Reno is rising to the top of investment lists for 2020. The market is a cheaper alternative in Nevada for investment, and it is showing significant growth potential. The Lear Industrial Center in Reno recently traded hands for $117 million, illustrating the activity and growth in the market. Clarion Partners
purchased of the property, a 1.4 million-square-foot four-building class-A business park, from Panattoni Development Co.
“This deal shows the continuing trend of compression in cap rates and increase in dollars per square foot,” Mark Detmer
, senior managing director at JLL
, tells GlobeSt.com. “Also the buyer of Lear is looking to add value by further demising the vacant unit and pushing rents 23% in the near term.” Detmer represented the seller in the deal along with JLL’s Bo Mills.
The market is showing tremendous growth and has become a popular investment market as of late. “The market is robust from a stabilized or ground up basis,” Detmer says. “On the former, we are seeing rents year-over-year increase by 7-10% depending upon the class and size so there is a value add component. On the latter the spread between initial yield and exit is 100-150 basis points. Nevada is also an attractive alternative to less stable regulatory environments for investors chasing yield.”
Clarion Partners, the buyer in this deal, is one of the most active players in the market, along with major investors, like Blackstone, Prologis, AEW CalSTRS and BlackCreek. “Starwood has high level of interest and has been the bridesmaid on two large portfolio sales,” adds Detmer.
Nevada in general is getting a lot of attention. Las Vegas is one of the fastest growing markets in the country, and is attracting California residents looking for more affordable living. “Reno is a cheaper alternative in Nevada from a rent and investment standpoint,” says Detmer. “Also, LV occupiers are more SoCal centric whereas Reno has a more diverse distribution model with access to 11 Western States in one to two days. Reno is a more pure distribution and manufacturing market and LV has a convention center component.”
While there is a lot to be excited about in Reno, finding opportunities might be a challenge. Already, the market is seeing a shortage of deals. “I believe we will continue to see continued interest in assets in Reno, assuming they can find something to buy which is becoming problematic,” says Detmer. “Owners who have acquired industrial property in Reno are currently not interested in selling.”