Development, Construction and Property Management
McKenzie Properties acquires land located at 0 Double Diamond Pkwy and 0 Trademark Dr.
Read the full article from Nevada Business Magazine below.
Dickson Commercial Group is pleased to announce a recent industrial land sale in South Meadows. Joel Fountain, Nick Knecht, and Baker Krukow represented the buyer, McKenzie Properties Management, Inc., in the land sale acquisition of 0 Double Diamond Pkwy and 0 Trademark Dr. The 6.4-acres, consisting of two vacant land parcels were purchased from Lainer Development on July 31.
McKenzie Properties acquired the land with the intention to construct three new state of the art industrial buildings this fall.
McKenzie Properties develops, builds, and leases commercial space. Founded locally in 1953, the company has built more than $1 billion in projects in northern Nevada over six decades including many community landmarks. Currently, McKenzie owns and manages over 2 million square feet of office, industrial, and retail space. A full service, vertically integrated firm, the company offers general contracting, property management and development services.
McKenzie Properties was awarded Office Development of the Year for Mountain View Corporate Center at the 15th annual Summit Awards, hosted by Northern Nevada, NAIOP, CREW, CCIM, and Nevada Builders Alliance. Read the complete list of winners below.
The best in commercial real estate – 15th annual Summit Awards winners
The Summit Awards Committee is proud to announce this year’s winners for achievement and excellence in Northern Nevada commercial real estate.
We are disappointed that we aren’t able to celebrate with you all in person this year — our awards ceremony is known for lively entertainment and a relaxed social environment for industry professionals to network and celebrate their success.
This online and remote announcement of 2019’s winners is no replacement for the Summit Awards — but you can expect next year’s ceremony to be the best yet!
For the past two decades, the Summit Awards has been Northern Nevada’s premier commercial real estate achievement awards for contractors, brokers, developers, and other service providers in the Northern Nevada region.
The Summit Awards is hosted by the four leading commercial real estate and development organizations in Northern Nevada, NAIOP, CREW, CCIM, and Nevada Builders Alliance.
The Summit Awards are based on four categories including the Construction Awards for general contractor, subcontractor, and design professional, honoring their company/firm for their hard work and dedication in 2019.
Broker Awards are awarded to top-performing specialists in the industrial, office, retail, investment, land, and generalist categories, as well as a rising star award. The largest single lease, largest sale transaction, and total transactions by a single commercial real estate office are recognized, and top honors go to the Broker of the Year.
Developers and their 2019 completed projects are also recognized in several categories, including industrial, re-development, medical office, multifamily, office, and retail. These developments win high honors in the Development Awards category.
The Specialty Awards salute the individual accomplishments of NAIOP Developing Leaders, property managers, and the individual who has most actively supported the advancement of women in the highly competitive field of commercial real estate is awarded the Katie Morrison CREW award.
The Summit Awards Committee would like to thank all of those who sponsored this special announcement and congratulates the 2019 winners.
You have all helped to make the Summit Awards a fantastic event every year and we look forward to celebrating with everyone in 2021!
And the winners are…
The Northern Nevada Business Weekly, in partnership with NAIOP, CREW, CCIM and Nevada Builders Alliance, published a special section announcing the winners of the 15th annual Summit Awards on July 22.
Go here to view the full digital edition, which includes descriptions and details of each award.
The list of 2019 Summit Awards winners are listed below. Visit http://www.SummitAwards.org to learn more:
Development Awards
Construction Awards
Broker Awards
Specialty Awards
RENO, Nev. — “I feel like there’s a dam about to burst,” says Doug Erwin, spreading his arms wide. “We have a big pipeline and people are like, ‘As soon as it’s safe to travel, I’m coming.’”
In fact, Erwin, vice president of entrepreneurial development at EDAWN, told the NNBW in a video call that Northern Nevada’s pipeline for relocating startup companies — as well as larger established companies — is as big as it’s ever been.
After all, the coronavirus pandemic has driven many startup companies to rely on functioning remotely. This is especially true in dense tech hubs like the Bay Area, where COVID cases are spiking and restrictions are tightening.
