Northern Nevada Real Estate Journal Vol. 4 Issue 1

Northern Nevada Real Estate A special publication brought to you by the

Volume 4, Issue 1

COMMERCIAL | INDUSTRIAL | RETAIL | LAND | OFFICE

Monday, May 15, 2017 | www.nnbw.com

Creating a neighborhood gathering spot at Skyline

By Annie Conway aconway@nnbw.biz A Reno-based real estate investment firm is bringing new life to an old building on Skyline Boulevard in the western hills of Reno.

Blackfire Real Estate Investors is renovating offices and adding a restaurant to a commercial building located at 2995 Skyline Blvd. The building is approximately 8,000 square feet with 3,500 square feet of new restaurant space on the first floor and approximately 4,500 square feet of office space on the second floor. They have renamed the project The View.

“We were really excited about this project because we felt it was an opportunity to create significant change in the neighborhood,” Tilio Lagatta, managing member of Blackfire Real Estate Investors, said.

He envisions it as a place for people to congregate for coffee in the morning and a place for people to get a glass of wine and a bite to eat in the evening.

“I would like it to be a neighborhood hangout,” Lagatta said.

The building had previously been home to Skyline Marketplace, a market and gas station. Blackfire Real Estate Investors purchased the property in January 2017. According to the Washoe County Assessor’s Office, the property sold for $485,000. continued on page 11

Tilio Lagatta, managing member of Blackfire Real Estate Investors, stands in front of the newly renovated building with office and restaurant space at 2995 Skyline Blvd.

Photo by Annie Conway/NNBW

Industrial real estate records low vacancy rates leading into second quarter

By Rob Sabo info@nnbw.biz Investors in 2016 snapped up industrial properties in northern Nevada at record pace.

Last year there were 20 deals done over 100,000 square feet, which is double an average year, said Dave Simonsen, senior vice president of the industrial group at Kidder Mathews.

The pace of investment activity, particularly from national investors, took the market by surprise and left brokerages with limited investment opportunities to market in 2017, Simonsen said.

“We do not have the inventory to duplicate the demand we had last year,” he said. “Landlords are taking advantage of the tight market and increasing rental rates for new tenants and renewals — this is a This 210,215 square foot industrial building at 960 United Circle is one property that changed hands in an active market that is attracting investors.

Photo courtesy Kidder Mathews

180-degree turn in the market from five years ago.”

Investment activity in the first quarter was just under 1 million square feet and sold at an average of $57 per square foot, Kidder Mathews notes in its first-quarter industrial report. The largest transaction was by Mt. Anderson LLC, which acquired a 545,550-square-foot building on Moya Blvd. in North Valleys for just under $34.5 million.

The heated Reno-Sparks industrial market has garnered the attention of many national investors.

Stag Industrial of Boston purchased the 161,986-square-foot Nugget Industry Center for $8.4 million.

Simonsen said national investment continued on page 11

2 | Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com

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Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com | 3

Office market on slow, steady climb

By Duane Johnson djohnson@nnbw.biz The Reno office market remains steady as the first quarter of 2017 closed.

According to a report by CBRE Inc., Reno recorded a positive net absorption rate for the fourth consecutive quarter at 12,312 square feet. The vacancy rate stood at 13.6 percent in the first quarter, down from 14 percent in the fourth quarter of 2016.

David Woods, vice president in the Reno office of CBRE, said the upward trend in the office market should continue at a moderate pace.

“Reno is not battling a negative perception anymore,” Woods said.

“It is now well-known on a national level. Reno is now cool.”

Melissa Molyneaux, vice president in the Reno office of Colliers International, contends, though, that while the market remains positive, it also has flattened out a bit.

She cited some instances where office absorption cancelled itself out, such as when CAEK, Inc. leased office space, only to have another office space open up when Charles Schwab left its 13,000-square-foot space for Las Vegas.

Still, Molyneaux said while the market isn’t going gangbusters like the mid-2000s, commercial real estate brokerages are staying busy.

“As long as it’s a manageable level, that is good for us,” Molyneaux said.

Lease prices are a mixed bag.

Class A office space, has seen fluctuating lease-prices while the Class B and C submarkets are seeing competitive markets with owners jockeying for tenants.

One thing that Woods said is a bit worrisome is the lack of largescale office space over 10,000 square feet right now. Downtown Reno, for example is in very short supply of Class A office space.

With such short supply, it’s expected that Class A lease rate will rebound in the near future.

The Class A average lease rate decreased by $.06 to close at $1.82 per square footage while Class B decreased by $.05 at $1.53 per square footage.

Woods added there just isn’t that much Class A space available and an influx of new speculative office space is needed.

“A lot of companies from the Bay Area are looking over the hill to Reno,” Woods said. “A large number of these companies want the brand-new 2017 Class A office space.”

Construction of office properties has stalled as general contractors are focused on more lucrative sectors. Couple that with high prices of construction materials, there’s been very little new office space coming onto the market.

“Construction companies are very busy, but are increasingly turning their attention to retail or multifamily sectors,” Molyneaux said.

A few notable office property construction projects are McKenzie Properties’ Mountain View Corporate Center near the Kietzke Lane and Neil Road intersection in South Reno, and Reno Land Development’s mixed-use project at Rancharrah that includes office, retail and residential properties.

On the other hand, sales of office properties remain strong.

Molyneaux indicated investors have turned their attention to buying older complexes and renovating them to attract new tenants.

