It’s healthy.” The number of multi-family projects in the planning stages is also increasing, Noursoultanova said. In the first quarter, there were 4,000 multi-family units in various stages of planning on the books. During the second quarter of 2016, that had increased to 6,000 units. That’s
Industrial
continued from p1
It’s the second venture in northern Nevada for Avenue 55, which built a 411,000-square-foot building in Spanish Springs Corporate Park in 2006. Only 70,000-square-feet of the new Avenue 55 building remains vacant. Each tenant signed to the new facility was attracted here by the ability to distribute goods to 11 western states in one-day’s time, Bennett says. And each tenant leased space in the 50,000- to 100,000-square-foot range — a product size that’s in increasingly high demand throughout the Truckee Meadows. “It’s something this market is extremely tight on,” Bennett says. “It’s a product that is very limited, especially if you want newer construction and 30-foot clear heights with good parking and good trailer parking.” Developers of big industrial buildings have targeted that product size over the past several years. Tahoe Reno Industrial Center may be home to many of the largest industrial users in the region, but submarkets throughout the Truckee Meadows are proving a great fit for smaller users. Dermody Properties’ LogistiCenter I-80 West at Boomtown, a planned four-building development, features spaces divisible to 40,000 and 50,000 square feet. Panattoni Development is
a third the number of constructed apartment units — 20,000 — that CBRE tracks. (CBRE tracks multifamily complexes with 80 units or more.) “If there’s a hiccup on the horizon in the job growth (predicted by the EPIC report), we will have too much inventory. “But there are so many companies already coming,” she said. “If it continues to be favorable, I do believe the market will continue to be healthy,” she said. For the multifamily real estate industry, “all together, it’s a perfect environment.” ●
The site of the former Park Lane Mall is seen from the air. Reno Urban Developers plans to develop the 45.6-acre property at Plumb Lane and South Virginia into a mixed use development that includes apartments, retail, offices and dining. Photo Courtesy CBRE/Digital Sky Aerial
targeting the same types of smaller users at its South Valley Commerce Center, which totals 388,000-squarefeet split between two buildings at Sandhill Road and Double R Boulevard. Steve Kucera, vice president with industrial team at Kidder Matthews, says a growing trend over the next few years will be smaller bulk spaces in the 15,000- to 50,000-square-foot range. “We are definitely lacking on it,” Kucera says. “There is tons of activity in that range with limited product, and rental rates are going in the right direction for developers to build.” Michael Hoeck, senior vice president and managing partner at Kidder Matthews, says much of the best developable land in the most desirable regional submarkets already is in play — South Meadows, old North Virginia and Boomtown — are tapped out or nearly so. Tahoe Reno Industrial Center, of course, has ample land for new large-scale projects, and the Mustang area is starting to see some development activity, Hoeck notes. Nationwide developer Scannell Properties of Indianapolis is building a 569,000-square-foot building in Mustang that will house FedEx’s ground operations. One sleeper in the industrial market, Hoeck notes, is infill projects — specifically, the former Kmart distribution center in Sparks. At 1.55 million square feet, it’s the
second-largest industrial building in the market behind the JC Penney distribution center in Stead (and excluding Tesla’s Gigafactory). The vacant class C building was constructed over five different building phases starting in 1967. The building most likely will undergo major rehabilitation at some point and subsequently be subdivided into spaces between 120,000 and 300,000 square feet, Hoeck says. However, it remains in the flood plain of the Truckee River, and its location will likely deter certain prospective clients, he adds. Another infill project is Renown’s repositioning of the old Lowe’s building on Oddie Blvd. into a hub for back-office support. Expect more such projects over the next few years, Hoeck notes. New spec developments also are filling fast. Bennett says the CBRE industrial team has a tenant taking 217,000 square feet of Panattoni’s 707,000-square-foot North Valley’s Commerce Center building, and CBRE also is recording multiple prospects for Dermody’s 402,000-square-foot building at LogistiCenter 395. Lasko Valves took 224,000 square feet in phase 1 of the Dermody project. CBRE also inked a lease with Thrive Market for 328,000 square feet at 700 Milan Drive. Chewy.com
is in the other half of the 624,000-square-foot building owned by the Carpenter’s Pension Fund. And The Conco Companies, a private developer in the Bay Area, is building a 672,000-square-foot spec building at TRIC. CBRE is in negotiations with a client to take the entire building, Bennett says. So where will the next big boom be? Everywhere. Multiple developers have pad-ready sites for the next wave of construction that will get us through the next one to two years, Bennett says. Panattoni and Dermody have land in the north slated for additional industrial development, and the Carpenter’s Pension Fund has two pad-ready sites capable of supporting 1.1 million square feet at TRIC. SJS Realty, developer of the Randa Logistics building at Ireland Court in TRIC, also has a pad-ready site waiting in the wings. “North Reno, Stead, Spanish Springs, Tahoe-Reno, and new developments in West Reno, South Reno, and second-generation space are active across the board,” Bennett says. “From 5,000-square-foot units to manufacturing to ecommerce, we are really hitting on all cylinders right now. We will have another very strong positive net absorption year with many new companies in town and new job opportunities.” ●
Construction on a 409,000-square-foot spec building is wrapping-up at Spanish Springs Corporate Park. The building was almost entirely pre-leased prior to its completion. Photo Courtesy CBRE
12 | Northern Nevada Real Estate Journal | Monday, August 1, 2016 | www.nnbw.com