Real Estate Market Review Reno Office - Kidder Mathews · THE CARLE & ANN CONWAY FAMILY TRUST 140 Washington Street Reno 12,792 s.f. $3.25M or $169/s.f. JOHN BOCCHI 5465 Kietzke Lane

1st Quarter 2019 | 1

Real Estate Market Review

Reno Office

1st Quarter

2019

The office real estate market in the greater Reno/Sparks area had a

slower than usual first quarter with a reported 134,251 square feet in

leasing activity, and 214,790 square feet in building sales. However,

both direct and overall vacancy have shown an uninterrupted decline

quarter over quarter, continuing the upward push of lease rates

market-wide.

Weighted by 155,496 square feet of positive net

absorption, overall vacancy fell to 9.0% (8.4% direct), a

decrease of 6.67% in direct vacancy from the previous

quarter. The Downtown and Meadowood submarkets

hold the bulk of absorption with a combined 123,361

square feet. The most notable lease transactions that

transpired in the first quarter are: Reno Experiences leasing

10,557 square feet at 100 N. Sierra Street, Dennis Banks

Construction renewing their 6,611 square foot lease at 835

Maestro Drive, and Greater Nevada Commercial Lending

leasing 5,751 square feet at 5190 Neil Road, Suite 205.

While the notable lease transactions were in the 5,000 to

10,000 square foot range, tenant demand for office space

in the 1,000 to 3,000 square foot range remains solid.

An expected result of declining vacancy in the office real

estate market is the increase in lease rates. The office real

estate market in the greater Reno/Sparks area closed the

Continued, page 4

Market Forecast TrendsNet Absorption A reported 349,041 SF of combined lease & sale transactions prove for a slower first quarter than in previous years. We are expecting activity to increase in the second quarter with deals that were in the pipeline during the first.

Vacancy Vacancy for office real estate in the Reno/Sparks area continues to decline with minimal additions to the market.

Rental Rates Lease rates are increasing as the tenant demand for quality office space increases.

Construction Deliveries Six buildings totaling 80,491 SF were delivered to the office real estate market in the first quarter of which only 10,606 SF is currently available.

1Q 2019 Market Highlights

YEAR-TO-YEAR BASIS

ABSORPTION

RENTAL RATE

CONSTRUCTION DELIVERIES

VACANCY

2 | Reno Office Real Estate Market Review

Market Breakdown

1Q19 4Q18 1Q18 Annual % Change

Vacancy Rate 8.40% 9.00% 9.20% -8.70%

Availability Rate 10.30% 10.60% 12.10% -14.88%

Asking Lease Rate $1.64 $1.60 $1.54 6.49%

Leased SF 134,251 209,011 279,639 -51.99%

Sold SF 214,790 476,692 480,984 -55.34%

Net Absorption 155,496 -80,829 -52,261 N/A

Reno Office Charts

VACANCY, AVAILABILITY & LEASE RATE AVERAGE SALES PRICE & CAPITALIZATION RATES

NET ABSORPTION & NEW DELIVERIES SALES VOLUME VS. LEASE VOLUME

Direct Vacancy Total Available Direct Lease Rate

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

$0.00

$0.50

$1.00

$1.50

$2.00

5%

10%

15%

20%

25%

Average Sales Price (PSF) Cap Rate

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD$50

$100

$150

$200

$250

2%

4%

6%

8%

10%

Net Absorption (SF) New Deliveries (SF)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD

-200K

-150K

-100K

-50K

0

50K

100K

150K

200K

250K

300K

350K

400K

Sales Volume (SF) Lease Volume (SF)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 YTD0

500K

1.0M

1.5M

2.0M

1st Quarter 2019 | 3kiddermathews.com

Submarket Statistics

SubmarketTotal

InventorySF Under

Construction

Direct Vacancy

Rate

Total Vacancy

Rate

Total Available

Rate

1Q19 Total Net

Absorption

4Q18 Total Net

Absorption

1Q19 Leasing Activity

4Q18 Leasing Activity

Direct Rental Rate

Central/Airport 2,769,650 - 11.9% 12.0% 11.5% 19,332 -87,323 30,385 37,974 $1.24

Downtown 5,032,384 - 7.3% 7.4% 7.3% 72,689 -32,620 18,741 62,322 $1.73

Meadowood 3,540,182 75,491 9.5% 10.8% 9.9% 50,672 29,754 53,306 59,686 $1.83

South Meadows 2,368,199 - 5.9% 6.5% 5.1% 3,001 415 24,277 35,016 $1.77

Sparks 1,279,050 5,000 6.0% 6.8% 6.8% -2,331 9,651 3,684 8,653 $1.30

West Reno 364,699 - 12.6% 12.6% 12.3% 16,209 2,635 3,858 5,360 $1.32

Reno Total 15,354,164 80,491 8.4% 9.0% 10.3% 159,572 -77,488 134,251 209,011 $1.64