These factors, Erwin feels, will only accelerate the growing trend of startups pulling stakes from cramped Silicon Valley and planting in vast Northern Nevada.
With a lower cost of living, higher chance of sticking out, easier access to the outdoors and friendlier tax climate, many Bay Area entrepreneurs were already leaning toward a Reno-Sparks move prior to the pandemic.
COVID’s impact may tip the scales.
“In some cases, we’re hearing this is the last straw for some companies,” Erwin said. “I think we’re going to actually be a net-beneficiary of company relocations as a result of COVID.”
Grace Chou, director of the University of Nevada, Reno Innevation Center, a pre-accelerator based in downtown Reno, has a similar perspective.
“Entrepreneurs are drawn to Reno due to our lower costs, laid-back lifestyle, and superb outdoor recreation,” she said in an email to the NNBW. “These factors have not changed.”
Building Blocks
What’s more, Erwin said Northern Nevada’s startup ecosystem has more infrastructure than ever before. He pointed to the fact that, in the last five years alone, the region has added a pre-accelerator (UNR Innevation Center), incubator (StartUpNV), a seed fund (Reno Seed Fund), and, most recently, an accelerator (RNOX).
“From a building-block perspective, we have all the building blocks,” Erwin said. “They can always get better and we can get more diversity, but we just don’t have those big gaping holes in the ecosystem anymore.”
Entrepreneurial support groups are another piece that is helping prop up Northern Nevada’s startup space. Groups such as Entrepreneurs Assembly, Entrepreneurs’ Organization Reno-Tahoe, 1 Million Cups and more are helping startup founders transform their idea into scalable and revenue-generating businesses.
In fact, Brian Gifford, president and co-founder of Reno-based BluePeak Technology Solutions, said joining EO Reno-Tahoe in 2017 was a game-changer for him.
Since, BluePeak has seen triple-digit revenue growth, making Inc.’s list of the 5,000 fastest-growing companies in the U.S. in 2018, he said.
“I gained a lot of perspective on how owners look at their business and how they approach their own life,” said Gifford, who launched his IT solutions business in Reno in 2008. “I went from struggling to find a way to run my business and grow it to having to figure out how to manage the growth because of the changes that I’ve put in place.”
Lacking Local Investment
One piece of the ecosystem that needs strengthening, however, is the bridge between Nevada investors and entrepreneurs, said Jeff Saling, co-founder and executive director of StartUpNV, a statewide incubator.
Case in point: In about two years, 16 companies that have been incubated by the StartUpNV program have raised a total of $40 million in capital. However, less than 1% of that money has come from Nevada investors, Saling noted.
“That’s not a good thing for a startup ecosystem,” he continued. “You need to have local money investing at the earliest stages of companies. The ecosystem’s healthier with local capital.”
Saling said having new funds in the market — FundNV, an early–stage venture fund for StartUpNV companies, and the Reno Seed Fund — is an encouraging sign, but there is still a lack of local investment in the market.
This, Saling said, is why StartUpNV created AngelNV, a program that provides mentorship and access to a network of capital partners to startup companies.
Furthering that effort, AngelNV in September is starting a free 12-week boot camp for startup founders that will teach them how to attract angel investing, create a pitch deck, and eventually apply for a $200,000 investment from a group of angels.
Moreover, in January, AngelNV is launching an intensive program for 40 accredited investors — from first-time angels to experienced investors — that focuses on strategies and tactics. After 11 weeks, the investor group makes a $200,000 investment together in at least one company.
“It’s taught by people who have done it for decades,” Saling said. “At the end of it, you’ve now got investment in local companies by local investors. And you’ve created 40 new angel investors who are more than likely going to go on to make more investments.”
Buyer’s Market
To that end, Saling said it’s a “buyer’s market” during this economic slowdown, pointing to valuations being in the investor’s advantage.
“You might have invested $100,000 in a company that in a more robust economy might be valued at $5 million,” he said. “Suddenly, it’s valued at $2 million or $1 million. So, for the same money, you’re buying a much bigger stake in the company.”
Meanwhile, for startups looking to raise capital, it may be a good time to build a network of investors, said Chou, adding: “Investors may be more willing to do an informal video call.
