WESTERN SNAPSHOT, MARCH 2010

Reno, Nevada, Multifamily Market

1. MARKET MOVES

The Alexander at South Virginia, a 350-unit, Class A project by A.G. Spanos Cos., will be fully delivered in 2010 with an expected absorption of 15 to 25 units per month. Of the more than 750 units of new construction in the more than 100-unit, Class A category now in lease-up in the area, the median absorption of 18 units per month indicates a sluggish demand for apartments at the top of the market.  

2. MARKET MEASURE

The Reno/Sparks re-sale home market continues to show steep increases as new home construction dwindles, re-sale prices decline to a median value of $183,000 and housing affordability climbs. This metric accounts for a 15 percent reduction in apartment demand as qualified tenants move to the for-sale market or the shadow market of single-family rentals acquired by investors. Reduced apartment demand has forced a 5 percent decline in median rents and a market vacancy of 9 percent in the more than 100-unit market. The market average rental concession has stabilized at 13 percent of net effective rents, but additional single-family foreclosures continue to work through the market, with more than 6,000 homes in default and not yet foreclosed.

3. MARK OF A MARKET

Unemployment and falling household income have combined with a slight population decline to undermine apartment fundamentals regionally. Weakened tenant quality and reduced net effective rents jeopardize stabilized occupancy for some operators and keep overall occupancy in more than 100-unit projects under 92 percent.

However, Northern Nevada is exceptionally well positioned to rebound as the recession lifts. Known as a low-tax state with few barriers to business entry, Northern Nevada will surge in apartment demand by 2014 with the echo-boom generation and tax refugees from California moving into the area. Astute buyers now have excellent quality to acquire at outstanding values for an area in which little or no new construction is planned or being built.

— Morgan Walsh is a multifamily specialist at NAI Alliance in Reno.

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