An analysis of the Reno-Sparks market by Colliers International, a commercial real estate broker, found that 9.4% of the office space was vacant this spring - Down from a vacancy rate of 10% in the first three months of this year.
Vacancy rates this spring were highest in the airport area, where many office buildings are older. Nearly 15% of the office space in that area is vacant. In South Meadows, by comparison, the vacancy rate was a super-tight 2.6%, and the Meadowood market saw an 8% vacancy rate.
And there's even more good news for office landlords. Anecdotally it sounds as though most office users are paying their rent on time.
Overall, the average rent for office space in Reno and Sparks stood at $1.83 a square foot this spring, the Colliers analysis found, down slightly from $1.87 in the first quarter.
Office rents average $1.91 a square foot in Meadowood, the most expensive in town. Offices in Sparks are the least expensive, averaging $1.44 a square foot.
The former JCPenney building downtown Reno in 1958
The new owner of the old JCPenney building at 100 N. Sierra St. in downtown Reno, Fenway Capital Advisors is in the midst of a major remodel of the property.
The changes represent a major financial commitment to a property that originally opened as a JCPenney store more than four decades ago but has now seen better days. The turning point occurred around 10 months ago when new ownership came in. San Diego-based investment company Fenway Capital Advisors quickly decided to give the building what it needed most: Capital.
It has the right bones but it just needs money to be spent on it. You need to invest in the property in order to get tenants to sign the lease.
The old JCPenney building in downtown Reno 2020
New ownership also believes that prime office space is a key need in downtown's core. It's a belief echoed by other companies such as Las Vegas-based CAI Investments, which is investing in additional Class A office space for its downtown projects as well. These include the upscale Kimpton Hotel project planned for Court Street as well as a major remodel of Harrah's Reno into CAI's new City Center project.
The bet on increased office demand makes sense, especially given Reno's growth in recent years. Several years ago during Reno's Startup Row phenomenon, when startups started congregating around downtown's West First Street corridor in 2013 - outside tech companies began looking into downtown Reno, but the lack of suitable office space was an issue.
Overall, the former JCPenney building will offer 30,000 square feet of total office space that will be split evenly between its second and third floors. Plans for the second floor, for example, show five suites that range from 1,380 square feet to 2,756 square feet in size.
Liberty Food & Wine Exchange in the old JCPenney building
In addition to existing amenities on its ground floor such as Liberty Food & Wine Exchange as well as the Reno Axe throwing bar, the building's location and proximity to the city of Reno parking garage just across the street are key advantages.
Even as COVID-19 caused a decline in site visits to the region, the factors that fueled Reno's growth prior to the pandemic are still percolating in the background. The residential real estate market, for example, continues to perform better than expected despite the cold spell that COVID-19 has cast on the overall economy.
Activity is paused in the commercial world because most decision-makers are not making long-term commitments in a pandemic.
Commercial property owners are also not dropping their prices, a sign that they are confident in the future.
The remodeled 100 N. Sierra St. building will be well-positioned once the COVID-19 recovery occurs. The property is one block away from the river and it's a stone's throw away from all the amenities downtown. It's on the corner of Main and Main in downtown Reno.