At the halfway point of 2020, Northern Nevada startups have raised $18.4 million in capital, according to EDAWN. Though the economic uncertainty may slow the pace, the investment amount is on track to surpass every year’s total except for 2019, an outlier year that saw $110.3 million raised, according to EDAWN. 
Expanded Talent Pool
Of course, startups that relocate to Reno-Sparks to grow their companies will need to hire local, skilled workers. Pre-COVID, the low unemployment rate (3.3% in January), made it difficult to recruit talent, Chou said.
“Now,” she continued, “the pool of available talent may have expanded; thus, creating opportunities for startups to hire great talent.”
According to EDAWN, regional startups have created 150 jobs so far in 2020, which is trending to be the highest one-year total since the organization started tracking that data in 2013. Two years ago, Reno-Sparks saw 210 new jobs spring from startups.
“If there continues to be this much unemployment in the labor market, I think it will be good for startups,” Erwin said. “They will be able to access more talent.”
Looking Forward
For Saling, the outlook for the startup space is bright. Though the incubator’s pitch count dipped from March to June, he said the organization is creeping back to its average of seeing seven to eight pitches every week, which he takes as an encouraging sign for the ecosystem.
“We are still seeing a good amount of startup activity,” he said. “It spells good things for us in our future. Because, as long as we don’t lose sight of our roots by being business-friendly, by being less interested in regulating people out of business and controlling how they live and do their work, and open to new ideas, I think we’re going to be the benefactor of all of the creativity and good ideas going forward.”
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Reno, NV was named America’s best small city for 2020.
The 2020 ranking of America’s 100 best small cities is out, and Reno came out on top. 
Resonance Consultancy released the latest edition of its annual small city ranking Tuesday, which rates American cities with populations between 100,000 and 500,000.
Reno edged out other highly ranked cities including Naples, Florida; Santa Fe, New Mexico; and Savannah, Georgia in the study, which used factors such as natural environment, airport connectivity, sports teams, nightlife, educational attainment and online reviews to rank each city.
Reno ranked sixth in last year’s study.
‘Enviable location’
“By day, this sun-drenched town at the feet of the snow-capped Sierra Nevadas earns its #16 rank for Weather,” the report said of Reno. “By night, its neon-lit casinos help Reno to the top spot for Nightlife among our small cities.
“But it’s not just gamblers taking a chance on the ‘Biggest Little City in the World.; Increasingly, it’s tech companies and highly educated young workers, who come for the jobs and stay for the enviable location (Lake Tahoe is less than an hour away) and accompanying year-round outdoor lifestyle.”
Reno also scored well for Instagram hashtags (second overall), convention center (third) and attractions (third).
“The nation’s small cities face particularly pivotal months ahead,” Resonance President and CEO Chris Fair said in a press release. “Small-center urban growth was already rising before the pandemic. Now with millions of workers increasingly able to work remotely, many may choose to move to these smaller cities.
”At the same time, we expect travel to drive-to destinations to recover first. As American travelers hit the road, they’ll likely look to small cities to satisfy their travel desires.”
Top 10 cities
The top 10 cities, according to Resonance Consultancy’s methodology:
The Reno/Sparks office market is in a unique position: caught in the throes of a rapidly expanding commercial marketplace and aided by an ever-increasing population base. The most vibrant commercial real estate sectors in our area are industrial and multifamily, and they have been for decades. The office market is also seeing new companies, new developers and new buildings.
For the first time in many years, we will see a true speculative office development begin construction this summer. McKenzie Properties will be going vertical with its Skypointe development. Tolles Development Company is in the middle of completing its Rancharrah project, which contains 64,000 square feet of retail space and 36,000 square feet of office space. Last, but certainly not least, Reno Land Inc. and its partner Lyon Living have started the first phase of their Park Lane development, a 46-acre, master-planned development that will include office, retail and multifamily.
