Commercial real estate reports find good news amid troublesNorthern Nevada’s struggling economy continued to pinch the commercial real estate sector in the first half of 2008 with some positive signs to be found, according to an industry report issued Thursday.The analysis by executives of CB Richard Ellis’s Reno office covered key segments, including:· Industrial. Vacancy rates have increased to 10.25 percent from a low of 4.1 percent in mid-2006. But the “good news,” said Vice President Eric Bennett, is that speculative construction, which soared in 2007, has slowed. This has allowed for absorption of available inventory by mid-2008, he said, and several pending large-lease transactions would greatly cut the vacancy rate back to the 8 percent range.· Multi-housing. Sales of apartment units are “off considerably” compared with recent years, said Leonard Ramos, first vice president. But the overall vacancy rate on small andmid-sized apartments fell from 7.85 percent to 7.56 percent, and the west Reno and airport submarkets showed below 5 percent vacancy rates in large complexes.Additionally, the average rent increased from $615 to $625, Ramos said.· Office. The first half of the year proved advantageous for tenants as landlords resorted to more creative ways to find and keep occupants, said Matt Riecken, senior vice president. “Right now, tenants have flexibility in proposing ideas to landlords that can be met with success,” he said.But he said the biggest challenge to office sector growth is credit because of tightened policies from lenders in the wake of the residential housing slump.· Retail. Small-shop activity has slowed, influenced by the residential housing slump and diminished consumer confidence, Senior Vice President Chris Waizmann said. And, he said, lease rates rose slightly in established anchored retail centers with new construction demanding higher rates.Looking ahead to the rest of 2008 and beyond, the CB Richard Ellis report offered hope for the sluggish conditions, including:· Speculative industrial construction will continue to slow and land prices will stabilize. · Multi-housing investment opportunities will be more abundant and rents will stabilize with job growth and the continued influx of Californians looking for affordability. · The Meadowood-area office market will continue to be attractive with its proximity to housing, amenities and transportation. The South Meadows area will continue to have high vacancy rates with its significant sublease space. Downtown Reno will grow, its attraction tied to new housing opportunities, retail and the planned baseball stadium. · Retail vacancy and lease rates will continue to fall as the market’s expansion slows, largely because of poor consumer confidence, a weak housing market and record energy costs.
BY BILL O’DRISCOLL • bodriscoll@rgj.com • July 11, 2008