“On the sales side we have certainly seen prices coming back,”Molyneaux said. “Investors are fixing up these old buildings to attract those cool tenants,” she said. “It has been wildly successful.”

She cited 63 Keystone Avenue project in Reno. The once blighted building was purchased by Blackfire Real Estate Investors, which began renovating the entire property.

Overall, according to CBRE’s report, there is strong interest from out-of-state investors enamored with northern Nevada’s growth potential, even though leased investment opportunities are limited.

Although there is interest in downtown office space, Wood indicated the Meadowood Mall area is still the most sought-after submarket. He cited Meadowood’s proximity to retail opportunities continues to be an attraction for potential tenants. He added that while downtown has amenities the lack of parking options sometimes deters potential tenants.

While the office market is not as hot as industrial, retail or residential markets, results from the first quarter from decreasing vacancy and availability rates will continue into the middle of 2017. ●

While Reno’s downtown is a desirable place to open an office, the lack of parking pushes many businesses to other submarkets.

Photo by Duane Johnson/NNBW

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4 | Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com

Empty retail space continues to be absorbed

By Sally Roberts sroberts@nnbw.biz The retail real estate market showed significant signs of strength during the first quarter of 2017, as a couple big boxes found leases and the first large new retail in years nears completion.

“We’re starting to see some empty junior anchor spaces get gobbled up,” said Shawn Smith, vice president with CBRE and a retail specialist.

The vacancy rate fell by 40 basis points in the first quarter to 11 percent, according to the quarterly report from CBRE, Inc. Year-overyear, that represented a change of 100 basis points.

“Given market activity, vacancy rates can be expected to fall below 11.0 percent for the first (time) since CBRE began tracking market activity in 2009,” the report said.

Net absorption fell by 70,780 square feet, the ninth consecutive quarter of positive net absorption.

Leases in Spanish Springs signed by Grocery Outlet and Sprouts accounted for 59.7 percent of the first quarter’s absorption.

Grocery Outlet will move into a 22,000-square-foot space, a portion of the former Disc Drive Scolari’s.

Sprouts leased a building in Sparks Galleria that formerly housed a Circuit City. The store plans to expand the building by 10,000 square feet, which will create a 30,000-square-foot space, Smith said.

While no new projects opened in the first quarter, one big one is taking shape in south Reno.

South Meadows Promenade will be anchored by a second Sprouts and is expected to be completed in the third quarter of 2017.

Promenade is almost 100 percent leased, Smith said.

“Reno has a great story to tell,” As the retail market continues to grow, empty big box stores continue to give the real estate industry headaches. About 17 big boxes remain empty in the market.

“Most retailers are shrinking their footprint,” Shawn Smith, vice president with CBRE, told the NNBW. “They have an online presence and are maximizing their merchandise and aisle space.”

Retailers coming into the area generally don’t need the giant spaces of the past. In some cases, the spaces have been divided, but that process is expensive, Smith said, which increases lease rates.

Retailers would rather look at spaces already the size they need.

And example of dividing the space is the long-closed Wal-Mart in the Northtowne Plaza. Ross Dress for Less moved into 25,000 square feet of the mammoth building. Teleperformance U.S.A., the first to claim a piece of the building, opened a 45,000-squarefoot contact center in 2015.

Another option for solving the big box issue is repurposing the

he said, referring to the economic stimulation of Tesla, Switch, Apple and now Google.

The influx of companies big and small is increasing the number of jobs available, which attracts more people to the area. All those people with more money in their bank accounts are going out to dinner more and shopping more, which attracts more retailers.

Another planned retail project is an expansion of the Legends at Sparks with a 58,700-squarefoot build-to-suit building and a 7,060-square-foot speculative building.

Retail businesses set to move into the Legends include Burlington Coat Factory, Chick-fil-A, The Habit Burger Grill, Jersey Mike’s, Buckle and Charlotte Russe.

Even bigger projects are coming down the pipeline.

Two projects by Reno Land Inc. have substantial retail components as well as housing and office space. whole building.

Examples are Saint Mary’s Medical Group, which purchased a closed Scolari’s grocery store building in northwest Reno. In 2015, the healthcare company opened a medical campus with urgent care, pediatrics, primary care, specialists and a pharmacy in the 46,000-square-foot building.

Renown Health purchased a former Lowe’s Home Improvement store on Oddie Boulevard in Sparks in July 2016 and plans to house hospital and healthcare support services such as a call center and distribution in the 192,000-squarefoot building.

Repurposing retail space into medical offices has become common enough that real estate professionals have a term for it: “Doc in a box.”

Although harder to sell and lease, big boxes will slowly fill in one way or another as the RenoSparks commercial real estate markets tightens and fewer existing buildings are open. ●

Work has begun on Rancharrah in south Reno, off Kietzke Lane, and plans for the Park Lane project on Plumb and South Virginia are going through the approval and refinement process.

Rancharrah, originally the 141-acre estate of William Harrah, the founder of Harrah’s casinos, will be a master planned, mixed use community, with 12.8 acres designated for office and retail space.

The Park Lane project is on the 46-acre site of the now demolished Park Lane Mall. Plans include 110,000 square feet of retail and restaurant space.

The Promenade, Rancharrah and Park Lane projects are all infill projects giving life to unused land within the city limits. These and other, smaller projects taking shape, are expected to keep Reno’s retail market growing. ●

Above: Grocery Outlet recently leased the shuttered Scolari’s market on Disc Drive in Sparks, helping to absorb unused retail space in the Reno-Sparks market.

