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Rising Office Vacancies: Trend or Fluke? (Subscriber Content)

By John Seelmeyer

Vacancy rates are rising in Reno-area office buildings, but observers say it’s too early to tell if there’s something serious going on. Instead, they say it’s possible that a bunch of one-off events — a couple of office closures, some strategic moves by landlords — resulted in a hiccup in the market.

Colliers International reported a few days ago that the vacancy rate in office buildings around town stood at 12.5 percent during the first quarter of this year. That compares with 11.8 percent vacancy at the end of 2018.

In practical terms, the rising vacancy rate translates into an additional 79,000 square feet of office space available for rent. And the Colliers International survey found rising vacancy rates mean that rents have softened a bit, down to an average of $1.72 a square foot compared with $1.79 three months earlier.

Melissa Molyneaux, a senior vice president with Colliers in Reno, said closure of offices by Tahoe Resources, The Glenn Group and several smaller firms contributed to the higher vacancy rate.

At the same time, McKenzie Properties completed a major new building at 5520 Kietzke Lane — it’s the one just to the west of the Neil Road entrance ramp to I-580 — and about 10,000 square feet of the new building has yet to be leased.

Elsewhere, Molyneaux said some older buildings were sold, and the new owners let space stand vacant while they plan renovation projects.

Still, she said several potential new, large tenants are looking for office space in the region and numerous mid-sized and smaller firms are leasing more space to handle growth in their business.

The vacancy rate in the next few months, she said, will begin to provide clear direction whether the market is beginning to soften or just hit a bumpy patch early this year.