This new development shows the Reno/Sparks area is on the move, and fast. The area provides for a quality of life that is difficult to find when combining Lake Tahoe, the Sierra Nevada mountains and the Truckee River, which bifurcates the city. In comparison to the more populated cities of California, Reno is more affordable while still maintaining easy access to the many attractions California provides. Reno also works with the many companies that relocate from or maintain their existence in California. All companies that relocate to Reno expect a quality work environment that meets or exceeds their previous location. Reno/Sparks has invested in the resources to improve its downtown, roadways and UNR to facilitate this growth, now and well into the future.
This growth has led to an overall reduction in the office vacancy rate, going from 10.56 percent in 2018 to 9.93 percent at year-end 2019. We’ve also seen rent growth gain 4.4 percent year-over-year, ranging from $2.20 to $3.25 per square foot (full-service gross) for Class A office product. On the negative side, owners and developers are being impacted by the cost of construction. Whether it’s ground-up development, a rehab project or tenant improvement, all are impacted by construction costs and how they impact returns.
Looking into the future, we expect a very solid growth pattern to continue for years to come. Obviously, there will be challenges and, like every other community, we could see that impacted by the national and local political climate, geopolitical issues or, as we’re dealing with now, a significant health occurrence like the coronavirus. This strong and vibrant community was looking very bleak during the last recession, but now the promise of a vibrant community has been realized and should continue.
By Scott Shanks, principal, Dickson Commercial Group
One of the busiest intersections in all of Northern Nevada has been literally nothing more than a huge hole in the ground for decades. That’s set to change this summer, though.
The southeast corner of McCarran Boulevard and South Virginia Street, which sees more than 43,000 vehicles pass by daily, will become the home of a new multi-story office and retail project by McKenzie Properties.
Todd McKenzie says Skypointe Reno will benefit residents of the Truckee Meadows for decades. 
“It’s a property that I have always loved — it’s the best office and retail property in town,” McKenzie said in a March interview. “For me, this is a dream project, and it’s definitely a legacy project.”
Skypointe Reno will feature a six-story office tower of 180,000 square feet, as well as 35,000 square feet of retail split among three buildings and a five- to six-story parking garage that includes one level of below-ground parking. The garage will hold roughly 1,000 vehicles.
McKenzie expects to break ground this summer and bring the project online after an 18- to 24-month construction schedule. It will be just the second speculative office building taller than three stories built in Reno-Sparks in the last three decades, McKenzie says.
The last two were the five-story brick building anchored by U.S. Bank on Neil Road by Meadowood Mall and the Museum Tower downtown.
McKenzie Properties’ speculative office building at 5520 Kietzke Lane was the first spec office building greater than three stories constructed in the region since 1987. That building came online in January 2019 and is fully leased. 
“In 32 years we have not built an office building over three stories,” McKenzie says. “The city has a lack of Class A office supply, and we need more to accommodate the growth that Reno is enjoying. There are zero Class A spaces 20,000 square feet and above, so we are meeting the demand for that absolute lack of supply for larger quality Class A office space in this market.
“Companies looking at tertiary markets like Reno, Boise, Phoenix or Salt Lake simply move on from Northern Nevada because there’s no availability in 30,000, 50,000 or 100,000 square-foot Class A office spaces. We are losing companies to other cities that have this type of product.”
McKenzie Properties will work with CBRE to lease the new office space, while Colliers International will handle retail leasing.
“Reno lacks large contiguous blocks of space, especially in the Class A office category,” Matt Grimes, first vice president with the office team at CBRE, says.“Skypointe, with onsite retail amenities, will provide Reno a true Class A office environment in a mixed-use setting, which is something that simply does not exist in Reno today.
“When tenants outside the market are considering a relocation to our area, they are often looking for an environment that will be the right fit for their corporate culture and will serve in attracting and retaining employees who often have to make a move to the region. The Skypointe project will appeal to a broader range of companies outside of this market.”
Despite its prime location, the prize piece of land sat dormant for decades. The project brings about several development challenges primarily associated with the parking garage since the first level of parking will be underground.
That level requires extensive mechanical, ventilation, fire suppression and electrical work, and it also must be engineered to support the platform for the retail and office structures above.
“That has not been done in this city, and it’s a major challenge,” McKenzie says.
