New year brings opportunities, challenges for retail operations
Northern Nevada Business Weekly
RENO, Nev. – Normally upbeat about prospects for small businesses in northern Nevada, Rod Jorgensen sounds a cautionary note these days as he counsels independent retailers.
“It’s touch and go for most small business retailers,” says Jorgensen, director of counseling at the Nevada Small Business Development Center in Reno. “Whatever little nest eggs they had are gone.”
The upshot? Even though some who keep close tabs on the retail sector in northern Nevada say they see signs that sales are beginning to rebound, others believe even a modest recovery may come too late for some shop owners.
“The bad news is that retailers did everything they could in 2009, and those retailers that are still struggling despite lease restructuring and cost-cutting on all controllable expenses (including labor), may have to shut their doors during the first half of 2010,” says Roxanne Stevenson, a senior vice president for retail properties in Reno with Colliers International, a commercial real estate brokerage.
The numbers paint a grim picture:
Taxable sales in Washoe County during September were down nearly 21 percent from the same month a year ago – and the 2008 figures themselves were down by 12.6 percent from 2007’s levels.
Carson City sales during September were down by almost 24 percent, and auto dealers in the Capital City reported sales that were down more than 35 percent from September 2008.
Staff members of the Washoe County government, who follow sales activity close because of the importance of sales tax revenues to the county, don’t expect a significant upturn in 2010.
John Sherman, the county’s finance director, notes that sales have fallen by double-digit percentages for 13 consecutive months. Comparisons in 2010, even if they show year-over-year gains, will be against the depressed numbers retailers posted in 2009.
With that, the county expects that taxable sales activity will be essentially flat, maybe ticking up slightly, if the regional economy continues to pull itself together. If the economy falters, the county says taxable sales could fall another 7 percent.
“It’s extremely difficult to predict because it’s so volatile right now,” Sherman says.
A major factor, he says, is the direction of home prices because the decline has limited the spending of homeowners who are upside down in their mortgages and weakened the confidence of everyone else.
High unemployment figures also are a major contributor to weak retail sales, Sherman says.
The sharp decline in retail activity has brought widespread vacancies in shopping centers.
About 15 percent of the retail space in the Reno-Sparks area stands vacant, Colliers International has estimated. While that’s about half again the national retail vacancy of 10.3 percent, Stevenson says the vacancy rate appears to have stabilized in the last half of 2009.
Larry Hunt, senior general manager for Bayer Properties LLC, the owner of The Summit, says the company began to see signs in mid-summer that retail sales were reviving.
Consumers have been more willing to open their pocketbooks, he says, as the stock market recovers and the housing market appears near a bottom. Both factors improve consumer confidence.
The Summit’s recent new tenants – including Pace’s Pizza Balls, Kiiwe Yogurt Cultures, the Reno Aces and others – have been predominately local retailers or regional chains, and Hunt says the company expects that trend to continue.
Jorgensen says he sees potential in 2010 for retailers who can win the favor of cash-strapped consumers – valued-priced restaurants, for instance – although he cautions that there are few of those opportunities available.
Legends at Sparks Marina, for instance, is tweaking its branding to give more emphasis to the value-oriented retailing of outlet stores in the lifestyle center.
“We’re not satisfied with the status quo,” says Dennis McGovern, general manager of Legends. “The economy has tapped us on the shoulder and told us to rebrand ourselves.”
While Legends opened with advertising that emphasized its high-fashion tenants – Saks Fifth Avenue’s Off 5th, for instance – the new advertising carries the theme “Let us be your outlet for …”
“We’re very excited about the first quarter because of the change in our branding,” McGovern says.
Throughout the region, other new and expanding retailers can take advantage of declining rents – some are 30 percent lower than they were two years ago – and generous improvement allowances from landlords to improve their odds.
A glut of vacant restaurant space in the region in mid-2009, for instance, has seen continuing trend of new eateries that spring up quickly in spaces that already are well-equipped.
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