Rental vacancies rise to 11%

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This morning’s RGJ contained a report on the Reno-Sparks rental market.  Apartment vacancies rose to nearly 11% for the 2nd quarter.  Consequently average apartment rents fell to $844 in Reno-Sparks; compared to an $863 average for the first quarter.
See Rent falls, vacancies rise for the story.

In an unrelated story the RGJ reported today that the first three requests for state foreclosure mediation have been filed. See First three request made for state foreclosure mediation

About Guy Johnson

I am a licensed Nevada REALTOR® living and working in Reno, Nevada. Give me a call at 775-722-4011. My team and I will be happy to assist you with your real estate needs.
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43 Responses to Rental vacancies rise to 11%

  1. billddrummer says:

    To Guy,

    This has been going on for six months, maybe longer. As you know, I’m a renter now, and in May moved from a 1 bedroom 1.5 bath townhome style apartment to a conventional 2 bedroom 2 bath unit in a better complex.

    Rent on the old unit–$900. Rent on the new one–$815.

    The old complex is zoned for condos, and they are attempting to sell them for $167,000. But since the buildings are 30 years old, and all they did was change the countertops, appliances, and install a compact washer/dryer and air conditioning, I still think they are massively overpriced. At one point the model was for sale for $199,000. Didn’t happen. (This complex is near the homes along Virginia Lake marketed by Silverstar Communities. They’re the same price, but brand new.)

    In my existing complex, you can get a 1br/1ba unit for $550/month. Low deposit (2 weeks rent) and a free month if you sign a 1-year lease.

    Owners will do anything to fill up their units. And with the new complex on South Virginia coming online, the ones at McCarran/Clearacre, and new complexes in NW Reno, chances are rents will stay low for awhile.

  2. billddrummer says:

    Another thing: I got the free month and a low deposit on my unit. But the deals are even better now.

  3. MIkeZ says:

    And with the new complex on South Virginia coming online

    The Alexander at South Virginia?

    Has anyone here toured these or gotten rent/lease figures? Are they ready for occupancy?

  4. GratefulD_420 says:

    MikeZ – I have not toured Alexander. It is occupent ready, (sign hanging out front, even though visibly still being built)

    Here are the market prices for these jewels as listed from rent.com

    TYPE Bd/B Prices sq ft
    Athena 1 1 $1095 – $1195 916
    Aphrodite 2 2 $1310 – $1410 1053
    Apollo 2 2 $1310 – $1410 1078
    Artemis 3 2 $1695 1331

    Bill O’Driscoll had an article in the RGJ with the developer on June 6th with lots of great quotes… about “how people are willing to shell out the money for something nice in an exquisite area…..” [built between the freeway and S.Virginia] – nothing but beauty…. selective beauty. I would be interested to pull the original article (but its archived $) because I think the prices above have already been lowered.

  5. billddrummer says:

    I stopped there out of curiousity right about the time that article came out, and the leasing agent said she ‘wasn’t sure’ what rents would be when I would be ready (one year out).

    It sounds like a nice place, although freeway noise might be a challenge. It’s also right below the flight path for the main north/south runway.

    It seemed to me that the project is attempting to attract people who don’t want houses.

    But aren’t there a ton of condo projects in town that provide the same thing, for less money?

  6. 3niner says:

    GD_420 – Those prices look pretty high to me. I expect they’ll have trouble getting them occupied. There should be many nicer condos (in better locations) available for less rent.

  7. Grand Wazoo says:

    Those new apartments are in a great location.

    Fantastic sunset views of five lanes of S. Virginia for quiet evenings on the veranda.

    Epic sunrise views of I-395 out the back of your unit for those mornings when you need to be at one with yourself.

    Who could really ask for more?

  8. Waldo says:

    But Grand Wazoo, if one is lucky enough to get an apartment right up front on Virginia Street, one could perhaps gaze across the lanes of 60mph traffic to Moana Nursery and see all the trees in a bucket. Surely that must count for something.

  9. Hickup says:

    Well gollee, that there $1700 rent sure do seem high, don’t it? I figure I could buy me one of them Smithridge condos for $44,000 with one of them there 3% down govt loans, and my monthly payment would be about $250 bucks. Of course, at Smithridge I couldn’t gaze on them trees in a bucket.

  10. pogg says:

    For the past year I rented a never-lived in 2BD/ 2BA/2 car garage condo in a small development just below Golden Valley at the intersection of Lancaster/N. Virginia (old N. Virginia). The original owners quickly sold to a greater fool (although the wife is the property manager now). Despite its North Valleys location (lots of wind, eccentric property owners nearby, few close dining choices, drivers suprisingly prone to using their high beams), the current owners were very stubborn at sticking with 2007 rents until last month.