Photo by Sally Roberts/NNBW

Below: Commercial real estate professionals are turning to creative solutions to fill long-empty big box stores such as this former Lowe’s Home Improvement store in Sparks.

Renown Health purchased the sprawling building to use for support services.

Photo by Sally Roberts/NNBW

Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com | 5

Dermody describes robust industrial economy in region

By Rob Sabo info@nnbw.biz Michael Dermody has seen his fair share of boom growth and bust recession in his 30-plus year career at the helm of Dermody Properties.

Dermody joined the family firm in 1976 and was named president and chief executive officer in 1983.

In that time, Dermody Properties has benefitted from strong local and national economies, a bit of good fortune and timing, and an eye toward providing industrial real estate tailored to meet customer’s needs to grow from a small family business in Reno to a national real estate investment firm.

This latest round of boom is much different than any other growth cycle in northern Nevada’s history, Dermody said. It’s reminiscent of when the MGM hotel was built in the late 1970s, a major development that proved to be a game-changer for the regional gaming and resort property markets. The sheer scope of the project was a catalyst for northern Nevada’s infrastructure and labor market, and meeting those demands better positioned the region for additional growth that occurred throughout the 1980s, Dermody said.

Today, the addition of Tesla, along with other national/international names such as Apple, Switch and now Google, has put a national spotlight firmly on northern Nevada.

And it’s thrust companies such as Dermody Properties into the limelight to meet the demand for new industrial properties for those companies and a host of others.

“The industrial economy here is better than it’s ever been,” Dermody said. “Google is a good example of the national companies that are validating our region even more than ever, and that’s the big news. You have companies that do a lot of due diligence that previously might not have gone into Nevada who are now calling northern Nevada their home.

“Silicon Valley companies are finding it very acceptable to do business here, and that hasn’t happened on this scale since I have been in business,” he adds. “Northern Nevada becoming part of the growth of the Silicon Valley companies is a significant shift for us, and it is unique.

It’s not going to happen in Las Vegas, it’s not going to happen in Portland – it’s happening here, and I look for it to increase dramatically in the next 10 years.”

The expansion of Silicon Valley giants and other companies is expected to put a great deal of pressure on many key industry segments of northern Nevada. New inventory for industrial real estate already is in extremely high demand, as is demand for industrial investment opportunities.

The additional demand for labor, housing, office space and the infrastructure to service new growth areas should provide robust development opportunities for Dermody and many other companies.

Meeting those demands — as the region did back when the MGM was erected — better positions all of northern Nevada to succeed through this current growth cycle and beyond, Dermody said.

“There are a lot of people working very hard in the cities, and at the county and state levels making sure that we have the infrastructure to

handle the growth we have coming,” he said. “It’s wonderful to have Tesla, but in addition comes all the suppliers.

The suppliers to Tesla, Google, Apple and Switch are all important parts of the industrial mosaic. It’s bringing in new customers, and it’s also bringing in companies that are willing to pay a higher wage, which is good for the region.”

Dermody, 66, is quick to credit his senior management team with much of the company’s current success.

Dermody works as company chairman and CEO, while Doug Kiersey works as president.

“They have done the heavy lifting and I have tremendous respect for the entire team,” he said of his executive team.

But as so often is the case, timing is everything. When it comes to timing, Dermody has been masterful.

In 2007 DP Industrial, a joint venture between Dermody Properties and the California State Teachers Retirement System, sold its portfolio of 24.7 million square feet of industrial space to ProLogis for $1.85 billion in the largest real estate transaction ever recorded in northern Nevada.

The portfolio included 114 buildings, with nearly half of them in Reno and Sparks. The remaining assets were scattered between Chicago, Las Vegas, eastern Pennsylvania and Southern California.

It proved to be an extremely fortuitous transaction for Dermody Properties. Less than a year later, the national and regional economy crumbled under start of the Great Recession and property values plummeted.

Dermody said a key factor behind the company’s longevity is its attention to servicing customer needs. The new building Dermody Properties erected for Urban Outfitters in 2011 at North Valleys is a good example. Instead of typically 32foot clear height, the Urban Outfitters building was constructed with 36-foot clear height, which greatly increases available racking space in a smaller footprint.

When Dermody Properties broke ground for Phase 1 of Logisticenter at 395 off Lemmon Drive in 2013, it was the first speculative industrial building under construction since 2008. That 624,000-square-foot building was erected with the same 36-foot clear height and greater parking space that’s now become a hallmark for large Internet retail companies. As a result, Amazon vacated its longtime Internet fulfillment center in Fernley to move to Reno.

“We try to make a difference in how we treat our customers,” Dermody said. “We really listen to them. By focusing on Urban Outfitters, we set the platform — unknown to us at the time— to create a state-of-the-art fulfillment center for Amazon.”

Although there’s strong demand for new industrial product in northern Nevada, Dermody said the regional market still is more balanced than other areas. Companies are leasing new space within a year of a building’s completion, rather than when permits for new construction are pulled, he said.

Locally, Dermody Properties is beginning the second part of Phase 2 of Logisticenter at 395. The company will erect 450,000 square feet of new class A industrial space. It’s also developing new class A space at LogistiCenter at I-80 near Boomtown.

Dermody said he doesn’t have any grand view of what the next 10 years will bring. However, he’s still as passionate about his work today as ever.

“That’s a difference maker, because customers like that,” he said.

