Office Properties Group Lease Transactions for November 2011

Posted by: NAI Alliance Office Group

775 336 4600

The Office Properties Group welcomes:

• Navellier & Associates - 1 East Liberty Street, Reno
• Apex Logic Inc. - 200 South Virginia Street, Suite 470, Reno

Reno/Sparks Office Market Q3 2011

Posted by: Dominic Brunetti, CCIM
Vice President

Office Properties Group
dbrunetti@naialliance.com
775-336-4670

Reno/Sparks Office Market (Q3 2011):


Vacancy
The U.S. economy and labor markets start – stop momentum continues to influence the local market of Northern Nevada. Coming off a relatively positive Q2, market-wide vacancy stood still at 17.88%. The one noticeable difference quarter over quarter was the reduction in available sublease space; a sign of master leases expiring and the continuation of companies taking advantage of short term sublease opportunities at advantageous pricing. Neither way presents a fortifying net absorption gain to the local office market.

The long term and very large master leases of the home builders and associated trades that signed during the residential fizz have expired or nearing expiration. This has left those building owners with the decision to market the space in its entirety or to appeal to the Northern Nevada average tenant of 3,000 to 5,000 square feet by employing creative demising plans. Those building owners that have been proactive, such as is the case in the South Meadows submarket, have been able to redesign floor plates and back fill at market rates; an imperative strategy in today’s office market, if the building owner can afford to do so.

Rental Rates
Pockets of the Meadowood submarket, namely the Kietzke Lane corridor, and specific buildings within the CBD, have seen gradual gains in lease rates. Although the free rent concession continues to play its key role, starting lease rates for quality space in these areas have touched the $2.00/sf/mos mark. Quality space in these two submarkets is limited and with no sign of new construction on the horizon, there will be instances when building owners will be able to push lease rates once again.

Overall, Class A office space averages between $1.70 - $1.80/sf/mos. Starting at the top, there is an approximate 20% discount between product classes throughout the Truckee Meadows.

Healthcare Practice

Posted by: Suzy N. Klass
Associate Office Properties Group
sklass@naialliance.com

Northern Nevada medical community comprises a wide range of providers and health care services and everyone is trying to figure out what the future will look like for our region, and the country. I am working to stay ahead of new developments and what the Affordable Health Care Act will mean for health care providers. Here in Nevada, we have roughly 550,000 people without health insurance who are likely to have access to care under the Act, either privately or publically funded. And what will happen to reimbursements? How will mandated electronic medical records be implemented and accessed in Reno?

That’s why NAI Alliance stepped up to the challenge and decided to build a new practice group called, “Healthcare Practice” to specialize in all aspects of leasing, sales and market analysis for medical, dental, and physical rehabilitation offices. And I am proud to be the dedicated professional to help create this full service practice group for our clients.

3rd Quarter Reno/Sparks Industrial Market Report

Posted by:

775 336 4600

Suzy N. Klass joins NAI Alliance

Posted by: NAI Alliance Office Group
775 336 4600

NAI Alliance Commercial Real Estate Services is pleased to announce the addition of Suzy N. Klass as an Associate in the Office Properties Group, specializing in healthcare practices.

Suzy will focus on medical office leasing, sales, subleasing, tenant and landlord representations, market analysis and research, with a subspecialty in physician and dental groups.

After a successful career in the medical field managing physicians in private practice and as an administrator at a large health care system in the metropolitan New York area, Suzy and her husband, a physician at the University Of Nevada School Of Medicine, relocated to Reno. She builds on these experiences to represent both owners and users in the medical office properties field.

Suzy earned her undergraduate degree from Cornell University and a Master’s in Science in Administration from Columbia University.

Suzy was appointed to the West Truckee Meadows Citizen Advisory Board for the Washoe County Planning Commission. She is a member of Commercial Real Estate Women of Nevada (CREW), active in the newly launched Terry Lee Wells Nevada Discovery Museum, on the Board of the Incline Crest One Homeowner’s Association, and is a member of Alliance with the Washoe County Medical Society (AWCMS).

As part of a four generation real estate family which owns and manages multi-family properties in the NYC area, she brings knowledge and experience to all sides of the transaction.

New Property Listing - 850 E. Patriot, Suite G

Posted by: NAI Alliance Office Group

775 336 4600

The Office Properties Group is proud to announce a new property listing for 850 Patriot Blvd., Suite G in Reno, Nevada.

This two story space is 5,786 square feet and can be used for office, retail or flex. The lease price is $1.10 per square foot modified gross.

For more information on this property or to view all listings please visit us at http://naialliance.com/

Office Properties Group Lease Transactions September 2011

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes:

• Noble Studios - 50 West Liberty, Suite 1300, Reno
• Olsen & Associates Public Relations - 427 Ridge Street, Reno
• Greater Nevada Mortgage Services - 150 East Main Street, Suite 130, Fernley

Leverage Uncertainty a Hidden Asset Risk

Posted by: Morgan Walsh
Multi-Family Specialist
775 336 4646
mwalsh@naialliance.com

Morgan Walsh is a commercial broker with 20 years experience in investment sales, multifamily and specialty sales, representing buyers and sellers, institutional and private developers in market rate apartment sales, mixed-use residential devepment and the development of affordable housing projects.