    These 2/2/2 that were renting for $1095 are now available for $925. As recently as three months ago the property manager was insisting on either a year or Gulp! 18 month lease. Now they will go 6 months. One unit was vacant for at least 5 months as the owners/property manager resisted being responsive to the deflating rents.

    Will be interesting to see how long it takes before the current owners throw in the towel and realize rents and the local economy will only get worse for several years. Anyone notice the Spaghetti Bowl not as crowded as it was in 2006?

    During the boom I checked on rents at an old, tired complex in rather bad part of town at intersection of Vassar and Harvard Way. 2BD/1BA with no garage increased from $700 (Oct 2004) to $775 (Oct 2005). Now it is, and will continue to be down, down, down……

  11. billddrummer says:

    To all,

    This sounds suspiciously like another bust-in-the-making.

    The general contractor is on the ropes, and Spanos Construction has taken over paying the subs.

    I wouldn’t be surprised if the rents fall by 20% within 6 months.

  12. Mark D says:

    Many of the unfinished units of the Alexander apartments are on fire right now shortly after midnight. Extremely huge and violent fire! Highway 395 is closed at S Meadows. Hope no one got trapped in these flames. We could see the fire from Legends.

  13. Horcio says:

    Well… I guess the demand for those apartments was just too hot!

    I wonder if the place carried insurance?

  14. gobagheera says:

    A fire that starts at midnight and burns so hot that it 22 of 36 buildings are destoryed quickly at a luxury apartment complex at a bad location in a horrible economy… we need Sherlock Holmes to figure this out. And of course the insurance is in place!!!

  15. 3niner says:

    Alexander fire update: According to radio reports, nobody hurt, 22 buildings destroyed.

  16. Grand Wazoo says:

    I do not believe in coincidence.

    Years ago there were a string of suspicious building fires in Washington state that burned structures with such intensity that there was literally nothing left for investigators to use to determine cause. It was eventually determined that the fires were all arson, and the accelerant used was solid rocket propellant.

  17. billddrummer says:

    The construction deed of trust is $52,500,000.

  18. ditz says:

    Live up in Arrowcreek and smelled smoke during the night. Drove by on 395 coming home. Nothing left but smoldering remains. South Virginia is backed up with lookie-loo’s.

  19. billddrummer says:

    A Spanos spokesman said the company would rebuild some of the units. But if there will be fewer units in the final project, will the rents have to be even higher?

  20. CommercialLender says:

    BDD,
    that depends on what the insurance company and lender agree to, whether to rebuild or simply pay down the construction loan. In this market, it would not surprise me if the lender took the insurance award and just paid down the loan with it, leaving the remaining 1/3 asset and loan for the owner to stabilize first before getting a future loan on the next phase. One thing is for certain: it’ll take a long, long time to sort this mess out and start rebuilding, maybe a year or more. By that time, demand will have changed, the city might re-think approvals, etc.

    The asset lacks amenities and doesn’t fit into the ‘luxury’ market like they thought it might when they started planning it, IMO. So, they might very well use this ‘opportunity’ to revamp the project to a different density or amenity package.

    Before we all assume something nefarious on the behalf of the owner, I’d remind us all this actually happens much more frequent than one would think. I can cite numerous examples in my world – never fun. It might well have been arson by some kids or a homeless encampment, but no way on earth A.G. Spanos company would have been behind this, IMO. In uncompleted form, without windows, drywall, roof shingles, etc. the building materials are a cinder waiting to ignite. It actually surprises me that insurance companies don’t lobby the building code bureaucrats to force the lumber suppliers to somehow coat raw wood with fire retardant chemicals (not my expertise, maybe they already are/do?).

  21. MikeZ says:

    RE: Alexander at South Virginia

    Thanks for the info, everyone. After seeing this morning’s RGJ:

    http://www.rgj.com/article/20090729/NEWS/90730001

    I don’t think I’ll be renting there. 😉

  22. bondstevenbond says:

    Admittedly I have no idea who A.G Spanos is so I can’t attest to their reputation. But usually the simplest explanation is the most likely. Consider circumstances…i’m just guessing here…

    1) The economy turned horrendeous by any measure
    2) A builder has just built 300 plus units now sitting empty
    3) Builder has already discounted the rent
    4) But foot traffic is still extremely low
    5) Nobody has moved it yet, but a few planned to in a few days
    6) A fire is started at midnight
    7) A human being was probably there at the time
    8) It is very very dark at that location
    9) The chances of being seen are low
    10) The fire burns all the units least completed
    11) The fire burns all the least desirable units nearest the freeway.
    12) 22 of 36 buildings burn very quickly, others are fine.

