Reno Multifamily Market Report

4th Quarter 2023

Posted In — Market Research | Market Report

A total of 10 multifamily assets traded in Q4 of 2023 with a total volume of $20,150,000 or an average price per unit of $214,643.

Of note, a private investment company based out of San Jose, CA acquired Quail Manor Apartments (56 units) for $14,500,000 ($258,929 per unit) at a 5.20% cap rate (in place), Ben Nelson of Kidder Mathews conducted the sale. The buyer was coming out of a 1031 exchange in San Jose and sourced financing through Plumas Bank.

Apartment vacancies remain relatively low for Q4. Johnson Perkins-Griffin reported that the overall vacancy rate increased to 3.09% (+36 basis points) while asking rents decreased from $1,653 to $1,612.

Just over 3,684 apartment units are currently under construction, and nearly 4,771 apartment projects are in planning stages. All submarkets showed rental decreases during the quarter, led by Downtown experiencing the largest decrease (down $1,687 in Q4 compared to $1,835 in Q3). With vacancies on the rise, the hardest hit area remains the Airport submarket, with vacancies trending up (5.36% in Q4 compared to 3.21% in Q3). Several factors weigh into these changes, namely that tenants have been saving their money and have opted to “fly higher” to Class A apartments; another factor being lead tracking. Two property management sources stated that apartments are simply not getting the lead tracking they have been enjoying in the last several months.

A headline from Forbes stated that the Fed will be slow to cut interest rates in 2024, adding that The Federal Reserve will start cutting interest rates around mid-year 2024, but the cuts will be slow and gradual. Bond and mortgage rates will move earlier in anticipation of the Fed’s change in short-term
interest rates. Underpinning the Fed’s policies will be the basic data on the economy regarding the risk of recession and the movement of inflation. The risk of recession has fallen, according to the judgment of economists. Notwithstanding, all of this is a welcome change for multifamily investment to Northern Nevada as cap rates have been following interest rates, averaging in the low to mid 5% range.

It remains to be seen what will 2024 will look like, community banks in northern Nevada are not seeing any strain yet with multifamily portfolios. If the Fed is true to form on decreasing rates, this should bode well for investment opportunities for buyers moving their capital to Reno.

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