---

Apartment investors model asset returns based on rents, occupancy, expenses and leverage assumptions, and every leveraged acquisition begins with known terms of debt service. But while rents, occupancy and expenses are highly predictable factors based on rental demand, household formation and inflation, the terms of future leverage remain disquietingly uncertain. That uncertainty jeopardizes not only the successful operator who can’t re-finance, but also the buyer with a holding horizon beyond five years, and the owner of a weakly performing asset with substantial debt.

Historically, owners, investors and lenders to the apartment industry valued predictable terms of leverage because it permitted a forecast of investment returns over long maturities, a value especially useful in a commodity apartment market like Reno. The advent of GSE financing added further predictability by guaranteeing the availability of financing. In the current market, financing remains readily available with a steadily mounting list of caveats. Does the loan term fall short of the investor’s holding horizon ? Can the loan be re-underwritten at maturity without a principal reduction ? Will the buyer’s leverage deal support the seller’s future asking price ? How will debt service be handled if the asset value declines ?

Strongly capitalized, sophisticated investors buying stabilized, well-located investments still command leverage offering long maturities, low spreads and little flexibility. The investor who relies on a ready re-finance market, a net revenue stream that can withstand re-underwriting, a rising rental demand, controllable variable expenses, and the availability of new equity if needed is facing unprecedented uncertainty in handling debt service. Some investors respond by changing their acquisition metrics to create a value cushion in return, basis, asset quality and market, or all four. Buy right and you have pricing power, staying power and leverage opportunity. Unlike buyers in the 2003-2006 era, few investors now predicate their acquisitions based on a fixed, short-term exit. But the median apartment buyer with a reasonable return objective still needs to re-finance the loan deal, still needs to manage debt service until robust employment returns and still needs to deal with the buyer’s return objective when the owner goes to market in the future lending market which drives the cap rate for apartment assets.

Leverage uncertainty used to be discounted by owners and investors who held through the financing heyday of rising asset values. Massive deleveraging now shows that uncertainty is present in all of the factors which control credit availability: underwriting, asset strength and performance, personal liability, loan ratios, maturities, and property market performance and forecasts. Buyers in the current market are quantifying that risk by bidding up cap rates aggressively, by treating the computation of net operating income with all the deductions now applied by the loan underwriter, or modeling returns based on modest leverage. What few investors are doing is discounting the availability of GSE financing as we know it, yet FNMA and FHLMC just received an S&P downgrade and the long-term solvency of the agencies is in question.

Apartment investment has always been seen as the safest way to own commercial property. When leverage uncertainty is fully worked into the market demand for apartment property, the asset value needed to deliver that safety may lower prices more significantly than owners and buyers now expect. And in the background of these events is a lending industry refining a nimble, robust machinery for efficiently transferring distressed loan assets from borrowers without re-finance opportunities to large players in the distressed property markets.

New Property Listing - 5355 Kietzke Lane

Posted by: NAI Alliance Office Group

775 336 4600

The Office Properties Group is proud to announce a new property listing for 5355 Kietzke Lane in Reno, Nevada.

This two story class A office building is located in the premier Kietzke Lane business corridor. Quiet location, close to amenities and near the freeway. The building has 3,180 square feet available. The lease price is $1.45 per square foot modified gross.

For more information on this property or to view all of our listings please visit us at http://naialliance.com/

Reno/Sparks Office Market Q2 2011

Chase Whittemore, MS
Associate Office Properties Group
cwhittemore@naialliance.com

Reno/Sparks Office Market Q2 2011:

Vacancy:
Slight increases in the vacancy rates of the Central Reno and Airport Submarkets were not nearly deep enough to cut into the overall positive quarter that the Reno/Sparks Office market experienced in Q2. Overall, the office market saw 39,421SF of positive net absorption, which decreased the overall vacancy in Q1 from 18.23% to 17.71% in Q2. If this trend in positive net absorption continues, we should see a 2% drop in vacancy this year. These positive signs in decreased vacancy rates were the result of the South Meadows and Downtown Submarkets, which had 30,391SF and 17,127SF respectively, of positive net absorption. Even though the South Meadows Submarket experienced a very positive quarter, there is still a cautionary tale in the form of shadow vacancy-space available for sublease- within this submarket. The Downtown Submarket continues to pick up steam. New tech companies, new restaurants, and private investments all added to the buzz surrounding downtown Reno. The Downtown Submarket continues to benefit from low relative rental rates and companies relocating into Downtown from Class A, B, or even C properties previously in other submarkets.

