Industrial Real Estate in Northern Nevada – Is it Time to Buy or Sell?

The real estate market in northern Nevada, and specifically in Reno-Sparks, has been steadily experiencing very active leasing activity over the past several reporting quarters. In fact, it’s been sufficient to launch numerous new development projects in the region. In addition to this expanding market growth, lease rates have restored themselves to pre-recession rates over all market size ranges. Nationally and locally, the commercial real estate markets have been attracting significant investment fund activity with a flood of investment firms competing for the available portfolio sales offerings. The result has been a boon for sellers – as firms vie to get their investment funds placed, competition heats up and strong bidding has been achieving some very favorable sales prices for sellers across both Class A and Class B assets.

So the answer to the question, “Is it time to sell or buy?” is: maybe. Depending on the asset type, condition, income strength, your investment model and other factors, certainly sellers can expect to see considerable competition for their asset. For completed sales in the region, this has been translating to very low capitalization rates, generating very high sales prices relative to the income. Clearly, then, it’s time to sell. Right? Again, maybe. If there is competition for your product, you can likely expect a strong price for your asset. But if you have to turn around and re-invest, looking at another commercial real estate investment places you now on the buyer’s side of this formula. If, however, you’re in a position to cash out of your commercial property, then maybe it is a very favorable time to sell.

I believe that few would argue that our market is solidly in the expansion phase of the real estate cycle. Some might feel we’re reaching the apex of the cycle, while others may feel the expansion still has strong legs well into 2017 and maybe beyond. But sooner or later, our market will reach the oversupply phase, and as absorption slows and vacancies start to rise due to the inevitable new construction projects still coming on line that will have missed the timing of the market cycle, lease rates will start to erode slightly before slipping even more as overall market velocity slows. At this point, we will experience declining property values.

Industrial real estate property values are strong in northern Nevada currently. Will they be stronger yet in early 2017? Some will say maybe, others might say probably and still others might say no. The bottom line is that those who obsess over acting at the perfect market time always tend to be waiting and waiting. In many cases, they either miss the best time to act or never act at all because they miss the perfect market timing.

In the late summer of 2016, the Reno-Sparks industrial real estate market is strong – it’s a great time to achieve a handsome sale price for your property. Of this we can be sure based on market transactions. Will waiting further benefit a sale situation? Maybe. And maybe not. Most economic experts misjudged the timing of last recession by several years – did you?