    Numerous authorities must be on Spanos like white on rice!

  23. billddrummer says:

    To bondstevenbond,

    AG Spanos is one of the largest residential developers on the West Coast. Among other things, the company owns the San Diego Chargers.

    They’ve done developments here for decades, but have been relatively quiet for the past few years. (The apartment complex in NW Reno at McCarran & I80 is a ‘medium-sized’ Spanos project.)

    CL is right: It doesn’t make any sense to speculate about how the fire started, although playing on construction sites was one of my most fun activities as a teenager.

    So before people start pointing fingers, let’s wait until everything is sorted out.

  24. Grand Wazoo says:

    If it wasn’t arson and the fire was purely accidental and started in one unit only, it still dooms the development.

    Who in their right mind would rent in a development built so closely together that if one building catches fire, 20+ others go up as well?

    This thing has Hall of Fame level FAIL written all over it. Almost makes the Montage look like a good idea that just might work out.

  25. billddrummer says:

    To GW,

    I believe CL touched on one of the reasons the fire was so intense: Untreated building materials are highly flammable, and can spontaneously ignite from radiant heat. The buildings under construction weren’t sheetrocked, which would have slowed down the fire’s spread. Instead, you had untreated (presumably) stud frame structures in progress.

    It will be interesting to see what the project looks like after the cinders cool.

  26. doofus says:

    So how does a fire along the most traveled route in Reno fully engulf 3 entire 10 unit buildings before the fire department responds within 60 seconds of the first call? The timing doesn’t pencil without massive accelerates. This pure and simple a case of arson. I’ll go on record.

    Who? Not Spanos, but can you imagine a better outcome for them? Insurance will pay off the lender, but the lender has an out and won’t finance reconstruction of a now obviously doomed project. Sweet – 2/3 of the problem gone. My bet is on a disgruntled union member who wasn’t allowed to slave for $8 an hour framing this project.

  27. CommercialLender says:

    The developer would absolutely lose a chunk of change in the arrangement I described: insurance paying off a portion of the loan. It’s not a desirable outcome for a builder. There are a number of things insurance won’t cover in this case, such as the carrying cost of the construction loan during re-building, and all the red tape delays to restart building. Very costly. Even if they had to reduce rents to very low levels to fill it up, that developer has plenty of staying power to carry the loan thru to stabilization and a perm loan.

    My bet is on a lucky cigarette thrown out of 395 or better yet some joker arsonist who knew no one was there (therefore no murder, supposing there’s honor among criminals) so he/she set out some accelerant and torched it to get arsonist-rocks off. Sicko, most likely, or just a homeless or teen party encampment that went awry. Bonfire for a group of 16 yr olds gone bad?

    As for how these things spread, around 5 yrs ago a huge fire in San Jose, largest in recorded history in that town, was started by welder’s slag falling thru a metal sheathing crack/opening on the roof of the largest Santana Row building. This asset was 5 stories tall over parking, and 2 city blocks square. Cinders flew up, over 280, and landed on an apartment community a mile away. Let’s just say I was ‘quite famiilar’ with those apts. Each and every roof that still had cedar shake roofing burned to the ground and each roof that had been replaced with composite shingle survived without a hint of a burn. (They were in the middle of a roof-replacement project, ironically.) The fire caused $500M, that’s right, 1/2 Billion in damage! There’s fire depts all over densely populated SJ, but to no avail to keep the damage down. These things happen, which was my point: more frequently than we care to recognize.

  28. Zen says:

    If I spilled my cup of Starbucks today and had to buy another one, it would put a bigger dent in my net worth than those buildings burning down did to the Spanos net worth. It would not make any sense for them to have anything to do with the fire. So for those who feel compelled to make such accusations, please keep the crazy inside.

  29. billddrummer says:

    Well said, ZenMaster!

  30. Toby says:

    How would you like to be the framing contractor? First you get paid millions of dollars to frame the place, and then, when the framing is almost done, it burns down and you get to do it again and get paid all over again too.

  31. bondstevenbond says:

    CL,

    Talk about thoughtless speculation! You are betting on a lucky cigarette? Hahaha…what odds do you want for your lucky cigarette theory?