Rental Rates:
Until the office market experiences several positive quarters in a row of declining vacancy, rental rates should stay relatively flat. Moreover, we could even see a slight decrease in rental rates within some submarkets. The South Meadows Submarket poses the most threat to decreased rental rates as thousands of square feet are set to hit the market in the coming months. The arrival of space by years end, coupled with the continuous shadow inventory that seems to plague this submarket, rental rates should remain flat. Do not be surprised if a few buildings even lower the asking rental rate in the South Meadows Submarket. In that submarket, rental rates are $1.30-$1.65/sf/mo full service gross. In the Meadowood Submarket, rental rates remained flat in Q2, ranging from $1.45-$1.85/sf/mo on a full service gross lease. In the Central Reno Submarket, rates did not change, ranging from $1.25-$1.45/sf/mo full service gross. The Downtown Submarket remained flat in Q2, ranging from $1.40-$2.00/sf/mo full service gross.

Lakeridge Centre Office Park - New Property Listing

Posted by: NAI Alliance Office Group

775 336 4600

The Office Properties Group is proud to announce a new property listing for Lakeridge Centre Office Park located at 6005 Plumas Street in Reno, Nevada.

This office park offers a prime location situated at the corner of McCarran Boulevard and Plumas Street. Close to amenities and near the freeway. The building is 37,410 square feet with 19,997 square feet currently available. The lease price is $1.85 per square foot.

For more information on this property please visit us at www.naialliance.com.

100% Leased Investment Opportunity

Posted by: NAI Alliance Office Group
775 336 4600

The Office Properties Group is pleased to announce a 100% Leased Investment Opportunity at 455 Somersett Parkway in Reno, Nevada. The building is 8,161 square feet on .963 of an acre. This investment is offered for sale at $2,600,000.

For more information please visit our website at www.naialliance.com

Office Properties Group Lease Transactions for July 2011

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes:

• Cpmplete Family Care, LTD - 800 South Meadows, Reno
• H Dhindsa Retina Eye Center, LTD -5470 Kietzke Lane, Suite 205, Reno

Reno/Sparks Industrial Market Report - Q2 2011

Posted by: NAI Alliance Industrial Team
775 336 4600

Office Properties Group Lease Transactions for June 2011

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes:

• Muckel Anderson, CPA'S - 300 East Second Street, Reno
• Fusion Contact Centers LLC - 300 East Second Street, Reno
• Relocation Management Resources, Inc. - 4858 Sparks Blvd., Sparks
• Northshore Construction Inc. - 1140 Financial Blvd., Reno
• Western Asbestos - 300 East Second Street, Reno
  

Rail Served Property in Sparks, Nevada

For Lease or Sale
1285 Southern Way, Sparks, NV




This rail served, industrial property is located at the corner of Greg Street and Southern Way in Sparks, Nevada. With 225,515± sf and more than ample power available, this building can accommodate a variety of space needs. Recent renovations to Southern Way include upgraded T-5 lighting, interior paint, new carpeting in offices and updated landscaping.

Property Highlights-
225,515±sf Available (divisible to 55,515±sf)
14 Dock High Doors
7 Rail Doors
1 Drive In Door
2,000 Amps, 480/277 Volts
40’x40’ Column Spacing
24’-26’ Clear Height
Rates from $0.25±/sf/NNN

View Digital Tour
View Loopnet Listing
View Property Brochure
View Site Logistics

Flight to Quality in Industrial Spaces

Our market is currently experiencing a 'Flight to Quality'. Class A product is getting most of the attention while the Class B and C product await interest. We are seeing existing tenants taking advantage of low rental rates to upgrade their building, as well as new tenants to our market focus on these same Class A buildings.
Over the past few years, deals completed greater the 50,000sf have landed as follows:
2008 – 22 deals completed, 14 went to Class A (63.6%)
2009 – 18 deals completed, 13 went to Class A (72.2%)
2010 – 14 deals completed, 10 went to Class A (71.4%)
2011 YTD – 10 deals competed, 6 went to Class A (60.0%)
If activity stays up, the Class A inventory could tighten quickly, which will bring hope to Class B and C buildings.

The Office Properties Team Welcomes Chase Whittemore

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes Chase Whittemore, MS to their team as a new Associate.

Chase will specialize in office leasing, sales, subleasing, tenant and landlord representations, market knowledge and research.

Chase is a third generation Nevadan who graduated from the University of Nevada, with a Bachelor of Arts in Economics. He received his Master of Science in Real Estate and Construction Management from the University of Denver, Daniel's College of Business.

Office Properties Group Lease Transactions for May 2011

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes:

Kaempfer Crowell Renshaw Gronauer & Fiorentino, LTD - 50 West Liberty, Suite 900, Reno

Country Financial - 1255 N. McCarran Blvd., Sparks

10 Leasing Insights - #10

Posted by: Dave Simonsen

Industrial Specialist

775 336 4667

dsimonsen@naialliance.com

Dave has more than 21 years experience as a commercial real estate broker. Dave exclusively works with industrial tenants, buyers, developers, landlords and land owners. He has represented companies such as AT&T, Barnes & Noble, Converse, DHL Worldwide, Delta Industries, Hawco Development, Lucent Technologies, IBM, Hopkins Distribution, Nextel, NEC, Sherwin-Williams Company, and UPS.