“Development is like every profession; you have to be responsible at it. We are not looking for boom growth.

We prefer evenly-paced moderate growth, but you can’t dictate what the economy does and we try to adapt to that.” ●

Pictured is the first building of Dermody Properties’ LogistiCenter at 395 Phase 2 industrial buildings. Located in North Valleys, the LogistiCenter projects are designed with large distribution centers in mind.

Photo courtesy Dermody Properties

6 | Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com

Housing for vets, disabled, homeless opens in Carson City Staff Report Carson City’s new, innovative apartment building for veterans, disabled and other homeless residents opened on May 1.

“It’s a place to live and move to self sufficiency,” Gary Longaker, executive director, Nevada Rural Housing Authority (NRHA), who developed the project, told the Nevada Appeal.

The goal is for people to get on their feet, get job training and other skills, find work and eventually move out once their income exceeds the limit to be on the program.

“This is not transitional housing, it’s permanent, supportive and they’ll live there until they can move into the regular rental market,” said Jeni Chavez, NRHA director of rental and housing programs.

NRHA and Nevada Rural Housing Inc. were co-developers on the project, which was funded by lowincome housing tax credits, HOME program funds through Nevada Housing Division, Community Development Block Grant funds from Carson City, and Federal Home Loan Bank Affordable Housing Program funds.

It started as a $7 million project but grew to about $8.5 million, mostly because of the addition of security measures such as cameras and doors with window panels, said Heather Simola, real property administrator, NRHA. The federal rental assistance housing vouchers subsidizing the costs are dedicated to the project

and eight of them are designated for veterans.

The complex includes 38 fullyfurnished apartments, laundry, game, and community rooms, library and office space for health and other service providers as well as a 2,400 square-foot training center where residents can learn new job skills.

An on-site property manager from Northern Nevada Community Housing occupies a 39th unit.

“It’s the first of its kind in Nevada.

Other organizations provide similar housing, but their supportive services are nearby and not on site,” Simola said.

Each apartment is 520 square feet and includes a kitchen, living room, bedroom and bath.

Four of the units are outfitted for disabled tenants and up to three people are allowed to live in each apartment.

Outside, off a large community room, is a dog park area for residents’ pets and planned raised garden beds.

“We have more applicants than we know what to do with,” Jeni Rios, director of rental and housing programs for NRHA, said. “We have enough for two more buildings this size.”

The idea for Richards Crossing was hatched in 2013 by staff with Friends in Service Helping (FISH).

Garth Richards, the facility’s namesake, donated the 1.7-acre parcel on Jeanell Drive for the apartments.

“The best thing that has ever happened to me is my wife

Joanie,” Richards said during the April 12 opening ceremony for the apartments. “And the second best thing is this.”

Jim Peckham, executive director of FISH, said the service organization raised $1 million and brought on NRHA, which raised the rest of the $8.5 million needed to build the project.

Q&D Construction Inc. broke ground on the project in mid-2016.

“It became the talk of the town and people wanted to be involved,” Peckham said.

That included Supervisor Lori Bagwell, who’s on the FISH board of directors, and Mayor Bob Crowell,

Richards Crossing has 38 supportive housing units for special needs households and veterans.

Photo by Jim Grant/Nevada Appeal

who together led the effort to raise the $1,425-per-unit needed to equip and furnish each apartment so they’re move-in ready.

Many volunteers helped with book donations to fill the library, assemble furniture and even make handmade quilts.

“I’m just thrilled at the community’s acceptance of this project. We’ve had no pushback,” Bagwell said.“I’m humbled that in Carson City we have people with such good hearts.” ●

Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com | 7

University District a hot submarket for multifamily investors

By Annie Conway aconway@nnbw.biz Student housing “are some of the hottest deals in Reno,” said Trevor Richardson, an agent with Dickson Commercial Group who specializes in multifamily.

“The university is growing at an enormous rate, it has the highest amount of students that it has ever had and they are only looking to continue to expand over the next three to four years,” Richardson said in a phone interview with NNBW. The University of Nevada, Reno now serves nearly 21,000 students creating a demand for additional student housing in the area. However, this demand is being hindered by the amount of developable land around the university.

“You have student housing developers really excited about the growth, but they find it challenging with the amount of development sites around there,” Richardson said.

Developers must be creative with land that is available.

“So you are having developers having to go vertical,” Richardson said.

One example is the 7-story, 105-unit complex currently under construction called Identity Reno. The project is located at 1551 N. Virginia St. and is slated to be complete before the fall 2017 semester.

“We don’t have a lot of dense projects in Reno. That is probably one of the more dense ones we have going on right now,” he said.

Identity Reno is one of several new student housing developments currently being built around the university. Others include Towers at Pink Hill, a 23-unit student housing development located on North Virginia at 14th Street, and Wolf Run East, a 105-unit development on the east side of the university located at 1980 Valley Road.

The demand for student housing is also elevating the price for existing complexes around the university.

Richardson explained that property owners know that this type of housing is in demand and they are setting the prices for property in the area very high.

Richardson and Tom Fennell, of Dickson Commercial Group, represent the seller in the sale of a 24-unit assemblage of three apartment buildings, a duplex and a single-family home, which sold for $2,995,545 in the first quarter of 2017.

“Developers and investors want to be in that submarket,” Aiman Noursoultanova, senior vice president of investment properties with CBRE, said about the University District.