    That sure must have been one lucky cigarette! It flew from highway 395 one hundred feet westward. It also flew over the top of a 30 foot earth barrier. What did it do then? Did it land in an can of paint thinner in the center of room full of sawdust? Amazing how those cigarettes can do that straight into the teeth of a 10 MPH wind from the west…hehe…why reach for the non-obvious? Almost sounds like you have a dog in this hunt.

  32. Grand Wazoo says:

    RGJ online is quoting the Reno fire marshal that the fire was arson.

    Shocking, completely shocking.

  33. CommercialLender says:

    BSB,
    it was a tongue-in-cheek attempt at a joke, geez.

  34. El Diablo says:

    Does anyone remeber when the developer tried to burn down the Belvedere in downtown last year. Boy did that get swept under the Carpet fast. Police determined it was arson and then we never heard anything else about it. What makes the Belvedere disaster different than the Alexander disater? In my opinion exact same motive.

  35. inclinejj says:

    Sounds like an insurance job to me..

    most of these are like Commerical lender said..started by a welders spark who set the whole thing off..

    When in doubt and the funds are running short ande the lender is balking on giving you another advance torch the place!!!

  36. billddrummer says:

    To inclinejj,

    I don’t think the lender was balking at an advance so much as the market for these type units crashed and burned before they started construction.

    I know, I know, bad pun.

    I’m just glad no one got hurt.

  37. Grand Wazoo says:

    Speaking of the Belvedere, anyone have the latest on that project? I noticed “NOW LEASING” signs up when I drove by the other day, so I guess Plan B is to rent the joints out.

  38. Reno Ignoramus says:

    Boy what would have been a pretty boring thread sure got going once events got people all fired up…..:(

  39. bondstevenbond says:

    Same as you

    Grand Wazoo!

    I am shocked, shocked to find that arson is going on in here!

  40. Grand Wazoo says:

    More good news for the Montage from the WSJ today:

    Corus Bankshares Inc., the Chicago lender battered by the condominium bust, warned it is “critically undercapitalized” and that it is “highly unlikely” it can raise capital without substantial aid from bank regulators.

    Corus disclosed a $487 million second-quarter loss in a filing with the Securities and Exchange Commission. Tier 1 capital, a measure of its cushion against bad loans, fell to negative $157 million at its banking unit at the end of June, a condition that usually triggers seizure.

    Of the five banks that have reported negative Tier 1 levels for the second quarter, four have been seized by regulators, according to Foresight Analytics. Corus has assets of $7.07 billion.

    The deteriorating financial condition of Colonial and Corus puts even more pressure on bank regulators, who have been shopping around assets of critically wounded financial institutions and trying to line up buyers for banks that can’t be saved.

    Some analysts thought Corus would be taken over by regulators and its best assets sold after it failed to shore up its capital position ahead of a June deadline. Several private-equity and real-estate funds are looking at buying the bank’s assets, which include 76 condo construction loans, including 12 for buildings that Corus is in the process of acquiring through foreclosure.

    That sales process has dragged on longer than many analysts expected, as would-be buyers look for a loss-sharing agreement with the Federal Deposit Insurance Corp. Potential bidders are heavily discounting the assets because of challenges in gauging the true value of the bank’s nonperforming construction loans.

    “Anytime you have a situation like this where the equity hole is so deep and the loan loss is so severe…[buyers] will want protection and assistance from the FDIC in a fairly significant way,” said Peyton Green, a senior analyst at Sterne, Agee & Leach Inc.

    Potential bidders for Corus include real-estate developer Related Cos., real-estate investor Lubert-Adler and private-equity firms Starwood Capital and Colony Capital.

    Corus concentrated heavily on condo-construction lending, and more than half of the $3.9 billion in condo-construction loans weren’t generating payments or were in foreclosure at the end of March. Construction loans accounted for 88% of the bank’s outstanding loans at the end of the first quarter, the largest share among any U.S. bank with more than $100 million in loans, according to Foresight Analytics.

    “If I were the FDIC, I would want to cut my losses and run,” Mr. Green said.

  41. billddrummer says:

    To bondstevenbond,

    “Your insurance proceeds, sir.”

  42. Grand Wazoo says:

    Interesting story in the RGJ tonight online – somebody turned the hydrants off at the apartment fire site before setting the fire.

  43. Lawmon says:

    This fire was a very professional job. This was not the work of an amateur. Somebody paid well for this job. And the more professional the job, the less likely the guilty are ever discovered, let alone prosecuted.

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