Class A 1,994,548 40,785 11.2% 13.7% 13.7% 151 -10,270 - 18,845 $2.11

Class B 8,222,597 39,706 9.4% 9.6% 8.7% 40,135 -66,023 116,591 136,339 $1.63

Class C 5,137,019 - 5.8% 6.0% 5.9% 119,286 -1,195 17,660 53,827 $1.37

Notable Lease Transactions

RENO EXPERIENCES

100 N Sierra Street Reno

10,557 s.f.

GREATER NEVADA COMMERCIAL LENDING

5190 Neil Road, Ste 205 Reno

5,751 s.f.

Notable Sale Transactions

WATCH HILL CAPITAL

555 Hammill Lane Reno

65,000 s.f. $13.6M or $209/s.f.

THE CARLE & ANN CONWAY FAMILY TRUST

140 Washington Street Reno

12,792 s.f. $3.25M or $169/s.f.

JOHN BOCCHI

5465 Kietzke Lane Reno

4,190 s.f. $1.7M or $406/s.f.

DENNIS BANKS CONSTRUCTION

835 Maestro Drive Reno

6,611 s.f.

4 | Reno Office Real Estate Market Review

Kidder Mathews is the largest, independent commercial real estate firm on the West Coast, with more than 750+ real estate professionals and staff in 21 offices in Washington, Oregon, California, Nevada, and Arizona. We offer a complete range of brokerage, appraisal, property management, consulting, project and construction management, and debt equity finance services for all property types.

ASSIGNMENTS ANNUALLY

TOTAL # APPRAISERS/MAI’S

MANAGEMENT PORTFOLIO

51M+ 1,600+

PROPERTY MANAGEMENT VALUATION ADVISORY

36/23

ANNUAL TRANSACTION

VOLUME

$9B

ANNUAL LEASING SF

40M

ANNUAL SALES SF

20M

COMMERCIAL BROKERAGE

# BROKERS

380+

Contact

The information in this report was composed by the Kidder Mathews Research Group.

Jerry Holdner

Director of Research 949.557.5050 [email protected]

Eric Luhrs

Regional President, Brokerage Northern California/Nevada 775.301.1300 [email protected]

Designated Broker

Mark Read | LIC # 00572743

kiddermathews.com

This information supplied herein is from sources we deem reliable. It is provided without any representation, warranty or guarantee, expressed or implied as to its accuracy. Prospective Buyer or Tenant should conduct an independent investigation and verification of all matters deemed to be material, including, but not limited to, statements of income and expenses. CONSULT YOUR ATTORNEY, ACCOUNTANT, OR OTHER PROFESSIONAL ADVISOR.

quarter at 8.40% in direct vacancy, nudging overall base

rates up to $1.64/square foot (Class A $2.11/square foot,

Class B $1.63/square foot, and Class C $1.37/square

foot). Carried by 53,306 square feet of leasing activity, the

Meadowood submarket leads the market in highest lease

rate at $1.83/square foot. South Meadows is not far behind

at $1.77/square foot.

In the first quarter, Reno/Sparks saw a reported 214,790

square feet in sales combining both owner/user and

investment office buildings. Although not an all-time high,

the average price per building square foot closed the

quarter at $202.89/square foot (a $41.28 increase from

the fourth quarter of 2018). Watch Hill Capital purchased

65,000 square feet at 555 Hammill Lane for $209.23/

square foot, The Carle & Ann Conway Family Trust

acquired 12,792 square feet at 140 Washington Street for

$169.08/square foot and John Bocchi purchased 4,190

square feet for $405.73/square foot at 5465 Kietzke Lane.

There was a reported 80,491 square feet of new office

building deliveries in the first quarter of this year. The

majority of new construction is in the Meadowood

submarket. Two medical office buildings totaling 10,271

square feet (of which only 7,285 square feet is available)

are also currently under construction in Meadowood and

are expected to be delivered this May.

In the new quarter, we expect the leasing sales activity to

increase resulting in net absorption increases, declines in

vacancies and continued increases in lease rates for the

greater Reno/Sparks area.

Source: CoStar