Noursoultanova explained that CBRE was involved with the transactions of three of the large student housing complexes north of the university that are now called The Republic, The Highlands and Sterling Summit. They are continuing to see interest from investors in the area.

“There are a number of investor groups looking to enter the submarket who have not been able to,” she said.

Noursoultanova said there is potential for student housing south of the university; however, there have been studies that show that students do not want to cross I-80.

“Students are not ready to cross over the highway yet,” she said.

UNR plans for future development south of the university, but still north of I-80, in what is called the Gateway Precinct, as outlined in the university’s master plan. The Gateway Precinct is designed to serve as an extension of the campus as it continues to grow and connect the university and downtown Reno. The extension could be an opportunity for more offstudent housing in the future.

“That just hasn’t happened yet,” Noursoultanova said.

Additionally, the Reno multifamily market in general is continuing to be in hot demand. The high demand and low vacancy rates are driving rents to historic rates.

Noursoultanova explained that Reno’s multifamily rents have historically been in the $800 - $850 category. Those rates are quickly becoming a thing of the past.

The average rent rose to $1,111 in the first quarter of 2017, as reported

by CBRE. This is a 4.22 percent increase from the average rent of $1,066 reported in the fourth quarter of 2016 and a 12.22 percent yearover-year increase from the first quarter of 2016. While the average vacancy rate decreased from 2.93 percent in the fourth quarter of 2016 to 2.23 percent in the first quarter of 2017.

The strong job growth and the lack of inventory are the driving forces behind the increase in prices.

According to Noursoultanova, as rents continue to increase people will begin to look to neighboring areas such as Sparks, North Valleys, Carson City and more. She said that they are already seeing Sparks benefit due to its proximity to the Tahoe Reno Industrial Center.

However, Reno is still an affordable market compared to California markets.

“We still have some ways to go to catch up to Sacramento, San Jose and other west coast markets,” Noursoultanova said.

New construction will help to alleviate the rate of rent increases.

There are a reported 2,713 units under construction and another 6,658 units in the planning stages.

“We have a lot in the pipeline,” Noursoultanova said. “If all of them are going to materialize is the question.”

She anticipates the Reno multifamily market to continue to gain national attention from investors and for rent growth to remain strong with the possibility of vacancy rates increasing as new construction projects are delivered toward the end of the year. ●

Above: A rendering of a 105-unit student housing complex called Wolf Run East.

Students will be able to start moving into the newly constructed units on Aug. 1.

Photo courtesy Wolf Run East

Below: Construction is currently underway on Virginia Street for a five-story student housing complex called Identity Reno.

Photo by Annie Conway/NNBW

8 | Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com

In his own words:

Marcus & Millichap’s Kenneth N. Blomsterberg Name/Title/Company: Kenneth N. Blomsterberg, Senior Vice President, Marcus & Millichap Real Estate Services Number of years with company: 28-plus Number of years in the profession: 40 Education: Studies included Electrical Design Engineering – Golden West & UCLA Last book read: Driven by Donald Driver Favorite movie: Rudy Favorite musical groups or genre: Pink Floyd; ACDC; Journey; Foreigner Spouse, kids or pets: Rosie (wife); Michael, David, Michele & Kristin (children); Tiffany, Trevor, Brittany, Destiny & Zachary (grandchildren); Maddie & Hunter (great grandchildren). Dosha (dog), Pippin, Destiny & Butchmeister (cats).

Northern Nevada Business Weekly: Tell us about your company/organization and the duties of your position.

Kenneth N. Blomsterberg: Marcus & Millichap was founded in 1971 by George Marcus and Bill Millichap in Palo Alto, Calif. They pioneered exclusive representation for sellers. When I started with Marcus & Millichap in January 1989 the company had 13 offices (furthest east was Chicago), transacted $1.2 billion in sales in 1988 and had 250 investment specialists. Fast forward to today, there are 76 offices within the United States and Canada, $42.3 billion in sales in 2016 and more than 1650 investments specialists. Marcus & Millichap went public on the NY Stock Exchange in 2014 with the call letters MMI. The Blomsterberg team specializes in the sales of multifamily properties in northern Nevada and northern California. I have a team in Reno and Roseville plus a transaction coordinator to help facilitate a successful execution of our assignments.

NNBW: How did you get into this profession?

Blomsterberg: I worked in the aerospace industry as a senior electrical design engineer in Southern California for about seven years prior to moving to Incline Village in 1972. When I moved to Lake Tahoe I exited the engineering field and started a new career in residential and commercial development with my brother-in-law. I phased into real estate sales full time in 1980 when I became a partner in a residential real estate firm called Tanager Realty in Incline Village. I resigned from Tanager Realty prior to joining Marcus & Millichap and started a new career in commercial real estate.

NNBW: What do you enjoy most about working in your field?

Blomsterberg: I enjoy the excitement and challenges of putting deals together.

I also enjoy the relationships I develop with clients as most become good friends. I’m fortunate to work with a young smart educated team that I’m able to mentor. It gives me great pleasure to see these young agents succeed and there have been many.

NNBW: What is the most challenging part about your job?

Blomsterberg: I learn something from every deal that I close from what works best and what not to do in the future. There are different challenges that may present themselves during a transaction and the goal is to mitigate the challenges. If you have a willing buyer and seller most challenges can be resolved. What I love about commercial versus residential real estate is that emotions are not as prevalent in commercial as they are in residential.

NNBW: What do you foresee in the future of your profession?

