Andie Wilson and Brad Bonkowski: Improvements effect on commercial property values
While there are many exciting things happening in Northern Nevada (think Switch, Tesla…), probably the most impactful event to happen in the world of Carson City commercial real estate is the pending corridor improvements. The 1/8th-cent sales tax increase helped pay for the Multi-Purpose Athletic Center, which just opened, the new animal shelter, which is under construction, and is paying for most of the corridor improvements, which commercial property owners are excited about.
There are four corridors which will be affected: (1) Downtown Carson City; (2) North Carson Street; (3) Highway 50 East (William Street); (4) South Carson Street, in that order.
These four corridors will be improved in phases to manage the construction as well as the impacts to traffic, businesses and property owners. The downtown corridor will be completed about the same time as the freeway opening, so our downtown will be prepared to survive the changing traffic flows. The goal is to provide for pedestrian and bike safety, improve lighting and ADA accessibility and provide landscaped greenbelts with public art opportunities.
The specific improvements to the corridors for stages 2 through 4 still are in the works. But the improvements for the downtown corridor are now fairly well defined, and would include the widening of sidewalks for commerce and citizen safety, with the idea being the improvements will enhance the corridor, make it more walkable, safer for pedestrians and bicyclists, and more inviting for businesses and their customers, and to allow the business community to hold coordinate special events, drawing larger crowds to the downtown core. This begs the next obvious question: will property values in the downtown corridor benefit as a result?
The answer is: probably. If a property owner takes this opportunity to make improvements to their property, which may in turn increase the rental rates within their building, then yes. But if a property is neglected, if the façade or interiors haven’t been updated since the 1960s, 1970s or 1980s then no… dressing up the streets and sidewalks outside the property aren’t necessarily going to help.
Of the many variables used in evaluating commercial property values, there are two that should be affected by the improvements: salability and market value. What the improvements may truly affect is salability, or desirability of a property, meaning a property may become easier to sell, regardless of condition, while the true value will still be derived by the condition, location, rental income generated, etc.
Market value of a commercial property will continue to be analyzed by the three formulas we’ve always used: (1) comparable sales data; (2) cost of construction, or the cost to duplicate the property in a similar location; and (3) the income approach (the value of the property based solely on the income stream). The corridor improvements should only affect the first of these three approaches, so you can see it’s a minimal potential impact to the big picture.
Maybe the lesson here is at the end of the day, there’s no substitute for properly maintaining and updating a commercial property throughout its economic lifespan. Postponed improvements or deferred maintenance can’t be solved by the city’s corridor improvements but hopefully the investment by the City and taxpayers will be the stimulus that encourages property owners to take this opportunity to also invest in the downtown (and other corridors) to the benefit of all.
Andie Wilson and Brad Bonkowski are Broker/Owners of NAI Alliance Carson City, a commercial real estate brokerage. They can be reached at (775 721-2980.