Alin Beane takes a closer look at what's driving this trend.
There’s not a lot of apartments to go around in northern Nevada, and rents are climbing because of it.
Those are just a couple of the findings from a recent report published by local commercial real estate agency Marcus & Millichap.
"Over the last five years, we've seen roughly 11,000 new units come online,” says Ryan Rife, the Managing Director of Investments at Marcus & Millichap. “As we're absorbing those, we were seeing concessions being offered, right? Move in specials, things like that. As those units have been absorbed, concessions are coming off."
Rife says rising home prices are contributing to low vacancy rates.
Ryan Rife, Marcus & Millichap: "You take the median home price of, let's say roughly 635,000. I think it's the most recent one and the average mortgage is going to run you 4300 bucks a month, where average rent right now MSA wide is 1600 bucks."
That gap of $2,700 is pushing potential home buyers toward renting instead.
But there's not a lot of options.
Marcus & Millichap's report says Reno had the steepest drop in vacancy for major markets over the 12 months period ending in March, with 3.8% of units available.
The Nevada State Apartment Association (NSAA) is a little more optimistic, reporting 5.5% vacancy.
Rife says vacancy is going down because construction isn't keeping up.
“One of the main reasons is the cost of construction has still remained relatively high,” he says. “Another big factor is just the interest rate environment. Deals are getting harder to pencil, and so we're seeing construction ease off."
For the first time in six years, Marcus & Millichap says we'll see fewer than 1,400 new apartments this year, with 580 set to open by December.
NSAA says there are 5,081 apartment units at some point in development, with nearly 2,400 currently under construction.
According to Rife, many of those are still a year and a half away. But the good news is once they're built, renters will have more options with plenty of amenities.
“The newer units that are coming online, they're offering better amenities,” he says. “They're more amenitized. The packages are better.”
But the lull is having an impact on renter's wallets.
The report says average rent is expected to reach $1,770 dollars by year's end, in large part due to low vacancy and an influx of renters.
NSAA says the average effective rent as of June is $1,776 in Reno, and that rate is expected to remain flat through the rest of the year.
The full report from Marcus & Millichap is attached below.