McKenzie is working with world-renowned architectural firm Gensler of San Francisco on primary design and engineering for Skypointe, as well as Miyamoto, Glumac and Wood Rodgers for structural, mechanical and other work.
McKenzie says there are a limited number of companies that specialize in underground structural concrete work, so availability isn’t a concern. The project has not yet been let to bid for construction. As of this story’s writing in late March, plans should be complete in the next few weeks, and the bidding process should commence soon after.
Fortuitously, though, there’s not a lot of excavation that needs to take place once work does commence since site grade dips about 8 feet from the existing sidewalk. 
“Because it’s a hole, we have a little bit of a head start,” McKenzie says. “The grade of the project starts about a foot from the corner of the sidewalk — that’s the high-water mark.”
McKenzie says Skypointe Reno will elevate the consciousness of the entire city and potentially spur similar types of infill development.
“You get one shot to get this right,” he says. “We have spent a lot of time thinking about the best and highest use, what’s best for the community, and the most needed product. All the ingredients that make a great project, we have been really thoughtful and careful about approaching because we want to do it right.
“It’s an honor and a privilege to develop this corner for the benefit of our entire community. We are providing a product that’s timely and that Reno really needs if we are going to attract the companies and high-paying jobs we want to attract. That’s why we are doing this project.”
RENO, Nev. — Although office development has lagged during Northern Nevada’s extended and white-hot boom cycle, two new speculative office buildings are going up in one of Reno’s hottest markets.
McKenzie Properties is erecting a 41,000-square-foot building at the south end of Kietzke Lane, and Charles Schwab is erecting a two-story 20,000-square-foot building near the east entrance of the new Rancharrah development.
Charles Schwab plans to occupy the second floor and lease out about half the building’s space on the ground floor. Tolles Development Company also plans to construct a roughly 25,000-square-foot office building at Rancharrah, and Nevada Urology recently erected a new medical office building next to the McKenzie site.
Despite the region-wide building boom in residential, multifamily, retail and industrial properties, there’s just a handful of new office spaces going vertical because of stagnant office rental rates and high construction costs that are stifling both new construction and remodel efforts, developers and Realtors told the NNBV.
BUSINESSES MOVE IN, BUT OTHERS MOVE OUT
According to Dickson Commercial Group’s first-quarter office market report, overall Reno-Sparks office vacancy is just under 12 percent. Scott Shanks, principal with Dickson Commercial Group, says overall office vacancy is likely to remain there throughout 2018. There’s absorption in the market with new companies coming to town, Shanks notes, but absorption continues to be offset by existing space coming back on market.
“Over the last year, year and a half, we have floated around 12 percent with overall vacancy,” Shanks says. “Office is healthy; the problem is that there is not as much activity as most people believe. Yes the tech sector is booming, and there are a lot of Bay Area firms moving into town, but they are bite-sized tenants of about 2,000 to 5,000 square feet.
“We are starting to fill up some buildings and see some absorption, but we also are seeing people move out of town at the same time — as much as we are filling space, we are getting back space. That seems to be the continued march over the last year.”
Much of the recent absorption stems from existing tenants in the market expanding their office space, Shanks notes.
Although the new product being erected is speculative development, there are tenants for more nearly three-quarters of the space.
For example, Colliers International has relocated to the south Kietzke area from its former downtown digs at the Museum Tower at 100 W. Liberty St. in downtown and will take space in the new McKenzie property once it’s completed in October. Industrial logistics company Prologis also will take space in the building, as will McKenzie Properties itself.
THE IMPORTANCE OF PRELEASING PROPERTY
Having tenants in tow is likely the new model for any future speculative office development in Greater Reno-Sparks, Shanks says.
“With the current market, (preleasing) is critical,” he says. “We don’t have enough overall net absorption to truly build a spec building out of the ground. Preleasing is critical for any new development that will go up for office space.”
Todd McKenzie, president of McKenzie Properties Management Inc., says that securing preleases was a crucial factor in getting the Kietzke project financed through Umpqua Bank. The new building is 70 percent leased, and McKenzie says several different companies are looking at the remaining space.
“I expect it to be 100 percent (leased) soon,” he says.