~10 Leasing Insights ~
Broker tips to better deals

Tip # 10
Why Creating Competition Between Landlords Helps You Get a Better Deal (even on renewals)

In the leasing cycle you have significantly more negotiation power prior to signing your deal (or signing your extension) than you do once you are in contract. Creating competition between landlords to win your business is a powerful tool for achieving a better outcome. Face it, your existing LL is betting you don’t want to move at all, so a deal on your existing space only improves when the landlord believes you have viable alternatives. The downside of this tactic is that finding multiple new spaces, negotiating deals and understanding all the costs associated with each one is a lot of work! There is nothing wrong with making your broker work for his or her commission!

BROKER INSIGHT: Landlords are like everyone else, they have different motivations at different times. Let’s assume you employ a broker, request proposals from 3 different landlords and gather the responses. Setting aside the financial factor – one is likely the low cost alternative – other important factors in the deal will demonstrate the LL’s motivation to sign a lease with you. One LL may offer more free rent up front in return for a higher face rate. Another LL may offer a low rate for you to take the space “As-Is”. The final LL may give you 3 or 5 year options with a great TI allowance. Each LL is looking for both a way to differentiate their space from the others and get the highest price they can out of you. Knowing a LL’s motivation at any given time is one of the most valuable insights a broker can give you.

Last Tip... How Much Space Do You Need?

Click Here to find out more about NAI Alliance's Industrial Team

10 Leasing Insights - Tip #9

Posted by: Michael Nevis, CCIM
Industrial Specialist

775 336 4623

mnevis@naialliance.com

Mike has specialized in industrial properties since 2004. His leasing assignments included over 4MM square feet of institutional bulk and flex industrial projects. In addition, he participated in over 700,000 square feet of Build to Suit projects on behalf of Landlords and Tenants. Mike’s clients have included: USAA Real Estate Company, Bentall Kennedy, McMorgan and Company, Scannell Properties, Latitude Management, Washington Capital Management, REEF, ING Clarion, Trex Company, and Archbrook Laguna.

~10 Leasing Insights ~
Broker tips to better deals

Tip #9
How Much Space Do You Need?
One of the first questions a real estate broker asks any prospective tenant is, “How many square feet are you looking for?” There are many different ways to approach this question:
• Competitive Analysis – How much space does your competition occupy?
• Budgetary Analysis – Decide how much you can afford and shop for the best space in that price range.
• Demand Analysis – Identify the primary factor driving your requirement for physical space – machines, boxes, employees – and calculate how much space you need.
• Strategic Analysis – How much space will your fully realized business model require?
Try approaching this question from a variety of perspectives to arrive at the best answer you can forecast. Keep in mind that no forecast is ever perfect. Things change. A 3 – 5 year commitment will be based on the best information you have at the time.
BROKER INSIGHT: When a developer plans a project, they target users in a given size range and design the building accordingly. In a normal market, the cost of the project determines the rental rate the owner will accept. A 10,000 SF space in a 30,000 SF Flex Center will likely cost more than a 10,000 SF space in an 80,000 SF Mid-Range Building and much more than 10,000 SF in a 200,000 SF Distribution Building. The foot print in each scenario is the same, but the actual spaces will function much differently. If you involve your broker in the conversation early, he or she should bring insights gained from seeing lots of different types of spaces.

Next Tip.... Why Creating Competition between Landlords Helps You Get a Better Deal

Last Tip... Trade Fixtures vs. Tenant Improvements

Click Here to find out more about NAI Alliance's Industrial Team

Second Consecutive Year

For the second consecutive year Scott Shanks, SIOR and Dominic Brunetti, CCIM were named ‘Office Brokers of the Year’ at the Northern Nevada Summit Awards.

NAI Alliance Takes Top Summit Award Honors

Saturday, May 7, 2011 marked the ceremony for the 6th Annual Summit Awards. Both the Office Team and Industrial Team of NAI Alliance took home top awards.

Scott Shanks, SIOR and Dominic Brunetti, CCIM of the NAI Alliance Office Team were named ‘Office Brokers of the Year’. This is the second consecutive year for Shanks and Brunetti to receive this award.

J. Michael Hoeck, SIOR; Dave Simonsen, CCIM, SIOR; Dan Oster; and Paul Perkins, CCIM, SIOR of the NAI Alliance Industrial Team were recognized for the ‘Largest Single Sale Transaction of the Year’.

Honorees were selected based on commercial real estate transactions completed in 2010. The Summit Awards are hosted by Commercial Real Estate Women (CREW), National Association of Industrial and Office Professionals (NAIOP), & Certified Commercial Investment Members (CCIM) to recognize northern Nevada professionals who have excelled in their respective fields of commercial real estate.

