WESTERN SNAPSHOT, MARCH 2008
Reno/Sparks, Nevada Retail Market
The retail markets for the twin cities of Reno and Sparks, Nevada, have proven to be interrelated in the last few years. While the stigma of being a gaming town has overshadowed the area for several decades, Reno/Sparks has made strides to facilitate growth in business and industry. In addition to providing an excellent quality of life, it has become a hub for logistics operations specializing in servicing retail companies such as J.C. Penney, Wal-Mart, Amazon.com, Barnes & Noble, PetSmart and others taking advantage of being located at the intersection of U.S. Highway 395 and Interstate 80. This location allows overnight ground shipping to approximately 19 percent of the U.S. population. Other key reasons for the influx of businesses are the favorable tax climate (no state corporate tax, personal income tax or inventory tax) and the ease of creating corporate entities.
Nevada leads the country with a 28.4 percent population growth from 2000 to 2007. Reno and Sparks had a population of 251,004 in 2000 and an estimated population of 294,214 in 2006 according to the U.S. Census Bureau. In addition, the inclusion of the immediate outlying areas that utilize Reno/Sparks as their principle source for retail amenities brings the total population estimate up to about 400,000.
Reno/Sparks has been referred to as “under-retailed” in the past; however, the housing boom in the early 2000s helped the area expand its retail identity. But with the boom also came inflated land and building costs, which drove the cost of retail upwards. Current retail rents range between $1.20 per square foot per month NNN for mature properties to more than $3.25 per square foot per month NNN for higher-end properties. The absorption of new product has slowed, as has construction for new neighborhood centers. In the last few months, brokers have seen more aggressive offers relative to the past. The estimated retail vacancy is between 7 and 10 percent depending upon the product and markets measured.
In the last 2 years, Reno welcomed several new large retail chains to the area. The most notable are Cabela’s, RC Willey, Dillards and BJ’s Brewhouse. This trend continues as Scheel’s plans to open a 248,000-square-foot retail property in Sparks in fall 2008. Ruth’s Chris Steakhouse is planning to enter Reno in the resurgent downtown district. Whole Foods Market is scheduled to open in spring 2008 in a refurbished shopping center formerly occupied by Shopko.
Reno/Sparks will also soon have REI, Sportsman’s Warehouse and potentially Bass Pro Shops to accommodate this niche market. The area’s sports-oriented and active outdoor lifestyles have facilitated considerable retail growth in recent years. This is due, in large part, to the proximity to Lake Tahoe, the Sierra Nevada Mountains and the Black Rock Desert (where the notorious Burning Man Festival is held annually).
Additionally, a new baseball facility is planned to open in downtown Reno next to the National Bowling Stadium in 2009. This will attract a new sports element to the downtown submarket, which has seen an upscale rebirth with higher-end retail. This is due to continual redevelopment and community events and themes like the ArtTown festival, which celebrates the art of the area. Also, a nationally recognized white-water rafting park was completed in the downtown portion of the Truckee River.
While gaming is not as prominent as it once was in Reno/Sparks, the large casinos are working to increase their marketability with attractions, expansions and retail facilities. The Grand Sierra Resort, formerly the Reno Hilton, plans on building two indoor water parks and more than 100,000 square feet of strip retail on its property. The Peppermill and the Atlantis resorts are both undergoing large expansions with new hotel towers and renovations to the gaming areas to make it more attractive. The Las Vegas-based Station Casinos tentatively plans on building two local-minded facilities that incorporate a large mix of dining and retail.
The outlook for 2008 in Reno/Sparks is uncertain as the national economy slows. With home growth stagnant and the absorption of large tenants going mainly into redeveloped or new properties, the net vacancy will likely stay consistent, if not rise slightly. This could stimulate prices to adjust downward as motivated landlords try to fill available spaces with more attractive rates and incentives. The leveling of lease rates may help start-ups and expansions; however, the credit crunch and higher minimum wages limit the opportunity for local shops, as well as struggling national chains, to increase the overall retail presence of the Reno/Sparks retail market.
Earl A. Peterson is a senior market research specialist for Stark & Associates Commercial Real Estate/TCN Worldwide in Reno.
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