Both the new McKenzie building and the Charles Schwab offices represent a more modern style of office development for Reno-Sparks. And that’s important since there’s been little in the way of new office product built over the past decade.
“The last spec office building was over 10 years ago, and most of the building stock is 10, 20 or even 30 years old,” McKenzie says. “We need new product, and we need to update the product we have.”
MORE CAPACITY ATTRACTS LARGER COMPANIES
In additional to updating existing office product in Greater Reno-Sparks, developers direly need to add more square footage, McKenzie adds.
“Demand is coming, and we have to augment what we have. If we don’t have capacity we will just get overlooked,” he says. “If there is a company out there that needs 50,000 square feet, they won’t even look at us because it just doesn’t exist. We need more capacity if we want to attract companies that provide higher paying jobs and benefit the community.”
Across the region, Downtown Reno remains the hottest office submarket, followed by Meadowood and South Meadows. Notable recent sales include the 79,552-square foot building at 10375 Professional Circle that houses Employers, and S3 Development purchased a nearly 40,000-square-foot building at the corners of Wells and Ryland avenues. S3 Development plans a mix of office, medical and retail at the site.
The high costs for new construction are also affecting the remodel market. Shanks says building owners and developers are struggling to find contractors willing to take on smaller tenant improvement projects in older submarkets, which is pushing up costs for tenant improvement work.
“The dynamics of office layouts are changing to more open and collaborative spaces, and when you have old prototypical offices changing there is a lot of demo work and revamping of spaces,” Shanks says. “Finding contractors has been tough — they have an appetite for larger deals, but for smaller deals there’s just a handful of contractors.”
RENO, Nev. — Todd McKenzie recently was asked why now was the right time for his company to develop the first speculative office project the Reno-Sparks region has seen in a decade.
McKenzie, who owns McKenzie Properties, explained that the inventory of available office space, while not a dire situation, does need to be replenished.
He also pointed out existing office space is rapidly being absorbed; some of the existing buildings are 10, 20 or 30 years old; and because of limited supply, lease rates are on the rise.
“I think if you have someone who’s looking at the current stock (of office properties), we just have a lot of old buildings,” McKenzie said at the Feb. 22 NAIOP Northern Nevada Chapter’s “HOWsing & Development” Forum. “… We have about 350,000 square feet of Class A office space, and that’s basically 1,400 new jobs … so if that many new jobs came here, that (office space) would be basically be wiped out.”
McKenzie was among several panelists at the NAIOP (Commercial Real Estate Development Association) forum.
Other panelists included: Chris Askin of the Community Foundation of Western Nevada; Jim Pfrommer of Pfrommer & McCune Ltd.; Par Tolles of Tolles Development; Aaron West of the Nevada Builders Alliance; Doug Roberts of Panattoni Development Company; Joel Grace of Reno Land Inc.; and Paul Andronico.
McKenzie’s project, the 40,826-square-foot Mountain View Corporate Center business park located just off of South Kietzke Lane in South Reno, should be completed this spring.
While there appears to be a need for more office space in the Reno-Sparks area, panelists said, no other large-scale projects are on the immediate horizon.
The massive Park Lane Mall project in Reno, for instance, was originally intended to have around 40,000 square feet of office space, but developers Reno Land Inc. decided to nix the office portion of the project.
“When we started out with Park Lane, the biggest challenge is finding the right mix,” said Grace, who is vice president of development for Reno Land Inc. “We started out with a mix of residential, retail and office space. We ended up upping the retail space and eliminating office.”
The developers agreed that locations for retail often are not always great locations for office space, considering such factors as ample parking.
While there may not be other large-scale projects in the works, some redevelopments in the region are focusing on adding or refurbishing office space.
For instance, S3 Development recently purchased a 39,816-square-foot building on the southeast corner of Wells Avenue and Ryland Street in Reno, with plans to redevelop the site for mixed-use purposes — including office and medical practices.
KPS3 Marketing, a veteran Reno firm, also recently acquired a three-story, 15,657-square-foot office building at 500 Ryland St. in Reno. The company has intentions of remodeling the top and bottom floors of the building.