First Quarter 2011 Office Market Update

Posted by: Dominic Brunetti, CCIM

NAI Alliance Office Group

775 336 4600

Activity breeds activity and it continues to slowly and steadily increase. Most people report this good news to inbound companies such as Brightpoint North America and Benco Dental Supply which are absorbing hundreds of thousands of square feet within the advanced logistics niche market. On the other hand, we do not hear enough about companies within the business service sectors such as Consolidated Agency Partners, MyNewPlace.com, Sanare, B&B Medical Services, Enel Geothermal and others that are new to our market or expanding locally, creating an economic impact, diversifying the economy and absorbing office space.

Ending 2010 with a decreasing overall vacancy rate of 17.84%, the office market continues to improve with a total gross absorption of 29,625 square feet, netting positive absorption of 8,889 square feet end of Q1 2011 and a reduction in vacancy to 17.73%. Although we continue to see the “flight to quality” or image upgrade of local tenants, we are seeing more and more inbound activity from our neighboring states.

From a building owner’s perspective, let’s not get too bullish. Specific submarkets within Northern Nevada seem to be leading the front from a standpoint of improving quicker. The South Meadows, or often referred to South Reno, and Downtown Submarkets are leading the trend accounting for over 100,000 square feet of gross absorption year over year; a continuation of our flight to quality theory. That said, the Northern Nevada office market still bears approximately 300,000 square feet of Class A and Class B vacancy that would require absorption before Class A (or otherwise) speculative construction would be warranted. Therefore, rents continue to lag behind Q1’s positive absorption results remaining flat within their respective categories.

As mentioned last quarter, we are taking baby steps towards a recovery in the office market. Lingering state legislation and global trends will continue to be the burden or the boost necessary to create the jobs required to have an effect on the Northern Nevada office market.

9070 Double Diamond Parkway - For Sale and/or Lease

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group along with the Investment Properties Group is pleased to announce a New Exclusive Sale/Lease Listing for 9070 Double Diamond Parkway in Reno, Nevada. The Office Building is 4,160 square feet.

For Sale - $725,000

For Lease 2,000 to 4,160 square feet - $1.20/psf + NNN

Office Property for Sale - 175 Salomon Circle, Sparks

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group along with the Investment Properties Group is pleased to announce a New Exclusive Sale Listing for 175 Salomon Circle in Sparks, Nevada. The Office Building is 17,640 square feet and is 100% occupied. The Sale Price is $2,650,000.

Office Properties Group Lease Transactions for April 2011

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes:

Dr. Kimbriel - 2281 Pyramid Way, Suite 16, Sparks

Cornerstone Retirement Group - 5525 Kietzke Lane, Suite 103, Reno

Behavioral Health Resources - 1495 Ridgeview Drive, Reno

Pacific Tanning Company, LLC - 780 Vista Blvd., Suite 500, Sparks

Reno Photo Booth, 175 Salomon Circle, Sparks

Farmers Insurance Exchange - 50 West Liberty Street, Reno

New Property Listing for Sale and/or Lease

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group is pleased to announce a New Property Listing for Sale and/or Lease:

• 6130 Plumas Street, Reno, Nevada - 10,222 square feet available. Property for Sale at $1,700,000. Available for Lease all or part at $1.00/psf for the first year on a five year lease pending tenant improvements.
  

Office Properties Group Lease Transactions for March 2011

Posted by: NAI Alliance Office Group 775 336 4600

The Office Properties Group welcomes:

• Chrysalis - 5595 Equity Avenue, Suite 400, Reno


• Avisen Securities - 6880 South McCarran Blvd., Reno


• Ormat Technologies, Inc. - 6225 Neil Road, Suite 100, 200,201, 203 & 300, Reno


• Professional Billing Services - 800 South Meadows Parkway, Suite 500, Reno


• Online Techstores.com - 10381 Double R Blvd., Reno


• My New Place - 300 East Second Street, Suite 1310, Reno


• Curves - 2261 Pyramid Way, Suite 8, Sparks


• Muzea Consulting Services - 9650 Gateway Drive, Suite 100, Reno


• Alliance Home Health Services - 1380 Greg Street, Suite 207, Sparks

Mixed Signals Point to a Market Bottom

Posted by: Morgan Walsh Multi-Family Specialist 775 336 4646 mwalsh@naialliance.com

Morgan Walsh is a commercial broker with 20 years experience in investment sales, multifamily and specialty sales, representing buyers and sellers, institutional and private developers in market rate apartment sales, mixed-use residential devepment and the development of affordable housing projects.

---

Owners, buyers and investors are carefully watching the spring lease-up in Reno for signs that the apartment market bottom has been reached. Market bottoms show a very characteristic pattern-- low sales activity, high bid/ask spreads, negative sentiment widely shared, little new construction, slow absorption, flat rents and little investor interest. Market turns, however, occur unpredictably because they begin when conditions look a lot like the past six months. The period 2008-2010 saw falling occupancy, then falling rents, followed by flat rents and another dip in occupancy, and another dip in rents. Job loss, double-up of tenants, tenants leaving the region, and the rapid expansion of the single-family rental market are critical factors in apartment demand, and the large property owners have reacted by adjusting rents to demand, qualification criteria to the recession tenant, and marketing to a labor force which must reduce housing cost.