Blomsterberg: In a nutshell: continued success. We at Marcus & Millichap take the role of advisors to our clients and are not caught up with transactional brokerage. We are in it for the long haul and “relationships” is the name of this game.

NNBW: What advice would give someone who wants to get in your profession?

Blomsterberg: Being a fee-based business, I would advise new agents to have sufficient funds set aside for 12 months; be prepared to put in 10-12 hour days; take the advice of your senior/mentor (do not try to reinvent the wheel); set realistic annual goals and hit them; you can be successful in this business if you have that burning desire to be a winner; this business is the best kept secret.

NNBW: What was the best advice anyone ever gave you either professionally or personally?

Blomsterberg: Treat people the way you want to be treated. It’s not difficult to be nice to people. Do not be judgmental of other people. That’s what I love about this business; you meet some really nice, professional and extremely successful people.

NNBW: Has there been someone who was especially influential in helping you establish your career or in reaching your higher goals? If so, who and how?

Blomsterberg: My father was the initial influence who guided me in the right direction with being the best person that you can be. There is nothing you can’t be if you set goals and put your mind to it. After I left the aerospace industry in southern California and jumped into Incline Village real estate, my wife Rosie has been my most influential person. Having a supportive spouse and children I find it’s not difficult to set goals and be the best you can be, if nothing else, but for them.

NNBW: Do you belong to any professional/networking organizations? How has membership benefitted your career?

Blomsterberg: I’m a member of NAIOP and ACRE. I’ve had the pleasure of being nominated for investment broker of the year supported by these organizations, which has given me recognition with my peers and clients.

NNBW: Is there any educational advancement that is essential for someone in your career field?

Blomsterberg: To begin a person needs to pass the Nevada Real Estate Examination and most colleges and community colleges offer real estate courses to prep a person for the exam. Once licensed, the state requires an agent every two years to acquire 24 clock hours for continuing education classes. Public speaking classes are also helpful for agents who may be a little fearful of speaking to a group.

NNBW: How do you manage your time between the responsibilities of your profession and your personal life?

Blomsterberg: Many times they run together. I’m blessed with an understanding wife (empty nesters) that does an amazing job on keeping our personal lives on track which allows me a full reign on my profession. I have great young smart people that help make up our team that allows me to leverage my time and enjoy quality time with my wife and family.

NNBW: Why did you choose a career in northern Nevada? What do you like about living/working here?

Blomsterberg: I’ve been in Nevada since 1972 when I relocated from Seal Beach, Calif. I got tired and frustrated with the traffic and smog in Los Angeles and moved to Incline Village… I think Nevada has so much to offer and especially northern Nevada with all the great economic news propelling the area. I like everything about Reno from the ease of getting around the city, proximity to Lake Tahoe, Sacramento and San Francisco, the people are friendly, the Reno Aces, Bighorns and new USL team and the tax climate is much more favorable than California.

NNBW: Is there a nonprofit or charitable organization that you like to donate your time to?

Blomsterberg: For the past 12 years, I’ve been on the board of directors for the Child Abuse Prevention Council of Sacramento and Prevent Child Abuse in California.

NNBW: Do you have a favorite vacation spot?

Blomsterberg: Four Seasons Resort in Maui, Hawaii. My mom is Portuguese (Teves) and she and her family are from Hawaii.

NNBW: Is there a place around the world you have never been to that you would like to visit?

Blomsterberg: Australia.

NNBW: If you had enough money to retire right now, would you? Why or why not?

Blomsterberg: I enjoy what I do. It’s enjoyable putting deals together. It’s not necessarily easy but fun and rewarding.

NNBW: What is a unique characteristic or attribute about yourself that makes you stand apart from other people?

Blomsterberg: I think many people have the same characteristic that I have but I treat people the way I want to be treated and do not be judgmental. Pretty simple!!

NNBW: Is there anything in your life that you wish you could do over again?

Why? Blomsterberg: I wish I would have discovered commercial real estate sales earlier in life but I have no regrets. God has a plan and I’m following it.

NNBW: If you had one moment in time to cherish for the rest of your life either professionally or personally what would it be and why?

Blomsterberg: When I met my best friend and wife Rosie.

NNBW: Last concert or sporting event attended?

Blomsterberg: Foreigner in Lake Tahoe.

Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com | 9

A record year for Reno’s apartment market

By Trevor Richardson The robust Reno apartment market is a tale of two competing sides. On one hand, investors and apartment owners are enjoying the highest rental rates we have ever seen in the Reno area, which generates higher returns for their bottom line. On the other hand, tenants are struggling to keep up with rising monthly rental rates and are having difficulty finding an apartment with the low availability of inventory available. Housing affordability has become a major concern for the city of Reno due to rapid growth, and it’s safe to say that we are experiencing growing pains in the housing sector.

The Reno apartment market experienced those growing pains during 2016 through a swift rise in apartment rental rates. The high demand for apartments in the Reno area allowed multifamily owners to increase rents to an average of $1,066 per month and drove vacancy rates down to just under 3 percent at the end of 2016, according to the Johnson Perkins Griffin’s fourth quarter apartment survey.

This translated to a whopping 12.6 percent growth for apartment rental rates during 2016. Reno significantly exceeded national trends that show rental growth hovering around 4 to 5 percent annually, according to MPF Research, a leader in apartment trends research.

Northern Nevada is not the only area in the region that is experiencing record-setting apartment figures.

A neighboring market, Sacramento, is among the highest for large apartment markets in the U.S. at around 10 percent annual rental growth.

