In Reno, Nevada, Class A Office Market Has Low Vacancy, But New Construction Still Doesn't Make Financial Sense

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Date:

22 Jul 2026

In most American office markets, an 8 to 9 percent vacancy rate would signal room to grow. In Reno, Nevada, it represents the tightest conditions the Class A segment has seen in over 20 years, according to Chad Clemetson, managing partner of NevDex Properties, and yet no one is breaking ground on new supply. Construction costs have risen so sharply that current rents, even as they climb, cannot justify a speculative build. The result is a market caught between strong occupancy and a structural ceiling on new inventory.

NevDex owns roughly half a million square feet of Class A office space in Reno. Clemetson describes the dynamic in baseball terms. “It’s a market where you hit singles. You’re not the big home run hitter,” he says. “That’s tough to go build a brand new building on spec.”

Construction Costs

The single biggest change in Reno’s office leasing market over the past year, according to Clemetson, is the cost of building out tenant space. Rates that were recently around $2.50 per square foot for a full build-out now run $3.30 to $3.70 per square foot. That increase is altering how deals get structured on both sides.

NevDex previously differentiated itself by offering turnkey build-outs, finishing spaces with high-quality materials and absorbing the cost as the landlord. That approach has become financially unsustainable. “Now it’s getting so expensive that we have to almost go back to giving a TI allowance, which is something we normally didn’t do before,” Clemetson says.

For tenants, the math is equally uncomfortable. A company coming off a five- or seven-year lease faces a significant jump in occupancy costs. Landlords can offer some relief through free rent periods, but Clemetson says the underlying cost always shows up somewhere in the deal. “At the end of the day, the number is the number, and it comes back one way or another.”

The consequence for tenants renewing leases is direct: rents must rise when landlords spend more to prepare space. Companies that locked in rates years ago now face materially higher costs regardless of how they structure the next term.

The Post-COVID Reversal

The remote-work downsizing wave that hit Reno’s office market a few years ago has largely reversed, but the space those tenants gave back no longer exists in large contiguous blocks. NevDex spent significant capital subdividing vacated floors into smaller suites during the downsizing period, and those smaller spaces leased quickly at higher rents. Now companies that shrank are trying to expand again and finding that large Class A blocks are not available.

The workaround is messy. Companies that need significant space are taking two or three smaller offices around town on short-term leases – but short terms don’t justify meaningful tenant improvements, so the spaces remain basic. Others are locking in longer terms of seven to ten years, calculating that today’s rates, while elevated, will look favorable compared to where rents are headed.

“You have groups looking for really large blocks of space that aren’t there,” Clemetson says. “So they still need to grow, but now they’re taking two or three offices around town and doing shorter-term deals.”

For companies weighing their next lease, the decision comes down to a bet on direction: accept today’s elevated rate on a longer term and lock in certainty, or sign short and risk paying substantially more at the next renewal.

National Assumptions Don’t Apply

One recurring friction point in Reno is that corporate real estate teams based in larger metros assume the same leverage they have in distressed office markets elsewhere applies locally. Clemetson describes a recent renewal negotiation with a national firm whose real estate director came in aggressively, expecting concessions consistent with tenant-favorable conditions in major cities.

“I had to explain: if I put your space on the market, I will have three offers within a month,” he says. The tenant independently verified and renewed at the proposed rate within a week.

The market’s insulation comes partly from its tenant composition. Reno is predominantly a 4,000- to 5,000-square-foot market. The days of mortgage companies and homebuilders taking 30,000 to 50,000 square foot blocks – and then vacating overnight during the 2007 downturn – are gone. Today’s tenant base is more diversified and more appropriately sized for the market, which means any single departure barely moves the vacancy needle.

Companies relocating to Reno from larger markets should expect landlord-favorable conditions despite national headlines about office distress. The leverage tenants hold in San Francisco or New York does not transfer here.

Stability as a Market Characteristic

Nevada’s business-friendly tax and regulatory environment continues to draw companies from states perceived as less accommodating, providing a steady trickle of new demand. But Reno’s office market is not a high-growth story in the conventional sense. Many of the market’s best tenants have occupied the same square footage for 20 years. They renew, they stay the same size, and they remain creditworthy.

“That doesn’t mean they’re not growing and doing great things,” Clemetson says. “That’s the way Reno is. It’s not overly dynamic. It’s just very, very stable.”

That stability cuts both ways. Reno is unlikely to see the sharp rent spikes or speculative construction booms that characterize faster-growing metros. But it also means the current supply constraint, too little Class A inventory for tenants who need it, with no financial path to adding more, will persist until construction costs fall or rents rise enough to close the gap. According to Clemetson, rents would still have to rise “tremendously” beyond current levels to justify breaking ground on a new building.

About the Expert: Chad Clemetson is managing partner of NevDex Properties, a Reno, Nevada commercial real estate firm owning approximately half a million square feet of Class A office space in the market.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.