Q1 2019

333 Holcomb Ave., Ste. 300 + Reno, Nevada 89502 + 775.850.3100 + DicksonCG.com

OFFICE REPORTRENOSPARKS

LeasesSales

So, is this the new normal?

As it pertains to the Northern Nevada Office Market, normality is on the verge of being turned upside down. After observing the data points of the market for nearly two decades, it is evident that change is in on the horizon. As they say, change is often good and that change will amplify our office market in concert with the local economy. The new normal is yet to come and the anticipation is building (no pun intended).

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LEASING RECAP

1ST QUARTER 2019

Tenant Size Details

Greater NV Credit Union 5,751 SF Meadowood - 5190 Neil Road

Amada Senior Care 4,345 SF South Meadows - 985 Damonte Ranch

Waddell & Reed 3,037 SF South Meadows - 10765 Professional Circle

Silvaroli Dental 3,286 SF Central - 601 W. Moana Lane

NOTABLE LEASE TRANSACTIONS Completed by Dickson Commercial Group, Inc.

Is this the new normal?

The talk of the town is Opportunity Zones. The continued growth of the local economy has spurred national developers into a competitive effort to assemble land and blighted properties in the Northern Nevada Opportunity Zones, namely east and west Downtown. These redevelopment projects will certainly entail the construction of new office space; the tale that continues to fortify the dynamics in a new Class A office building.

The suburban submarkets also continue to prosper. South Meadows has posted an all-time low vacancy rate of just over 5%. The discussions of future office construction in Damonte Ranch and Northern Nevada Corporate Center continue, but it will be the first to go vertical with freeway visibility to catch this positive tide.

The Meadowood Submarket and Kietzke Corridor continue to boast activity. Discussions of the Schwab building leasing the 2nd floor after 2 years of vacancy, continued pre-leasing at The Village at Rancharrah, and the newly acquired Corporate Pointe building and excess land at Meadowood Mall make up the moxy of today’s speculative market.

Yet, let’s not forget about the data. We all like to put the blame on extended holiday schedules in January, but the fact is that Q1 lacked notable activity. Slight negative absorption was lead by primarily two companies in retirement or disposition mode. This brought our vacancy rate up slightly to 11.05%. The good news, the crystal ball is telling us that the market will punch back in Q2. After two consecutive quarters of occupiers condensing, we will have a few announcements for you.

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The office market continued to have strong quarterly performance, and Q1’s $71 million in volume was more than any quarter of 2018. The first three months of the year had 22 sales transactions at an average of $258 per square foot. Although we have seen interest rates fluctuate and an uncertain Fed and Stock Market, the demand for quality leased office product for investment still remains strong.

MULTI-TENANT SALESMulti-tenant BuildingsMeadowood continued to see to be a hot submarket and featured the two largest sales in Q1. The most notable was McKenzie Properties’ acquisition of Corporate Pointe. The purchase included the existing 85,510-square foot office building at 5250 S. Virginia Street and the adjacent 5.5 acres of land on the corner of McCarran Boulevard and S. Virginia Street. McKenzie paid $23,000,000 for both the building and land and plans a large mixed-use project on the vacant parcel. Right behind the Corporate Pointe sale was the sale of the Village at Lakeridge. Village Investment Partners from Northern California purchased the 71,678-square foot office and retail buildings for $17,900,000 ($250 p/sf), equating to a 6.2% cap rate on the year one, proforma NOI. The buildings were 100% occupied at time of sale. Tenants include Bank of America, UBS, Apple/Braeburn Capital, Starbucks, CBRE, Merrill Lynch, Bradley, Drendel & Jeanney, Sierra Nevada Properties and Moxie’s M3 Restaurant.In Downtown, a 19,222-square foot, multi-tenant building at 140 Washington Street was sold by Tolles Development Company for $3,250,000 ($169 p/sf) with a 6.4% cap rate on in place income. The property was 100% leased at the time of sale.

SINGLE TENANT SALESIn Sparks, a newly constructed 10,429-square foot office building at 777 Vista Blvd at the corner of Prater Way sold for $6,508,000 ($624 p/sf). The Texas based developer Mitchell Asset Group, completed a design, build and flip of a DaVita Dialysis Center.

The Meadowood Submarket had a number of single-tenant transactions. The largest was 5580 Kietzke Lane, a 14,670-square foot building leased to Carrington College. The building sold for $4,450,000 ($303 p/sf) with a 7.2% cap rate. Also in Meadowood, the 6,111-square foot building at 835 Maestro Drive sold as a sale-leaseback for $1,509,500 ($247 p/sf) at a 6.5% cap rate, where the seller Dennis Banks Construction signed a 6-year leaseback. A 4,190-square foot dental building at 5465 Kietzke Lane sold for $1,700,000 ($406 p/sf). Lastly, the 6,048-square foot medical building at 661 Sierra Rose Drive traded in an off-market sale for $1,514,000 ($250 p/sf). It was 100% leased at the time of sale.