For investors looking to get into the Reno market, expected returns have been trending downward.

There are a variety of reasons that capitalization rates have remained low in Reno, with investors looking to start in the mid-5 percentile range for large apartment complexes.

These complexes are increasingly more difficult for private equity or institutional investors to acquire in our market. With a limited apartment supply base, rapidly appreciating

New luxury apartments coming to northwest Special to the NNBW A 312-unit luxury apartment community named “Vida” is under construction in northwest Reno.

Guardian Capital and LandCap Investment Partners broke ground for Vida on May 9 at the corner of Sharlands and Mae Anne avenues in Reno, a site previously slated for development that was halted due to the recession.

“Our company is proud to bring a luxury lifestyle to area residents and we are very grateful to the city for helping bring this project to fruition,” Guardian CEO Jim Previti said in a written statement.

“Regional economic and population growth is generating housing demand, particularly for multifamily homes,” Ward 1 Reno Councilwoman Jenny Brekhus said in a written statement. “This project is being built on a partially improved site that was halted by the Great Recession, which has lingered vacant for several years. The new project brings a welcome housing option to northwest Reno.”

The 20-acre development includes many region-first features and amenities, including a private dog park, bocce ball court, a tot lot, gated entry and attached garage parking for some units.

The luxury apartment community will feature one, two, and threebedroom homes in a country club-like community environment. Amenities will include large open park areas, satellite barbeques, pool and spa with cabanas, a clubhouse with a tech connect lounge, valet door-todoor trash service, 24-hour package pickup, and a fitness facility with state-of-the-art gym equipment as well as yoga and MyRide studio.

Apartment décor features will include plank flooring, quartz countertops, energy efficient stainless steel appliances, and Bluetooth enabled lighting.

Guardian, based in San Diego, previously partnered with LandCap Investment Partners on the 100-unit Square One project in Sparks, which opened to tenants last year, and the 209-unit Waterfront Apartments now under construction overlooking the Sparks Marina. ●

rents, promising regional growth, and a central location on the West Coast, Reno has been a popular alternative for deploying multifamily capital. This competitiveness has led to many of Reno’s large apartment complexes trading hands off-market.

If you examine the sales for 2016, cap rates have remained low even for complexes that need extensive renovations but are in relatively good areas for growth. The expectations for cap rates climb into the 6th percentile range for complexes that are smaller in the total unit count and are located in class C areas.

Multifamily investors will pay close attention to interest rate hikes in 2017. Typically, higher interest rates will be followed by rising cap rates, which will put a strain on expectations for buyers and sellers of multifamily properties. With cap rates remaining low, lending has proven to be difficult at times for investors looking to acquire smaller multifamily properties using more traditional commercial lending products.

A big story for 2016 has been the increasing rate of new apartment construction on a national level, which has also been the story here in Reno. MPF Research is estimating that U.S. apartment builders added 300 thousand new multifamily units in 2016, which is the most since the mid1980s. In the Reno area, there are over a 1,000 units under construction and over 7,000 in planning phases, which is significantly up from the previous year. However, not all of the “planned” construction projects may

come to life due to rising construction costs that have made it difficult for developers. South Reno and Sparks near the I-80 corridor have seen the most significant construction and planned construction. The I-80 corridor in Sparks should see significant multifamily activity due to the proximity of the major employers in the Tahoe Reno Industrial Center (TRIC).

The rise of hip urban restaurants, retail, and bars, in Midtown and Downtown Reno, has led to the opportunity for developers to convert existing motels into new apartment units. Downtown living has become a new trend for an area that is becoming very popular for urban dwellers. Examples of these new urban developments are the 3rd Street Flats west of downtown and the Center + Pine apartments near the new Patagonia location on Center Street.

When looking ahead to 2017 we are likely to see the dramatic 2016 rental rate growth begin to level off.

Much like the national picture, Reno area will begin to see apartment rental rates cool down due to elevated pricing and new apartment supply. It remains likely for rents to increase in 2017 but overall demand for apartments will remain strong enough to absorb the new apartment inventory hitting the marketplace.● — Trevor Richardson is an agent with Dickson Commercial Group. He can be reached at trichardson@dicksoncg.com.

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Commercial Real Estate

BY THE NUMBERS Industrial

Retail

Source: Kidder Mathews

Source: CBRE Research

Office

Multifamily

LEASE RATES

NET ABSORPTION

VACANCY & AVAILABILITY

Source: CBRE Research Source: CBRE Research

Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com | 11

Skyline

continued from p1

Tilio Lagatta, managing member of Blackfire Real Estate Investors, in the stairwell of the newly renovated building.

Photo by Annie Conway/NNBW.

According to Lagatta, he had already met with several existing restaurateurs in the area but had not found the right tenant at the time of the interview.

“We are trying to find the right idea and vision that aligns with ours,” he said.

The upstairs office space is also ready for tenants. Group West Inc. is the general contractor on the project.

“And this is why we call it The View,” Lagatta said referencing the view of the city, mountains and trees from the second-floor offices during a tour of the building.

Lagatta said that he hopes to do similar redevelopment projects in the future.

“This is one of what we hope to be more of a creative path of redevelopment and reuse projects,” he said.

With the economic growth in northern Nevada and the continual announcements of new companies settling in the region “we are very optimistic about what that is going to do in the near and long term prospects for Reno,” Lagatta said.