McKenzie and others, however, remain bullish on the office market in Reno-Sparks, even if new construction is slow to come.
“We need more development,” he said. “At some point, it’s going to happen, even if it’s slower than, say, the industrial market.”
RENO, Nev. — With Reno’s industrial, retail and housing markets on an upswing, office properties should be ready to follow along, right?
Nope.
Not that the office market is struggling the way it was near the end of the previous decade, when the vacancy rate hit 20 percent after the financial bust of 2008. But it’s not going gung-ho, either.
Just a few new office buildings are going up, only one of which — a four-story Class A facility at the south end of Kietzke Lane in Reno, which broke ground June 6 — with space that hasn’t been claimed by a future tenant.
Builder McKenzie Properties has been advertising the 40,286-square-foot building as Reno’s first speculative office project since 2008.
On the other hand, there have been enough companies coming into the area in the past year or so to absorb most of the space that stayed vacant after 2010.
It took two years to empty out those spaces, and their ongoing vacancy brought new office construction to a halt, said Steve Shanks and Dominic Brunetti, principals of Dickson Commercial Group.
“It’s taken roughly five years to absorb it and to improve the market to what’s now 11 percent growth,” Shanks said.
All things considered, the office market can be seen as healthy, though not robust.
“I’ve been accused of being an optimist, but the phrase I like to use — and I’ve used it throughout the past year — is, ‛we’re manageable,” said Melissa Molyneaux, an executive vice president and managing director of Colliers International’s Northern Nevada office.
In today’s Reno office market, “manageable” translates into a vacancy rate roughly similar to that of the days before the Great Recession.
“Our vacancy rate continues to improve, albeit slowly — between 2 and 3 percent of the total market share,” said Dominic Brunetti, principal with the Dickson Commercial Group. “Depending on what report you read, last quarter we grew at 0.8 percent.
“Annualized, we’d be at just over a 2 percent growth rate in our market for office space.”
In a recent survey of the area, national real estate analysis and marketing firm CoStar Group pegged the all-over vacancy rate at 9.2 percent for the last quarter of 2017.
Office buildings in CoStar’s Four- and Five-Star categories hit a vacancy rate of 8.4 percent.
Rents for top-tier offices set an average of $24.51 per square foot, with the overall market registering $19.52 — all of which means good and mild business at the same time.
“I think we’re ahead, but not as much as everybody would think,” said Scott Shanks, Brunetti’s fellow principal at Dickson.
New buildings are coming out of the ground, but mostly in small ways, not like the McKenzie property.
“If you were to dissect them by class, that would be the only Class A office building under construction,” Brunetti said. “The rest would be primarily garden office — which is your single-story, stick-frame building — and a lot of owner/user facilities.”
Instead of new construction, redevelopment is the focus these days, now that building owners and developers have more money to put into their properties thanks to the number of new tenants.
“In buildings that are 10 to 20 years old, we are seeing a ton on lobby updates,” she said.
To the three commercial Realtors, the growing health of the market does not mean it is ready for new construction at a faster clip.
Developer Todd McKenzie, owner of McKenzie Properties, disagrees, though he sees new construction hampered by the nuts and bolts aspects of real estate today.
“I think the market is ready for new product. The challenges are the current state of lease rates versus the cost of land and the cost of construction,” he said. “For most folks who want to start looking for a project today, unless you can get land at an unbelievable price, given where construction costs are, it doesn’t pencil out right now.”
For one thing, the cost of steel has gone up more than 20 percent over the last year, most likely to the surge of ecommerce-fueled distribution warehouse construction, he said.
Then there is the shortage of skilled construction workers, given that the Great Recession drove many tradesmen and tradeswomen out of the field and into other careers.
“That’s definitely a problem in building,” McKenzie said. “That’s an availability issues, and that affects time, which is money. We are nowhere near where we were or where we need to be.”
“One thing that could be an impetus for new growth is the new tax policy,” said Brunetti, referring to the federal tax reform package that eliminated deductions for state and local income tax payments, a non-factor for Nevadans. “It’s definitely going to affect California, so you could see a push populace-wise from people who say it was the straw that broke the camel’s back.”