SALES RECAP

# of Sales

$(p/sf)

1ST QUARTER 2019Volume

$(Millions of dollars)

Average Price/sf

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Address/SF Price Details

6990 S McCarran BlvdThe Village at Lakeridge

71,678 SF

$17,900,000($250 p/sf)

6.2% cap rate on year one, proforma NOI. 100% occupied at time of sale

Mix of retail and office

5250 S Virginia StreetCorporate Pointe

85,510 SF

$23,000,000($269 p/sf)

McKenzie Properties purchased office building + 5.5-acre parcel on corner of McCarran & S. Virginia St. Plans for a large,

mixed-use project on vacant land.

777 Vista Blvd 10,429 SF

$6,508,000($624 p/sf)

Newly constructed medical building by developer Mitchell Asset Group, who flipped it to another CA buyer.

Tenant is Davita Dialysis Center

5580 Kietzke Lane14,670 SF

$4,450,000($303 p/sf)

7.2% cap rate on 2020 NOI. Single tenant Carrington College with a new 5-year lease

with 2% annual increases

551-555 S Center Street8,803 SF

$1,250,000($142 p/sf)

DCG represented the seller2 parcels

Located in the Opportunity Zone

140 Washington Street19,222 SF

$3,250,000($169 p/sf)

Sold by Tolles Development Company6.4% cap rate on in-place income

100% leased at time of sale

9590 Prototype Ct13,682 SF

$2,600,000($190 p/sf) Mountain West Builders - purchaser

5465 Kietzke Lane4,190 SF

$1,700,000($406 p/sf) Dental Office

3915 Baker Lane3,818 SF

$1,640,000($430 p/sf)

1031 Exchange Buyer5.0% cap rate

Tenant is Pritchett Eye Care

661 Sierra Rose Drive6,048 SF

$1,514,000($250 p/sf)

Medical Office100% leased at time of sale

NOTABLE SALES

1ST QUARTER 2019

January A

All of the notable office deals occurred in the Meadowood submarket last month. January started off with the significant sale of The Village at Lakeridge at the corner of South McCarran and Lakeside Drive and was purchased ironically by Village Investment Partners from Northern California. The 71,678-square foot building sold for $17,900,000 ($250 p/sf), equating to a 6.2% cap rate on the year one, proforma NOI. The building was 100% occupied at time of sale. Tenants include Bank of America, UBS, Apple/Braeburn Capital, Starbucks, CBRE, Merrill Lynch, Bradley, Drendel & Jeanney, Sierra Nevada Properties and Moxie’s M3 Restaurant. Also in the Meadowood submarket, the 6,111-square foot building at 835 Maestro Drive sold as a sale-leaseback for $1,509,500 ($247 p/sf) at a 6.5% cap rate, and Tenant Dennis Banks signed a 6-year lease. Lastly, a 4,190-square foot dental building at 5465 Kietzke Lane sold for $1,700,000 ($406 p/sf).

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Vacancy Rates

1ST QUARTER 2019

Gross Absorption

Square Feet

Net Absorption

Square Feet

Vacancy RatesDIRECT WITH SUBLEASE

11.05%12.63%

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MARKET STATISTICS

VACANCY RATES

1ST QUARTER 2019

DIRECT WITH SUBLEASE

Downtown 13.81% 14.75%

South Meadows 5.35% 6.43%

Meadowood 9.25% 11.69%

Central 19.58% 19.68%

Airport 10.80% 13.33%

OVERALL 11.05% 12.63%

TOP 200 OFFICE BUILDING HISTORICAL VACANCY DCG

11.05%DIRECT VACANCY

Gross Absorption 85,175 SF

Net Absorption -49,300 SF

Newly Available SF 134,475 SF

NOTABLE DCG LEASES

NOTABLE SALES

N

LEASES

SALES

1

5. 6990 S. McCarranVillage at Lakeridge71,678 SF$17,900,000($250 p/sf)

6. 5250 S. Virginia St.Corporate Pointe85,510 SF + 5.5 Acre parcel$23,000,000($269 p/sf)

7. 140 Washington St19,222 SF$3,250,000($169 p/sf)

8. 551-555 S. Center St.8,803 SF$1,250,000($142 p/sf)

1. Greater NV Credit UnionMeadowood 5190 Neil Road5,751 SF

2. Amada Senior CareSouth Meadows985 Damonte Ranch4,345 SF

3. Waddell & ReedSouth Meadows10765 Double R 3,037 SF

4. Silvaroli DentalCentral 601 W. Moana Lane3,286 SF

6

7

9

9. 777 Vista Blvd10,429 SF$6,508,000($624 p/sf)

10. 5580 Kietzke Lane14,670 SF$4,450,000($303 p/sf)

2

3 4

5

10

8