For more information about leasing opportunities in the building, call 888-678-6660 or visit http://www. blackfireinvestors.com. ●

Industrial

continued from p1

will continue to come in as companies scour the region looking for robust investment opportunities.

“It is reminiscent of 2006 through 2008 on the investment side,” Simonsen said. “The difference this time around is that we have a number of investors buying existing properties. The last time we had investors buying properties, in addition to a number of new developers that came to town buying land and building buildings in excess of the need.”

The addition of national names such as Google, Apple and Tesla, combined with northern Nevada’s long-standing strengths as a business-friendly environment and western region warehousing/ distribution center have made Reno a much sought-after market for national investment dollars.

The addition of those big names lends additional confidence to investors already keen on Reno as a safe bet, Simonsen said.

“Investment demand for industrial properties in Reno is very high,” he said. “There’s a lack of willing sellers this year compared to last year that will likely result in less investment volume. The total number of sales in 2017 may be a bit below last year’s numbers due to the constraint of available product for users and willing sellers for investors.

“But there is no shortage of investors calling our office looking for properties; our issue is finding them suitable buildings or portfolios to buy.”

Cap rates also continue to drop, Simonsen adds, which means investors now are paying premiums for a given stream of income.

Market-wide, the $57 price per foot for investment activity represents a continued increase over the past three years.

Overall vacancy in the RenoSparks industrial market to start the second quarter was a very low 6.1

percent and is expected to drop even lower based on demand for the remaining vacant premier spaces in the market.

Tahoe Reno Industrial Center currently has the most class A space available with three buildings in excess of 300,000 square feet each.

However, Simonsen notes, two of the giant warehouses are vacant due to company expansions from online retailers Chewy.com and Jet.com.

There’s a smattering of new construction, but much of it already has tenants signed to leases.

Panattoni Development recently completed two buildings at South Valleys Commerce Center on Sandhill Road, and online retailer Zazzle took 209,000 square feet of it in a

relocation to northern Nevada from the Bay Area.

“What is being built is getting looked at if not leased,” Simonsen said. “We are getting lean on new class A properties.”

North Valleys continues to see the most new construction. Sparks has long led the overall industrial market with more than 25.6 million square feet under roof, but the North Valleys/ Stead area has 20.7 million square feet under roof — and the room to add more. Overall, there is 82.6 million square feet of industrial space in the Reno-Sparks market, Kidder Mathews reports, including 659,941 square feet of new construction.

There were 16 new leases signed in the first quarter, Kidder Mathews

reports. Fosdick Fulfillment took the largest amount of space with 269,620 square feet on Military Road.

Syncreon Technology took down another 182,000 square feet on USA Parkway at TRI. Direct vacancy is lowest in central/west Reno at 2.8 percent and in south Reno at 2.9 percent.

It’s highest in Tahoe Reno Industrial Center at 8.8 percent, but that number will drop over the next few quarters as several of those recently vacated spaces are re-leased.

Vacancy in North Valleys stands at 7.4 percent, and it’s hovering around 5 percent in the airport and Sparks submarkets. ●

The LogistiCenter at I-80 on the western edge of Reno will have four buildings with 803,322 square feet of industrial space.

Photo courtesy Dermody Properties.

12 | Northern Nevada Real Estate Journal | Monday, May 15, 2017 | www.nnbw.com

250-unit apartment complex trades hands in Reno Special to NNBW

Woodside Village, a 250-unit apartment complex in Reno, sold in April, according to Marcus & Millichap, a leading commercial real estate investment services firm with offices throughout the United States and Canada.

“Woodside Village is a strongperforming asset in an excellent in-fill location,” said Kenneth N. Blomsterberg, senior vice president investments in Marcus & Millichap’s Reno office. “The property gives new ownership the opportunity to increase revenue through loss-to-lease capture and the implementation of cosmetic enhancements to unit interiors. The ability to enhance revenue through a renovation program has been demonstrated by previous ownership and also by several other apartment communities within the immediate competitive set.”

The complex is located along a high-traffic thoroughfare at one of Reno’s largest intersections, the corner of Kietzke Lane and Virginia Street. The Reno-Sparks Convention Center is across the street.

The Meadowood Mall and two of Reno’s biggest casinos and larger employers, The Peppermill and the Atlantis Casino Resort Spa, are within walking distance.

“The Reno-Sparks market represents a diverse and growing economy with numerous wellknown major companies recently expanding their footprint in the area,

leading a rapid evolution in economic development and employment growth,” Ryan Rife, a Marcus & Millichap associate in the Reno office.

“Southwest Reno is considered to be one of the region’s most desirable neighborhoods, given its proximity to employment, major retail, excellent schools, entertainment venues, and the downtown Reno corridor.”

Blomsterberg, Rife and Benjamin L. Nelson, also an associate in Reno, represented the seller, Woodside

Among the many community amenities are four on-site laundry care centers, a cabana-style swimming pool, a soccer field, a sports court and a children’s playground. ●

Village Opco LLC, an affiliate of Pacific Real Estate Partners and Morrison Street Capital. The team also procured the buyer, Horizon Realty Advisors LLC. Built in 1977 and situated on more than 10 acres, Woodside Village is composed of 27 buildings.

The community’s one-, two- and three-bedroom apartments have central heating and air-conditioning, additional outside storage and private patios and/or balconies.

Woodside Village – renamed The Phoenix by the new owners – is a 250-unit garden-style apartment complex in Reno near South Virginia and Kietzke.

Photo courtesy Marcus & Millichap

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