Northern Nevada business: Commercial real estate market continues to thrive
RENO, Nev. — Northern Nevada is continuing to be a strong market for commercial real estate.
“Reno is one of the hottest markets in the country right now and it is really exciting,” Todd McKenzie, principal of McKenzie Properties, said in a phone interview with Northern Nevada Business Weekly.
McKenzie Properties is planning to start construction on their new Mountain View Corporate office building this April. The 40,826-square-foot, four-story, Class A building will mark the first speculative office building to break ground in northern Nevada since 2008. Construction is scheduled to be complete by the end of 2017.
McKenzie Properties purchased the 5-acre parcel of land back in 2015. The purchase also included the adjacent office building at 5470 Kietzke Lane, which is home to City National Bank, Holland & Hart, Blanchard, Krasner & French law and more. According to McKenzie, they are currently working on a lease that will bring the occupancy rate in the building to 100 percent.
The need for more office space is anticipated to increase with the decreasing vacancy rates.
“With the population growth and the job growth, our supply will probably be completely eaten up within the next few years and we will need new buildings,” McKenzie said.
However, high land rates and construction costs coupled with the current rental rates are deterring the building of more speculative office buildings.
“We definitely need some new product but the lease rates aren’t quite there yet,” he said.
Much of the current office inventory is aging since there has been no new speculative office building in nearly 10 years.
“We are all in the same boat, we are all in older buildings and none of them are really Class A,” McKenzie said.
It has become a trend for owners, particularly in downtown Reno, to renovate existing office spaces in order to attract new tenants. Examples include 50 West Liberty, 100 N. Arlington and more. McKenzie Properties also updated their five-story office building at 245 E. Liberty St. According to McKenzie, the company is working on a few deals that will bring the occupancy rate to 90 percent. The building has typically been at a 30 to 40 percent vacancy rate.
McKenzie Properties also is working on several new industrial buildings.
The company is currently in the midst of building the Golden Valley Industrial Complex in North Valleys. The Class A tilt up construction consists of two speculative buildings that are 85,000 square feet and 62,000 square feet. The project is scheduled to be complete this summer.
McKenzie explained that the recent wet weather and flooding has delayed the development.
“We basically have been shut down for about 60 days just because of the weather,” he said.
They are also building a 174,000-square-foot warehouse in South Meadows, which is already pre-leased.
McKenzie said that new industrial buildings are also getting more difficult to build in Reno because of high land prices.
McKenzie Properties is a family owned business founded in 1953. The company currently owns and manages more than 2 million square feet of retail, office and industrial space in Reno-Sparks.
“Historically, we are way more diverse than we have ever been,” McKenzie said when asked about how the economy has changed in recent years.
“The world has taken notice of Reno. We are now on the radar and we have flown below the radar for so long even though it is such as great place to live and work.”
However, he did not think that developers will be able to keep up with the large demand.
“I don’t think that we can build fast enough and again I think it is just available land and land prices,” McKenzie said.
Annie Conway is a reporter with the Northern Nevada Business Weekly, a sister publication of the Sierra Sun’s based in Reno.