Biggest little comeback: Reno-area economic turnaround
Call it the biggest little comeback story.
At least that’s how one site selection expert visiting Reno framed the area’s economic performance in the last few years.
It didn’t seem that long ago when the Reno area was ground zero for a distressed real estate market while Nevada was saddled with a 13.7 percent unemployment rate — the highest in the nation at the time.
Fast forward to the present and Nevada unemployment, while still among the highest in the U.S., is down to 5.8 percent. Meanwhile, Northern Nevada counts companies such as Tesla Motors and Switch as part of an ever-growing list of new arrivals that are diversifying the region and improving Reno’s image. Real estate, the area’s Achilles heel during the recession, is also in the midst of a seller’s market as strong demand and tight supply is causing home values to rise.
“When I came here four years ago, the economic transformation of the area was probably in the first inning,” said Dennis J. Donovan, a principal with New Jersey-based site selection firm Wadley Donovan Gutshaw Consulting. “Now you’re in the top of the sixth.”
Donovan was in town on Thursday to speak with members of the Economic Development Authority of Western Nevada.
Reno-Sparks’ turnaround continues to place the region on the map as it diversifies from simply being known as a logistics hub to a player in industries such as advanced manufacturing, data centers, unmanned aerial vehicles or drones, and several other technologies.
The recovery from the greatest downturn in the area’s history, however, is also bringing with it new challenges while also causing old issues that largely went dormant during the recession to resurface.
High up on the list is workforce, Donovan said. More accurately, it’s the ability to provide the skilled human capital necessary to sustain the needs of existing companies as well as the growing list of new firms now interested in the area.
“Fulfilling those skill requirements is a major challenge, particularly when you have rapid growth,” Donovan said.
Related to the growth being seen in the area is the issue of housing. The real estate crash made many developers gun shy about new home construction, leading to limited supply. An influx of people from out of town taking jobs in the area, combined with more locals looking to buy new homes or have acquired equity to move up to a bigger house, is squeezing housing supply even more.
The result? Concerns about housing affordability.
“If you’re making $75,000 or $100,000 a year, then you’re in great shape, but if you’re below that then it’s getting a lot harder to find affordable housing,” Donovan said. “When you realize that one-third of households here earn less than $35,000 a year, then you need to do something about affordable housing, whether it’s apartments or single-family (homes).”
Image, a longstanding problem for the area, continues to be a challenge, according to Donovan. Although there’s a lot of awareness about Reno’s excellent quality of life and economic transformation in Northern California and the inner mountain zone, it’s a different story as you get farther away from those areas.
“About 75 percent of the country either has no image (of the Reno area) or see it as a Little Las Vegas,” Donovan said.
The good news is that the arrival of companies such as Tesla is helping change that image. The Reno area also has a good image to one group that counts — company CEOs.
Reno even has established a reputation as the “middle office capital” of the Western states, Donovan added.
“When you look at the perception of CEOs, (Reno) comes out a lot better and ranked at No. 8,” Donovan said. “The Tax Foundation also ranks Reno No. 5.”
Even with its challenges, the area should be in better shape to handle an economic downturn now compared to eight or so years ago. Unless a major, “macro” economic issue hits the United States, Northern Nevada should be more resistant to downturns because it is no longer dependent on just one or two industries, Donovan said.
The bigger issue at this point is handling the issues that come with growth.
“The biggest difference (from the last four years) in a nutshell would be the acceleration of economic transformation,” Donovan said. “This is one of the most exciting places in the country that I’ve been to.”