In 2011, Class A and B properties have achieved normal occupancy (with some exceptions of distressed property or owners unprepared to adjust). In many cases, utilities have been passed through to tenants in whole or part, and major, new construction has stopped. This spring, those owners will begin raising rents. If successful, the value and attractiveness of their properties as investments will sharply diverge from the rental market segment still struggling with occupancy, declining rents and values.

The Class C apartment market is suffering a dramatic loss of value from three sources—sharply reduced demand for property in location or condition deemed difficult to rent, finance, manage and maintain; falling rents with 7-8% of additional rent reductions required to achieve stabilized occupancy above 85%; and occupancy by tenants most vulnerable to further declines in income and job loss. To the extent these property have been over-leveraged, with debt service levels predicated on high occupancy and rising rents, the risk of distress and default is high and properties have been liquidated at a fraction of their stabilized value.

Meanwhile, the shadow market for single-family rentals continues to grow (10% per year and likely to continue for 3-5 years) but the median landlord for such property is increasingly a savvy investor, not a distressed small investor, so the tenant selection, leasing, property management and maintenance of this housing stock is increasingly sophisticated and able, pushing the housing cost to rent a home up, especially in attractive submarkets. The net effect for rental tenants is a small gap between the high-end apartment and the attractive house, so the tenant seeking convenience will lean toward the well-managed apartment property. Finally, the net cost for move-in is now clearly in favor of the apartment property and will likely continue to grow.

2011 will bring two interesting effects. First, the Class A and B markets will strengthen profitability and gain market share in rental housing. Class C properties will find the rent level needed to maintain normal occupancy, de-leverage as quickly as possible or re-leverage at a lower value under a new owner, but no appreciable increase in Class C property value will occur until jobs return. Many low-end properties will change hands this year, as occurs at the bottom of every recession, with a new owner group bringing capital and expertise to exploit the property’s full potential. Traditionally, Reno’s opportunistic owners have bought and held. This time, we may see a significant fraction who stabilize the property and then exit for a new opportunity.

Financing remains exceptionally affordable, although underwriting has never been more demanding for borrowers and their collateral. We expect favorable financing to remain in place through the end of 2011. Apartment expense levels are highly manageable, with a soft market in property coverage, competitive vendors and owner’s high attentive to cost reduction. Fuel remains the wild card and could ripple into a major headache for apartment owners, as added expenses and reduced demand for tenants whose commute becomes too expensive. Further job loss is likely to affect the Class C market early and hard, and remains the most likely probable negative factor affecting apartment operations in 2011.

Posted by: Dominic Brunetti, CCIM

NAI Alliance Office Group

775 336 4600

A college friend of mine who is the managing partner of a major commercial real estate brokerage firm in the Bay Area expressed they are seeing drastic increases in lease rates and effective rents. In addition, I've talked to some other Bay Area brokers who said tenant bidding wars are back. Although the real estate cycles in the Silicon Valley recover faster, it's still a positive sign for commercial real estate brokers in Northern Nevada. This will have a beneficial impact on Reno and Sparks.

10 Leasing I sights - Tip #8

Posted by: Dan Oster

Industrial Specialist

775 336 4665

doster@naialliance.com

As a member of the Industrial Properties Group, Dan has participated in the sales and leasing of a wide variety of Industrial properties from 1,000 to 700,000 sqft in Northern Nevada. Dan's primary goal is to provide unsurpassed customer service to the clients he represents.

~10 Leasing Insights ~
Broker tips to better deals

Tip # 8
Trade Fixtures vs. Tenant Improvements

The shell of a building (floor, roof, walls and basic systems like heat) are often called the envelope. Everything inside the envelope falls into one of two categories – Trade Fixtures or Tenant Improvements. Tenant Improvements (TIs) include the office space, restrooms or any other generic improvements to a building that any future tenant will typically utilize. Trade Fixtures are the improvements specific to a user’s business. These might include ovens in a commercial kitchen or machines in a factory. By law, as soon as something gets permanently attached to the envelope, it becomes a part of the building and is owned by the landlord – unless it’s a Trade Fixture which remains the tenant’s personal property.

BROKER INSIGHT: Nothing in life is always black or white. The line between TIs and Trade Fixtures is no exception. If a standard user needs 5 -10% office improvements in a warehouse, and you need 25%, 50% or 75%, the question of who pays for the excess build-out in what proportion will make or break a deal. In practice, a variety of factors may include, tenant’s credit, market condition, LL’s cash position and many others, determine who pays for TIs. Often finding a building with the required improvements already in place will go a long way towards getting a functional space for your business at a price you can afford.

Next Tip.... How Much Space Do You Need?

