Northern Nevada retailers looking to expand take advantage of cheaper rents
Nevada Appeal News Service
Despite widespread vacant storefronts in shopping centers throughout Reno and Sparks, some retailers continue to look for space for new and expanded operations. Some of the demand for space comes from value-oriented retailers ” dollar stores, for instance ” whose sales have held up well during the downturn.
Also shopping for space are some independent retailers looking beyond the recession, and a handful of larger national chains that are opening new stores in the region.
Particularly among cost-conscious independent retailers, the downturn is providing a chance to lock in inexpensive rents, says Kelly Bland, a retail broker with the commercial real estate company NAI Alliance.
Some independent retailers think the savings are substantial enough that it makes sense to open new stores now and weather a few tough months until the economy turns around.
And they also figure, Bland says, that retailers routinely need two or three months before they can get open ” a delay that gets them that much closer to the start of the rebound.
Landlords increasingly are willing to negotiate as vacancies rise.
The retail division of NAI Alliance estimates that more than 13 percent of the retail space in the area is vacant (a figure that doesn’t include vacancies at regional malls). Colliers International, meanwhile, estimates vacancy at about 14 percent.
Those figures are the highest in at least two decades, says NAI Alliance. It says nearly 17 percent of the smaller shop spaces that surround big anchor stores is vacant, while nearly 11 percent of the anchor space is dark.
Ken Mattison, a retail specialist with Grubb & Ellis|NCG, says space that’s been vacated by previous retailers holds a number of attractions for potential tenants.
In many cases, he says, retailers find it’s substantially less expensive to build out second- or third-generation space than it is to get a newly constructed building ready for business. And other operating costs such as maintenance fees and insurance often are lower on older retail space. More difficult to fill, Mattison says, is vacant space in newer shopping centers where rents and operating costs are higher.
In new space as well as old, he says landlords these days are willing to talk with tenants such as payday lenders to whom they might have given a cold shoulder in the past. While some landlords still worry about the image that a payday lender brings to a retail center, Mattison says others believe that the lenders generate pedestrian traffic that helps neighboring tenants.
Other landlords are putting substantial energy into convincing anchor tenants to lessen restrictions that limit the types of businesses that can locate at many centers, says Roxanne Stevenson, a retail broker with Colliers International.
Given the choice between a dark space next door and the possibility of a neighboring business that generates traffic, some tenants are willing to listen, Stevenson says.
Other landlords, she says, are looking at creative deals to get tenants into space.
One, for instance, is taking a partnership interest with a franchise operator who wants to open a new store. Although the casual dining segment of the restaurant business has suffered badly during the recession, Stevenson said Reno-Sparks area continues to draw some interest from those companies. At least one restaurant that’s new to the region is looking for space, and a franchised location of Dickey’s Barbecue Pit is close to opening at Shoppers Square.
Fitness centers also are actively looking for space in the region, she says. Among major retailers, Smart & Final is nearing completion of its new-concept “Smart & Final Extra” store at Shoppers Square. Stevenson says Smart & Final plans to open one of its Cash & Carry grocery warehouse locations in the current Smart & Final store at 115 Kietzke Lane.
Walgreens, she notes, has two stores under construction, Wal-Mart has won approval for a store in North Valleys and expects to be under construction soon on a store near Glendale Avenue and U.S. 395, and Fresh & Easy Neighborhood Market has plans for at least four stores in the region. NAI Alliance has noted, however, that retail space in the region has been vacated by existing retailers faster than it’s filled by newcomers in recent monthys.
In the final quarter of 2008, NAI Alliance says, retailers signed leases on nearly 537,000 square feet of space. But they vacated about 546,000 square feet ” boosting the amount of vacant space on the market by about 9,000 square feet in 90 days.