Reno’s Industrial Market: Insulated, Not Isolated – Navigating CRE Debt Stress in 2025

Introduction:
While CMBS delinquencies in office, multifamily, and lodging have crossed 7%, industrial remains the outlier — and Reno’s market is showing both resilience and recalibration. Here's what investors, tenants, and developers need to know for the next 6–12 months.

1. CMBS Warning Signs — But Industrial Stands Apart
The commercial real estate capital markets are flashing red, with delinquency rates in CMBS (Commercial Mortgage-Backed Securities) surpassing 7% across office, multifamily, and hospitality sectors. Office leads the pack with a 10.3% delinquency rate. Lodging and multifamily are not far behind.

Yet industrial? Holding steady at just 0.5%.

That makes it the most resilient property type in the CMBS universe and a signal to investors that industrial remains the most defensive position in commercial real estate.

2. Reno’s Industrial Shift: From Tight to Balanced
Reno was once one of the nation’s tightest industrial markets. But over the last 24 months, vacancy rose from near-zero levels to over 12% as speculative supply hit the market and some tenants downsized or subleased space.

The good news? Q1 2025 posted the first positive net absorption in over a year. Vacancy ticked down slightly, and leasing activity began to recover. Landlords are holding face rents steady, but effective rents have softened through generous concessions.

3. Investor Takeaways: Capital is Selective, Not Scared
Despite macro volatility, institutional and private investors still see opportunity in industrial. Reno’s cap rates have expanded from pandemic-era lows, creating a new wave of value-driven interest.

What are they looking for?

• Long-term leases with credit tenants
• Class A assets with functional specs
• Discounted pricing from stressed owners or expiring debt

Selective underwriting and higher yields are replacing the FOMO of 2021.

4. Tenant Advantage: Time to Negotiate
For the first time in years, tenants in Reno have options and leverage. Vacancy over 11% means more space availability and landlords willing to negotiate:

• Free rent
• Generous TI packages
• Flexible lease terms

Sublease opportunities, totaling over 1.3 million square feet, give occupiers a rare chance to secure discounted short-term leases. Smart tenants are upgrading into newer facilities or consolidating operations under one roof.

5. Developers: Have tapped the Brakes, Planning emerging for the Next Cycle
With capital markets tightening and leasing velocity moderating, developers are pumping the brakes. Only ~1.5M SF is under construction in Reno now, compared to over 5M SF delivered in recent years.

Those with dry powder are:

• Land banking for future cycles
• Pursuing build-to-suits
• Targeting entitled sites at discounts

Expect few speculative starts in the next 6–12 months unless tenant pre-commitments or new capital strategies emerge.

6. Regional Comparison: Reno vs. Phoenix, SoCal, NorCal, SLC

• Phoenix: Similar overbuild issues and vacancy spikes, but larger scale. Absorption catching up.
• Southern California: Tightest market with strongest tenant demand; high rents and low vacancies persist.
• Northern California: More stable but expensive; capital flows remain strong.
• Salt Lake City: Vacancy rising modestly; stable user demand keeps outlook optimistic.

Reno sits in the middle: not oversaturated like Phoenix, but more volatile than coastal infill markets.

7. Final Thought: Insulated, Not Isolated
Reno’s industrial market is absorbing the shockwaves of broader CRE distress without breaking. It remains a compelling market for strategic investors, opportunistic tenants, and disciplined developers.

The fundamentals are intact, but capital psychology has shifted. In a market where fear is dictating many decisions, industrial is still the one asset class earning a vote of confidence.

Want to know where to position yourself in this cycle? Let’s talk strategy.