Last Tip... Representation

Click Here to find out more about NAI Alliance's Industrial Team

NAI Closes Pfizer Sale

On February 17th, the NAI Alliance industrial team closed on the sale of 1025 Sandhill Road. Brightpoint, Inc purchased the 263,924sf building from Pfizer Inc for $11,500,000. This deal makes a positive impact on the Reno/Sparks Industrial market and is the largest industrial user sale completed in the past 2 years. NAI represented Pfizer Inc and Jones Lang LaSalle represented Brightpoint, Inc.

If you have any questions on Industrial Real Estate in Northern Nevada, please give us a call at 775.336.4600.

NAI Alliance Industrial Team Signs 3.5M Square Feet

The 3.5MM square feet of listings Michael Nevis, CCIM has signed since joining NAI include 201 Ireland, Greg Street Commerce Park, Sierra Commerce Park, Southwest Commerce Park and 104 acres of land in the Tahoe-Reno Industrial Center.

201 Ireland
257,400SF Available
Spaces starting from 117,000sf

Sierra Commerce Park
475,282SF Available
Spaces starting from 25,508sf

Greg Street Commerce Park
24,288SF Available
Spaces starting from 4,608sf

TRIC Land
104 Acres Available
Build-to-Suit sites starting
from 300,000sf

We are getting bigger to help you better! If you have any questions on Industrial Real Estate in Northern Nevada, please give us a call at 775.336.4600.

Michael Nevis, CCIM Joins NAI Alliance

This year brings us our newest Vice President. Michael Nevis, CCIM has joined J. Michael Hoeck, SIOR, Dave Simonsen, CCIM, SIOR and Dan Oster making the NAI Alliance industrial properties team the largest in Northern Nevada. Nevis has represented some of the largest names in industrial real estate and brings over 3.5MM square feet of institutional leasing assignments to NAI. Mike is a board member for the Juvenile Diabetes Research Foundation and involved in numerous civic organizations.

We are getting bigger to help you better! If you have any questions on Industrial Real Estate in Northern Nevada, please give us a call at 775.336.4600.

2011 Brings a New Office Location

The NAI Alliance industrial properties team has an active start to the New Year. 2011 has brought a new office, an addition to the team, new listings and the largest transaction the industrial market has seen in over two years.


As of January 1st, NAI is downtown in the Bank of America building. We have expanded our office and moved into the heart of Reno. Our new address is:

50 West Liberty Street
4th Floor West Tower
Reno, NV 89501
You can still reach us by phone at 775-336-4600 or Find us online at http://www.naialliance.com/.

If you have any questions regarding Industrial Real Estate in Northern Nevada please give us a call at 775.336.4600.

10 Leasing Insights - Tip #7

Posted by: J. Michael Hoeck, SIOR

Industrial Specialist

775 336 4621

jmhoeck@naialliance.com

Mike began specializing in industrial brokerage with Colliers International in 1999, and in May 2005, joined Alliance Commercial as a Partner and as Vice President of its Industrial Properties Group. In May of 2007 Alliance Commercial became NAI Alliance and Mr. Hoeck became a Senior Vice President.

~10 Leasing Insights ~
Broker tips to better deals

Tip # 7
Representation (why choosing an agent to represent your interests helps)

Can you think of a single complex task you got 100% right the first time around? Sure, it gets done, but by the 10th time through it gets done much better (and quicker), and by the 100th time you’ve worked through almost every eventuality. The challenge in representing yourself in lease negotiations is that you only do it every 1 – 5 years. Typically, your landlord is likely more practiced and has an information advantage based on their experience as well. What’s a tenant to do???? You can hire a broker to represent your interests in the transaction. A broker (or better yet a team of brokers) typically has the experience from seeing lots of deals, and they can often avoid pitfalls you might not have thought to address.

BROKER INSIGHT: When a tenant is clearly represented by a broker, and there is a trust between those two parties, deals which are outside the formal Commercial Leasing Market can get done. If the perfect space for a tenant is somehow in a grey area (say it won’t be vacant for another 3 months), but a broker knows the tenant will protect them absent a landlord’s listing agreement, maybe a better deal gets done that otherwise wouldn’t have. These grey area deals can be great. They can also be a disaster. Without a broker you really trust, it would be difficult to know the difference.

Next Tip.... Trade Fixtures vs. Tenant Improvements

Last Tip... Option to Purchase

Click Here to find out more about NAI Alliance's Industrial Team

Office Properties Group Lease Transactions for February 2011

Posted by: NAI Alliance Office Group
775 336 4600

The Office Properties Group welcomes:

• Prism NV, LLC - 100 Washington Street, Lower Level Suite 80, Reno
• Kautz Environmental Consultants - 1140 Financial, Suite 100, Reno
• SOS Staffing Services - 394 East Moana Lane, Suite B-27, Reno

Office Market Report EOY 2010 & Outlook 2011

Posted by:
NAI Alliance Office Properties Group

775 336 4600

Exclusive Property Listing In Downtown Reno

Posted by: NAI Alliance Office Group
775 336 4600

The Office Team is proud to announce we have the exclusive property listing for 200 South Virginia Street in downtown Reno, owned and operated by Basin Street Properties.

