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