“For lease” signs are starting to crop up in retail centers around Reno and Sparks as some small businesses — particularly restaurants and bars — close their doors as the result of pandemic-related restrictions.
But it’s still too early to judge the full impact, especially because no one knows how long the economic downturn might last.
“It’s somewhat hard to see if some spaces are vacant or just closed due to the operating restrictions,” says Kelly Bland, a senior vice president and principal with NAI Alliance, a commercial real estate firm in Reno. But he says some businesses clearly have packed it in, and he expects to see more closures in coming weeks.
Restaurants and bars have been hard hit, he says, as well as other local businesses that have been required to close their doors during the COVID-19 outbreak.
Federal Paycheck Protection Program assistance helped keep some businesses afloat, Bland says, but the requirement that business spend at least three quarters of the money on payroll means that other costs such as rent have been difficult to manage.
Research by CBRE, another major commercial real estate firm, found that 28 percent of the new leases for retail space in Reno and Sparks last year were signed by restaurants — the businesses that are under great pressure now. Fitness studios, another hard-pressed sector, account for 6 percent of last year’s leases.
Smart shopping center owners will be flexible as their tenants try to bounce back, Bland says.
“It’s better to try to help your existing tenant get back on their feet rather than having a vacant space and needing to find another tenant to lease it,” he says, noting that landlords face additional costs when they need to market and improve a vacant storefront.
With commercial evictions suspended as part of Nevada’s pandemic response, owners of shopping centers don’t have any choice but to work with the owners of troubled businesses.
Even so, Bland says rents for retail spaces may soften if vacancies continue to rise. Before the pandemic restrictions were put into place, CBRE found that retail rents averaged $1.43 a square foot in Reno and Sparks.
CBRE researchers noted, too, that the vacancy rate in shopping centers had begun to creep up just a bit before the arrival of COVID-19. About 6 percent of the region’s shopping center space was vacant in the first three months of this year.
More than 200,000 square feet of new retail space is under construction in the area. That includes the big remodeling of the old Shoppers Square into Reno Public Market, the commercial project under way at Rancharrah in South Reno, the Keystone Commons center just west of downtown and several smaller projects.