The property is a total of 118,741 square feet and currently has 21,965 square feet of space available for lease.

Fourth Quarter 2010 Office Market Update

Posted by: Dominic Brunetti, CCIM
Vice President
NAI Alliance Office Group
775 336 4600

Reno/Sparks

We heard it again last week from a business colleague in the telco sector; every time it feels like the overall health of the market is improving; a national disaster, political eruption, or other news worthy event impedes momentum and causes for a retreat of attitude and the effect of hesitation to trickle back into Northern Nevada. After a surprisingly active December, do we dare hold our breath as activity continues to increase?

Ending 2009 with a record high overall vacancy rate of more than 20%, the office market is beginning to see positive activity ending 2010 at 17.84%. Most of the activity has been internally driven, with upgrades in space classification being optimized as prices continue to trade at ten-year lows. The Downtown submarket has recently seen a good deal of activity as more businesses are attracted to the revitalization of Downtown Reno and the amenities offered. Overall pricing continues to be stagnant, but this should improve as vacancy declines due to no new construction in place or planned.

The activity producing most benefit is that of local expansions and new business to our community. Notable transactions for the quarter included leases by Western Title Company (10,228 sf), Delphi Asset Management (5,524 sf), Greater Nevada Credit Union (5,400 sf) and Stifel Nicolaus & Company (5,117 sf). The quarter over quarter total office vacancy rate decreased slightly from 18.42% to 17.84%. This reflects the lowest overall vacancy rate since 2006.

Although conditions are looking more favorable, building owners are continuing to be aggressive with low rental rates and sale prices to fill buildings. The market will need to experience a few more quarters of declining vacancy before landlords firm up rents. The median asking rents for Class A office space was $1.58 per square foot, Full Service, while median asking rents for Class B and Class C office space ranged between $1.20 and $1.30, Full Service. Effective rates are negotiated 10% to 25% below asking rates.

The pattern of stabilization we are experiencing is approximately 1 year old. Yes, in its infancy, but we remain optimistic. The end of 2010 brought us into a positive net absorption of just over 1,000 square feet. The first positive within this data set since 2006. Baby steps indeed, but as no new speculative construction was built or planned and the build-to-suits for Williams Gaming and Customs Immigration Services are complete, we look to cautiously develop this trend through 2011.

Office Groups New Property Listings

Posted by: NAI Alliance Office Group
775 336 4600

The Office Properties Group is pleased to announce New Property Listings:

1. US Bank Building - 1 East Liberty Street, Reno, Nevada - 30,910 SF Available for Lease
2. 8610 Technology Way, Reno, Nevada - 2,577 SF or 3,905 SF or 6,482 SF Available for Sale
3. 911 East Second Street, Carson City, NV - 400 t0 8,256 SF Available for Lease
4. The McCarran Mansion - 401 Court Street, Reno, NV - 7,000 SF Available for Lease
5. 427 Ridge Street, Reno, NV - 1,555 SF Available for Lease

10 Leasing Insights - Tip #5

Posted by: Dave Simonsen

Industrial Specialist

775 336 4667

dsimonsen@naialliance.com

Dave has more than 21 years experience as a commercial real estate broker. Dave exclusively works with industrial tenants, buyers, developers, landlords and land owners. He has represented companies such as AT&T, Barnes & Noble, Converse, DHL Worldwide, Delta Industries, Hawco Development, Lucent Technologies, IBM, Hopkins Distribution, Nextel, NEC, Sherwin-Williams Company, and UPS.

~10 Leasing Insights ~
Broker tips to better deals

Tip # 5
Personal Guarantees

When you start a small business, it often feels like it owns you. Your financial health and that of your business are initially one and the same. As the years pass and the business grows, it can eventually take on a financial life of its own. From the other perspective, landlords give legal control over an asset (often worth a million dollars or more) in return for a promise from you to pay rent. They want to know they will get paid from the entity or its owner. So when and how can you avoid Personally Guaranteeing your lease?

BROKER INSIGHT: If you’re a startup company, you likely won’t avoid a Personal Guarantee. What you can try to do is structure an out after a period of time to limit your personal exposure. If this is your second lease or you have some operating history, phasing out the personal guarantee over time becomes much more likely. An alternative to a Personal Guarantee, particularly when a new venture is well funded, is to offer a surety bond or a letter of credit guaranteeing the lease. This will tie up some of your operating capital, but is often preferable to a Personal Guarantee. Recognize that as with individuals, businesses build credit worthiness over time. If you have to give a Personal Guarantee on your first deal, work toward building the business credit to the point you won’t have to in the future.

Next Tip.... Option to Purchase

Last Tip... You Covet Your Neighbor's Space

Click Here to find out more about NAI Alliance's Industrial Team