Go figure:
At the same time that the economy in Reno-Sparks fell off a cliff and everyone hunkered down in home offices this spring, organizations leased more space in office buildings around town.
A veteran observer of the market for office space thinks, however, that the falling vacancy rate may have been a fluke, and vacancy rates are likely to head upward later this year.
An analysis of the Reno-Sparks market by Colliers International, a commercial real estate broker, found that 9.4% of the office space around town was vacant this spring. That compares with a vacancy rate of 10% in the first three months of this year.
Melissa Molyneaux, a senior vice president with Colliers International who specializes in office properties, acknowledges that the leasing activity came as a surprise to some observers of the office market.
But she says the momentum of a strong market for office space at the start of this year may have continued into the spring, even though the economy itself was cooling.
“Transactions that started were already in motion or far enough along that tenants nor buyers could not back out,” Molyneaux says. “Much of the momentum from the beginning of the year closed in the second quarter.”
But because negotiations for new leases or sales of office buildings began to slow during the worst of the pandemic shutdown, vacancy rates could begin to rise in the second half of this year, she says.
Owners of office buildings also haven’t yet seen the full effect of the accelerating work-at-home trend, Molyneaux said. She noted the trend has been developing for a couple of decades but gained steam when state governors ordered office closures to battle the pandemic.
Vacancy rates this spring were highest in the airport area, where many office buildings are older. Nearly 15% of the office space in that area is vacant.
In South Meadows, by comparison, the vacancy rate was a super-tight 2.6%, and the Meadowood market saw an 8% vacancy rate.
And there’s even more good news for office landlords.
“Anecdotally it sounds as though most office users are paying their rent on time,” Colliers researchers wrote.
On the other hand, the spring months saw some cracks in the strong market as rents began to slip.
Overall, the average rent for office space in Reno and Sparks stood at $1.83 a square foot this spring, the Colliers analysis found, down slightly from $1.87 in the first quarter.
Office rents average $1.91 a square foot in Meadowood, the most expensive in town. Offices in Sparks are the least expensive, averaging $1.44 a square foot.
