The industrial market in Reno, Nevada has demonstrated remarkable resilience in the face of challenging economic conditions.
Despite such uncertainties, the region has maintained a strong industrial presence, showcasing its ability to adapt and thrive. Overall, the market delivered more than 22 million square feet of new construction since the start of 2020 and has experienced more than 50% rent growth over the same period, with bulk rates rising from $0.55 NNN in 4Q 2019 to $0.84 NNN by Q3 2024. As the nation grapples with inflation, supply chain disruptions, and shifting consumer behaviors, Reno’s industrial sector has managed to weather these challenges effectively.
The city’s strategic location, combined with its pro-business environment, has positioned it as a critical logistics and distribution hub. These factors have allowed local businesses to remain competitive, even as national economic pressures mount. Overall vacancy for the quarter increased from 9.77% in Q2 2024 to 10.40% in Q3 2024, however, direct vacancy fell for the first time in two years, down 5 basis points to 8.22%. Sublease space had another significant increase in the third quarter, rising from 1,704,566 SF in Q2 to 2,493,320 SF at the end of Q3. There is still little to no new construction expected to be delivered by the end of 2024 or well into 2025 which is a positive sign for the market as supply and demand should balance out, and we should see vacancy rates begin to creep down over the next few quarters.
The region’s central position near major transportation corridors, including Interstate 80 and U.S. Route 395, offers companies efficient access to key markets across the West Coast. This logistical advantage has attracted a diverse range of industries, including e-commerce, logistics, manufacturing, and distribution. Notably, the completion of infrastructure projects, such as the expansion of the Reno-Tahoe International Airport, has further enhanced the area’s appeal for industrial operations.
In addition to these favorable conditions, the Reno industrial market benefits from a growing population and increasing consumer spending, further driving the demand for industrial space. The ongoing investment in infrastructure and technology also positions the region for future success, making it a viable option for businesses looking to establish or expand their operations.
The industrial landscape has started to balance out although landlords are still having to be creative to win deals by offering attractive incentives such as free rent or flexible lease terms. Overall asking rates, however, have shown resilience as flex rates jumped from $1.18 PSF/Month in the second quarter to $1.33 PSF/Month in the third quarter. Mid-bulk and bulk rates, which have been the softest segments in the market, stayed generally flat, falling by only one cent
to $1.02 PSF/Month and bulk rates remaining at $0.84 PSF/Month.
Reno’s industrial market is also underpinned by strong fundamentals, which contribute to its long-term sustainability. Over the past 10 years, between 2014 and 2023, the market averaged just under 4 million square feet of net absorption annually, while the direct vacancy rate ranged between 1% to 6%. The region boasts a business-friendly environment with regulatory framework, low taxes, and an appealing quality of life that attracts talent. The local government has also prioritized economic diversification, actively supporting initiatives that foster growth in high-demand sectors.
Reno has showcased impressive resilience in its industrial market amid challenging economic conditions. The combination of sustained tenant demand, ongoing investment, and strong market fundamentals lays the groundwork for continued growth. As businesses seek to navigate an evolving landscape, Reno stands out as a strategic location for industrial operations, making it a key player in the broader industrial sector of the western United States. The outlook remains optimistic, with potential for further development and expansion in the coming years.
The largest sale of the quarter was the sale of the 1,089,400 SF USA Parkway Distribution Center from Bentall GreenOak to Exeter $140,000,000. There are several properties currently on the market which may transact in the 4th quarter.
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