Northern Nevada’s office market is doing considerably well in comparison to where it has been in the past. The growth has been steady over the years, with all-time low vacancies occurring in the third quarter of 2018. The office market is continuing to see vacancy rates decreasing and rental rates increasing. New office construction remains low, keeping vacancy rates low as well.
Reno office vacancies have been in the single digits since 2017. This is atypical for the region, and in part could be due to the influx of businesses moving to Nevada along with a lack of new office construction. The vacancy rate is currently 8.4 percent, sitting just below the national average of 9.7%. Taking low construction rates into consideration the vacancy rates are unlikely to change.
Northern Nevada’s low vacancy has allowed for healthy rent growth while remaining cost effective for tenants. Rental rates peaked in 2015 and since then have declined significantly. The demand for office in Reno is in the Downtown and The Meadowood submarket. These high demand areas feature the highest rents in Reno, primarily due to the area’s abundance of mid to high end inventory. Only about 10 percent of the current overall inventory is upper-tier product, making it very desired when it can be found.
Office inventory is unlikely to change drastically in the coming years. Only 10,271 square feet of new office space is under construction with a majority of that being made up of smaller scale projects; however, there are several large-scale projects on the horizon that may tip the scales. These projects include 300,000 SF on McCarran and Virginia by Mckenzie Properties, 39,000 SF at the Rancharrah development site, and 54,000 SF for the development of the Airport Office Campus on Terminal Way.
Office investments reached an all-time high in 2018, with several large transactions taking place. These transactions include the sale of the Employers building in South Meadows for $25.3 million, and the sale of 855 Trademark for $20.4 million. The most noteworthy sale of 2019 was the recent acquisition of 5250 S Virginia by Mckenzie Properties. While local investors continue to make moves into the office sector, there continues to be a steady stream of outside investors primarily from California markets.
In northern Nevada the office market is predicted to keep vacancy rates low and could possibly drop further with the factor of low construction rates playing a part. As more companies choose northern Nevada for relocation, growth could extend to the office market. For now, the market remains steady with no major highs or lows.