Northern Nevada’s construction industry shows no signs of slowing

Northern Nevada economic development leaders have spent the better part of the decade taking steps to diversify the region’s economy by luring dozens of technology and advanced manufacturing companies to greater Reno-Sparks.

But construction is still a pillar of Northern Nevada’s economy — and the industry shows no signs of a pending slowdown.

In October, statewide year-over-year construction employment spiked nearly 12 percent, with 10,500 new jobs added to the construction workforce, the state’s Department of Employment, Training and Rehabilitation reports. That’s the fastest job growth of any industry in Nevada. The construction industry employed 105,000 people in Nevada in October of 2019, DETR reports.

The building boom is evident just about anywhere you look in the Truckee Meadows.

Matt Clafton, vice president and general manager of Alston Construction, says 2020 will be a record year for Alston from a backlog standpoint.

“I’ll do $125 million to $130 million this year (2019),” Clafton says. “At the turn in January I’ll have over $100 million in backlog — signed contracts or work in place. For me to beat 2019’s totals, we have to sell $25 million to $30 million worth of work, and that’s not going to be a challenge.

“Everybody’s nervous to see what will happen with the election and is being cautious, but there’s still a lot of money out there in the marketplace,” Clafton adds. “I look at 2020 being very positive, and 2021, I don’t see it being a steep decline. We obviously are getting toward the peak of a 10-year cycle (of growth), but I don’t see (construction) falling off.”

‘DEMAND IS STILL ROBUST’

Greater Reno-Sparks has seen an unprecedented amount of development in recent years in nearly all sectors of commercial real estate — office has lagged well behind robust development in industrial, multifamily and retail. And the region’s seemingly insatiable demand for new residential product continues to add thousands of new doors to housing inventory.

Doug Roberts, partner with Panattoni Development Co., says Northern Nevada will see continued growth throughout 2020 in commercial, residential and industrial construction. That growth puts continued pressure on regional subcontractors to find enough skilled tradespeople, which can impact pricing on projects.

“Demand is still robust, and we aren’t seeing any abatement of interest in Northern Nevada,” Roberts says. “California continues to have its challenges. (Businesses) are moving out of the state, and that outflow is affecting Reno, Southern Nevada and other parts of the western United States.”

Industrial continues to be among the hottest sectors of commercial real estate. Panattoni’s North Valley’s Commerce Center started out as a modest 100-acre, three-building business park. It now encompasses 10 buildings and more than 4 million square feet under roof when completed — the final building should be delivered in 2021, Roberts says. The added industrial buildings are a bellwether of both Panattoni’s and its capital partner’s confidence in regional market demographics, Roberts adds.

“We haven’t had a single building delivered that hasn’t leased in our pro-forma period. We don’t build if we don’t think we will have tenants to take them,” he says.

BIG GROWTH IN SOUTH RENO

Perhaps nowhere is the regional building boom more evident than in South Meadows and Damonte Ranch, where new retail, residential and commercial properties continue to dominate the landscape. The Lewis Group of Companies, developer of Damonte Ranch Town Center and a slew of upscale apartment projects in the south area, remains bullish on the potential for future development.

Damonte Ranch Town Center, anchored by Home Depot and RC Willey, will get an additional anchor in late 2020 — a 63,000-square-foot Safeway supermarket. Lewis had long been trying to place a grocer in that center, says Gigi Chisel, vice president at the Lewis Group of Companies.

“That was a huge milestone and something we had sought from the beginning of that project even before the downturn,” Chisel says. “There isn’t a (grocer) in Damonte Ranch or Curti Ranch, and Safeway already has two stores in the region — this was their long sought-after, three-store strategy.”

Development in both south Reno and other coveted parts of town, such as Rancharrah, won’t slow much in the coming year, Chisel says, as strong year-over-year job and population growth continue to drive our robust economy; however, even a modest slowdown or “normalizing” of the pace of development still bodes well for developers.

“That’s a big milestone for us — we haven’t built any (spec) for a long time,” Chisel says. “But everything is subject to final construction numbers and a final pro-forma. Assuming we have rents that can justify costs, we will continue.”

Of note, though, “construction costs are still extraordinarily high, and we are not seeing any relief on that,” Chisel adds.

A primary challenge for developers in 2020 is either finding suitable land for development or deciding to move ahead with development plans on their current land holdings.

Lewis has additional land in the south area it can develop, Chisel says, and the fact that the 650 new apartment doors it’s already built in the last few years are fully leased gives weight to future development efforts.

Elsewhere, S3 Development has begun clearing land for its 164-door 4th Street Apartments project at site of the old Wildflower Village on West Fourth Street, among the many other projects underway in the Truckee Meadows.