Brief | Future Cities
Emerging Industrial Markets: Reno
Nearly 17 million people—24% of them in the important 18-to-34 age demographic—live within 250 miles of downtown Reno, making it an ideal distribution location to service eastern California, Nevada and the rest of the Mountain States.
Figure 1: Reno Population Analysis
Source: CBRE Location Intelligence.
Reno’s local warehouse labor force of 13,564 is expected to grow by 12% over the next 10 years, according to CBRE Labor Analytics. The average hourly wage for non-supervisory warehouse workers is $14.30, slightly higher than the national average.
Figure 2: Reno Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Over the past five years, there have been 41 economic incentive deals totaling more than $74 million for an average of $26,240 per new job in the Reno metropolitan area.
According to CBRE’s Location Incentives Group, among the top incentive programs available in Metro Reno are the Modified Business Tax (MBT) abatement, sales/use tax abatement and personal property tax abatement. To qualify, the Governor’s Office of Economic Development (GOED) requires businesses to meet the following criteria:
- Capital investment for new businesses must total at least $1 million. Capital investment for existing businesses must equal at least 20% of the value of existing tangible property.
- New businesses must create at least 50 full-time, permanent jobs. Existing businesses must increase new jobs by either 25 or by 10% of their existing workforce, whichever is greater.
- The state counts only new jobs that have an average annual salary of more than $50,253. This salary target is updated every year.
Figure 3: Top Incentive Programs
Interstate 80 passes through Reno, giving the market a direct route across the nation from San Francisco to New York City. A major rail corridor provides access to major West Coast ports, primarily the Port of Oakland, that serve inland destinations. The Reno Transportation Rail Access Corridor, completed in 2006, gives Union Pacific the ability to lengthen trains to 8,000 feet with double-stack containers and to increase train frequency, which has helped bolster warehouse demand in Reno.
With UPS, FedEx and DHL air cargo hubs, Reno-Tahoe International Airport is an ideal Western region air freight destination to and from Asia.
Lower operating costs are also driving tenants to the market. Through December 2020, Nevada’s average retail utilities price for industrial customers was 10.3% lower than the Mountain States, 61.4% lower than California and 16.4% lower than the U.S.
Supply and Demand
Reno’s industrial market continues to post robust fundamentals, with positive absorption, record-low vacancy rates and record-high rental rates. Through Q2, nearly 2.6 million sq. ft. has been absorbed so far this year for a growth rate (net absorption/existing inventory) of 3.0%—seventh best in the nation. Large absorption gains and relatively low construction completions lowered the overall vacancy rate to a record-low 2.7% at midyear. Despite high demand, only 4.6 million sq. ft. of logistics space is currently under construction (50% preleased).
Reno’s average annual asking rent stood at a record-high $6.96 per sq. ft. at midyear but was lower than that of Sacramento—the nearest major industrial market—at $8.85. Continued demand for space makes Reno one of the country’s top industrial markets most in need of new development. Until this occurs, vacancy rates should remain at all-time lows and rent growth should continue.
Figure 4: Reno Historical DataHistorical Data
Source: CBRE Research, Q2 2021.
Figure 5: Reno Size Range Comparison
Source: CBRE Research, Q2 2021.